Fund Times: Openings, Closings, & Manager Changes
Van Wagoner, Liberty Acorn, Putnam, Vanguard, Eaton Vance.
Van Wagoner Funds closed two of its five technology-heavy funds just before tech stocks peaked last year. Now the aggressive firm, founded by Garrett Van Wagoner, is reopening those funds. Is this an opportunity to buy the talents of a tech true believer just before his favorite sector rebounds? Only time will tell. Meanwhile, Eaton Vance (EV) plans to reincarnate some tax-managed funds and Liberty Acorn lost more talent.
Van Wagoner Funds, renowned for its rapacious appetite for technology stocks, plans to reopen its Van Wagoner Emerging Growth (VWEGX) and Van Wagoner Micro-Cap Growth (VWMCX) funds. The firm closed the funds back in 1999, when seemingly everyone was buying the idea that new economy stocks could not fail. Well, as we all know, tech stocks have plummeted and the assets of Emerging Growth and Micro-Cap Growth have fallen with them due to both performance and shareholder redemptions. Both funds will start accepting new investments again Monday.
Eaton Vance has restructured a couple of its tax-managed funds to help people avoid accumulated capital gains. The Boston-based firm says next month it will roll out new versions of its Eaton Vance Tax-Managed Growth (ETTGX) and Eaton Vance Tax-Managed Emerging Growth (ETMGX) offerings. Borrowing the naming conventions of the software industry, the new versions of the funds will be called Eaton Vance Tax-Managed Growth 1.2 and Eaton Vance Tax-Managed Emerging Growth 1.2, while the old funds will tack 1.1 to the end of their names. The idea is to create vehicles that haven't been around long enough to gather any capital gains that could be distributed to investors and taxed by the government. The new offerings will essentially be the same as the old, as they will share the same underlying portfolios through a so-called master-feeder fund arrangement.
This structure essentially lets "investors in a new feeder fund buy into a historically successful investment portfolio without taking on potential liability for capital-gains taxes on past portfolio appreciation," Eaton Vance said in a statement.
The firm plans to close the 1.1 funds to new investors after a period of transition. It also said it would make similar arrangements for Tax-Managed Value (EATVX), Tax-Managed International Growth (ETIGX), Tax-Managed Capital Appreciation (EACPX), and Tax-Managed Young Shareholder [ticker M$-DIBC] as their gains accrue.
Putnam Investments has taken a similar approach with its Putnam Tax Smart Equity (PATSX). Putnam intends to close its Tax Smart funds when capital gains gather to a certain point, and open new versions of the same fund so no one buys an offering with a lot of built-up capital gains. This approach, however, closes the door to new investors who usually help spread out the impact of capital-gains distributions, notes Morningstar's director of fund analysis Russel Kinnel.
HighMark Funds is using a subadvisor for the first time on its newly launched HighMark Small Cap Growth Fund. Institutional manager Nicholas-Applegate Capital Management will run the fund, which is the Los Angeles-based firm's 14th offering.
Give them credit for courage. Kansas City, Mo.-based Buffalo Funds plans to roll out its Buffalo Science & Technology fund in May. Technology stocks and funds might perk up by then, but right now they are the year's worst performers. Buffalo's fund is a clone of a private technology-focused account Kornitzer Capital Management has been running. The firm says the account not only posted a triple-digit return in 1999, but also landed in positive territory last year. Kornitzer has a pretty broad definition of technology, which includes not only electronics, hardware, software, communications, e-commerce, and media stocks, but also life sciences, environmental services, chemical, and defense and aerospace issues.
By tech-fund standards, the Buffalo offering will be relatively cheap, with no load and an expense ratio of 1.05% of annual assets, according to filings with the Securities and Exchange Commission. Kornitzer is a 12-year-old firm that manages five other Buffalo funds. Tom Laming, a former aerospace engineer and research analyst, will run the fund. Laming also manages Buffalo USA Global Fund (BUFGX) with Kent Gasaway. That large-blend fund had 38% of its assets in technology last fall, and is beating 73% of its category peers so far this year. Buffalo USA Global's annualized returns have outpaced 95% of its contemporaries over the last five years. Its asset base is still very small, though, at $54 million.
In April, Portland, Maine-based Forum Funds will open the Shaker Fund, a small- and mid-cap stock offering. It will be the firm's 12th fund. Edward P. Hemmelgarn and Ed Matuszak of Shaker Management will run the fund, their first retail mutual-fund assignment, which will have an pricey expense ratio of 2.15% of assets.
Closings and Mergers
Scudder-Kemper Investments will merge one tiny, poorly performing Asian fund with another slightly larger, mediocre one. Scudder Pacific Opportunities (SCOPX) will take over the assets of Kemper Asian Growth Fund (KANAX), according to SEC documents. Pacific Opportunities has trailed 66% of its peers over the last five years and has about $97 million in assets. Asian Growth has been worse than 95% of its category members over the last three years and has just $9 million in assets.
After little more than a year, the BearGuard Fund is closing. The first fund to do nothing but short stocks--that is selling borrowed shares with the intention of buying them back when their price drops and pocketing the difference--"has been unsuccessful in building assets to an economical level," wrote manager Paul L. McEntire in a letter to investors. According to Morningstar's database, the fund had about $400,000 in assets. The fund isn't unpopular because it wasn't doing what it promised, which was to profit from the decline of overpriced stocks and markets: BearGuard is up nearly 36% over the trailing year.
Wanger Asset Management is losing another manager less than a year after selling itself to Liberty Funds. Liberty Acorn Foreign Forty (ACFFX) comanager Roger Edgely, who also leads Libery Acorn's international-research team, is leaving the firm at the end of March to return to his home in England. He follows Liberty Acorn International (AXINX) comanager Margaret Forster, who left Wanger last month to spend more time with her family. Foreign Forty comanager Marcel Houtzager will stick around and International manager Leah Zell will take over the firm's international-research efforts. Acorn's managers signed five-year contracts when Liberty bought Wanger Asset Management, but Morningstar fund analyst Kunal Kapoor worries they may not be enough to keep the personnel around.
Federated Utility Fund (LBUTX) manager Steve Lehman has left the fund to run a new diversified offering, Federated Market Opportunity Fund. John Nichol, a former portfolio manager and analyst for Ohio's public-employee retirement system, will take over the Utility Fund. Expect Nichol to be a little more conservative than Lehman, said Morningstar.com fund analyst Paul Herbert.
Vanguard Group wants to go international with its Vanguard Star (VGSTX) fund. The Valley Forge, Penn.-based firm is asking investors to let them add two international-stock funds to the $8 billion fund of funds. The offering is designed to be a one-stop shop for investors, but is it has no international exposure. Thus, Vanguard wants to add its International Value (VTRIX) and International Growth (VWIGX) funds to the mix, which includes nine other stock and bond funds. Vanguard Star will continue to allot between 60% and 70% of its assets to equity funds and the rest to bond or money-market offerings. Shareholders get to vote on the proposal in May.
Calvert Funds' social-research department wants to delete MicroStrategy (MSTR), Paccar (PCAR), and Vishay Intertechnology (VSH) from its Calvert Social Index. The firm said MicroStrategy's business practices, and Vishay and Paccar's environmental practices, do not meet the criterion for inclusion in the index that serves as the benchmark for the Calvert Social Index Fund (CSXAX) and the Vanguard Calvert Social Index fund (VCSIX).
In an effort to dissuade market timers from jumping in and out of its Emerging Markets PMEAX and Asia Pacific Growth PAPAX funds, Putnam Investments will start charging investors 1% of their assets if they sell or exchange their shares within 90 days of purchasing them. Putnam made the move as the Investment Company Institute (ICI) released a study on mutual-fund redemption activity.
Fidelity Investments started making the 40 sector funds in its Fidelity Select Portfolios line-up available to participants in the 401(k) plans the firm administers, which includes nearly 9,000 programs and 7.5 million investors. Plan sponsors will have the opportunity to let their enrollees invest in the select funds through a "specialty window" in their retirement plans.
J.P. Morgan Chase (JPM) renamed its 39 Chase Vista mutual funds the JPMorgan Funds. The change is one of the ramifications of last year's merger of J.P. Morgan and Chase Manhattan Bank and their asset-management operations, which are now united under J.P. Morgan Flemming.
The ICI reported the assets in exchange-traded funds grew by 10% in January to $72.13 billion. If you counted those assets as one fund, it would be the third-largest stock fund in the industry.
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Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.