This one goes to 11.
We've had a bumpy year in the fund world, full of important manager changes. To make sure you haven’t missed any, I compiled this quick rundown of the 11 biggest changes and our first take on the impact of those changes. (I have a monthly column in Morningstar FundInvestor that tracks changes.) It’s worth following funds that made manager changes for at least a year or two after the change, to look for signs of how the new managers will run their funds.
1. Janus High-Yield JAHYX and Janus Flexible Bond JAFIX
Impact: Negative; Date: 3/31/16
Chief investment officer and lead manager Gibson Smith left Janus. Comanager Darrell Waters took over as lead manager.
Our Take: We have downgraded the funds' to Morningstar Analyst Ratings of Neutral as this is a big blow to two formerly appealing funds. Smith built up Janus’ bond effort over the past 12 years and was vital to the team.
2. MFS Global Equity MWEFX
Impact: Negative; Date: 2017
MFS announced that longtime lead manager David Mannheim will retire in 2017, though the exact date has not been determined. Ryan McAllister joined the fund as a comanager in September 2016. Roger Morley, who has been a comanager since 2009, will remain on board.
Our Take: Mannheim has done a great job and will be missed. While Morley is a seasoned MFS veteran who has a successful record running a fund on his own, McAllister doesn’t have as much experience, though he has been at the firm since 2007. In addition, Morley and McAllister will continue to draw on the work of a strong group of analysts. We still have faith in the fund, but we cut our analyst rating by one notch to Silver.
3. T. Rowe Price Small-Cap Stock OTCFX
Impact: Negative; Date: 10/1/16
Greg McCrickard retired in October. He was replaced by Frank Alonso, who has been an associate portfolio manager on the fund since 2013. Alonso has been with T. Rowe Price since 2000.
Our Take: We don’t have much of a track record to go by for Alonso, so it’s a big drop from the proven McCrickard. We lowered our rating to Neutral from Silver.
4. Sequoia SEQUX
Impact: Negative; Date: 3/23/16
Bob Goldfarb stepped down as comanager in the wake of the implosion of top holding Valeant Pharmaceuticals VRX. Sequoia explained that decision-making was too centralized and didn’t give enough room for analyst input.
Our Take: Goldfarb achieved a lot for investors, even though he may be best remembered for the Valeant mess. Moreover, the latest bad news on Valeant makes it clear that Sequoia’s thesis was wrong—up until this point we didn’t know if Valeant’s problems were small or large. We lowered our rating to Bronze from Gold.
5. Virtus Emerging Markets Opportunities HEMZX and Virtus Foreign Opportunities JVIAX
Impact: Negative; Date: 5/31/16
Former Morningstar Fund Manager of the Year winner Rajiv Jain left subadvisor Vontobel to set up his own firm. Matthew Benkendorf, who has been at Vontobel for 17 years, took over. Benkendorf signed a 10-year contract when Jain resigned, so we can at least be sure that he won’t be following Jain. Our Take: Losing Jain is a big blow, though Benkendorf is experienced and a fair amount of the team will most likely remain in place. We lowered our ratings for both funds to Bronze from Silver.
6. MainStay MAP MUBFX
Impact: Negative; Date: 10/1/16
This fund is run by two subadvisors, and managers from both teams have recently retired. Institutional Capital manager Jerry Senser retired at the same time as Roger Lob from Markston International. No new managers were added to the existing four-manager team from ICAP nor the two-manager team from Markston.
Our Take: Losing two senior portfolio managers at a time of a performance slump underscores the challenges this fund faces, and we downgraded the fund to Neutral from Bronze.
7. Oakmark Global OAKGX and Oakmark International OAKIX
Impact: Negative; Date: 11/30/16
Rob Taylor surprised us by announcing he will retire at age 44. At Oakmark Global, David Herro will take Taylor’s spot alongside Clyde McGregor. At Oakmark International, lead manager Herro will be the sole manager, though he still has the help of senior analysts at the firm. At the end of November, Oakmark promoted senior analysts to serve as comanagers on the funds. Michael Manelli, who has been with Oakmark for 11 years, was named comanager on Oakmark International. Oakmark Global named two comanagers: Jason Long, who joined the international team and the firm as an analyst in 2011; and Anthony Coniaris, a comanager on U.S.-focused Oakmark Select OAKLX since 2013, who joined the firm in 1999 and also serves as its co-chair.
Our Take: We are maintaining our Gold ratings on the funds as we have faith in Herro. The new additions provide some clarity for who might run the funds when Herro retires. Herro is 55, so we don’t expect him to retire in the near term.
8. USAA Income USAIX
Impact: Negative; Date: 11/4/16
USAA CIO Matt Freund, who comanaged this fund, left the firm to join Calamos Investments. Comanagers Julianne Bass and Brian Smith remain at the fund, with analyst Kurt Daum promoted to comanager to take Freund’s spot. Freund’s role of chief investment officer was filled by John Spear, who was also named comanager.
Our Take: Freund was the architect of the fund’s strategy and the most senior manager on the fund, so this is a blow. We are maintaining our Neutral rating.
9. Fidelity Leveraged Company Stock FLVCX
Impact: Neutral; Date: 12/31/16
Tom Soviero will step down at the end of the year. Mark Notkin will take Soviero’s place. Notkin runs Fidelity Capital & Income FAGIX, which has a Silver rating.
Our Take: Notkin has a strong record in his high-yield fund, which includes an equity sleeve. Like Soviero, he has tended to be an aggressive manager. At this fund he plans to tone down the weightings in individual stocks and tilt a bit more to growth. We are maintaining our Bronze rating.
10. Vanguard Mid Cap Growth VMGRX
Impact: Neutral; Date: 12/5/16
Vanguard replaced subadvisor Chartwell Investment Partners with RS Investments on 50% of this fund. William Blair Investment Management will continue to run the other 50%.
Our take: With low costs and good advisors, this fund still has appeal. Switching from a momentum-driven strategy to a more fundamental growth strategy is likely a good idea, as the former is a hard strategy to run well over the long haul. We are maintaining our Bronze rating.
11. T. Rowe Price New America Growth PRWAX
Impact: Negative; Date: 4/1/16
Dan Martino stepped down to move to T. Rowe’s value team. He was replaced by analyst Justin White.
Our take: Although White had worked closely with Martino, this is his first time running a mutual fund, so there isn’t much to go on. We lowered the fund’s rating to Neutral from Bronze as a result.