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Fidelity, Invesco See Kinetic Gains

Aston Value lives to see another subadvisor, New Eaton Vance funds have wanderlust, and more.

Flynn Murphy, mutual fund analyst, 07/14/2011

Some Fidelity and Invesco fund investors just made some money off of wound therapy.

Several Fidelity and Invesco funds own stakes in Kinetics Concepts KCI, a wound therapy device maker that agreed this week to be bought for $6.3 billion, including debt. A pension fund group led by Apax Partners will buy the small cap for $68.50 per share in cash, a 6% premium to Kinetic's closing price July 12, a day before the deal was announced.

Fidelity is the largest fund owner of Kinetic, holding 13% of the company's shares through funds such as Fidelity Low-Priced Stock FLPSX, Fidelity Small Cap Stock FSLCX, and Fidelity Advisor Mid Cap II FIIAX, among others. Invesco is the second-largest fund owner, holding 5% of Kinetic's shares through Invesco Small Companies ATIAX and Invesco Endeavor ATDAX.

Kinetic's stock is up 53% from its price five years ago. That should have made it a decent performer for long-term holders like Invesco Small Companies, which had 7.4% of its assets in the firm as of March 31. Other funds with material stakes include Hotchkis and Wiley Small Cap Value HWSIX and Westport Select Cap WPSRX.

Aston Value Survives With a New Leader
Aston Value RVALX is undergoing a change in management after losing more than 90% of its assets in March. On July 15, Cornerstone Investment Partners will step in as the fund's subadvisor, replacing longstanding subadvisor MFS Institutional Advisors.

Since 2002, MFS manager Steven Gorham and his large-value team have overseen Aston Value, with total assets peaking at nearly $420 million in 2007. But in March an institutional client pulled roughly $230 million from the fund after it lagged its Russell 1000 Value benchmark and most of its large-value peers for the past two years.  

Cornerstone's team will inherit a fund with $25 million in remaining assets and a mandate to continue the portfolio's value strategy. Arguably, Cornerstone better fits Aston's typical subadvisor in that Aston prefers to contract boutique managers who have no entanglements with other mutual funds.

Eaton Vance to Launch Two Go-Anywhere Funds
Eaton Vance is joining the throng of fund companies offering new funds that are free to use a range strategies over a variety of sectors. The firm's new funds are Eaton Vance Multi-Strategy All Asset and Eaton Vance Richard Bernstein All Asset Strategy; they are expected to launch in September 2011.

Eaton Vance Multi-Strategy All Asset will do what its name implies, and plain-vanilla investments as well as more-exotic derivatives are possible here. Jeffrey Rawlins and Dan Strelow will manage the funds. The A shares of the fund will cost 1.35%.

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