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Royce Ventures Into Large Caps

Plus, Van Eck launches a commodity fund to fight contango, and more.

Morningstar Analysts, 01/10/2011

Royce, a firm known for its smaller-cap funds, launched its first large-cap offering Jan. 3 along with three new international funds.

The large-cap offering, Royce Special Equity Multi-Cap RSEMX, will be run by Charlie Dreifus as an extension of the strategy he employs at small-cap Royce Special Equity RYSEX. Dreifus, an accounting maven with a keen focus on downside risk, won Morningstar's Domestic-Stock Manager of the Year award in 2008 and was also a finalist for Morningstar's Domestic-Stock Manager of the Decade accolade. He has run Royce Special Equity since 1998 but has honed his small-cap investment approach since the early 1970s.

Dreifus said the new fund will allow him to buy ample bargains in the large-cap space. He has owned more mid-caps in Royce Special Equity in the past year or so, but this will be his first stint running a fund focused on larger-cap stocks, which are heavily followed by Wall Street analysts and professional money managers.

Royce Special Equity Multi-Cap will own 35 to 50 stocks that have at least a $5 billion market capitalization. This fund likely will have the largest market cap of any at the firm. (Royce Mid-Cap's RMIDX market cap recently clocked in at $5.5 billion.)

The other new offerings--Royce Global Dividend Value RGVDX, Royce International Premier RYIPX, and Royce International Micro-Cap ROIMX--also broaden the firm's lineup. Prior to these launches, only four of Royce's 26 funds had international focus. But in recent years, the firm has made a big push to expand its research capabilities in the international small-cap arena, and many of the domestic offerings had relatively large stakes in foreign fare.

Global Dividend Value will be run by David Nadel and Chuck Royce. The managers will normally keep at least 40% of the portfolio invested in international stocks, and dividend-paying firms will soak up at least 80% of its assets.

Nadel, who has been a foreign equity fund manager at the firm for four years, will also be lead manager on International Premier and International Micro-Cap. George Wyper, who joined the firm in 2010 and formerly was head of Wyper Capital Management, will comanage International Premier. Firm veterans Jenifer Taylor and James Harvey will comanage International Micro-Cap. These two funds will devote at least 65% of assets to foreign stocks, but the market-cap ceilings for new stock picks are $2.5 billion for International Premier and $500 million for International Micro-Cap.

Van Eck Launches Second-Generation Commodity Fund
New York-based asset manager Van Eck Global recently launched the index-based Van Eck CM Commodity Index Fund CMCAX. The fund, described by the firm as a "second-generation" commodity fund, is designed to reduce the potential negative effects of contango that can significantly reduce the performance of commodity investments over time. (Contango occurs when the price of a futures contract exceeds the expected spot price when the contract expires.)

The passively managed fund seeks to track, before fees and expenses, the performance of the UBS Bloomberg Constant Maturity Commodity Total Return Index, or CMCI. The index was designed to minimize investment exposure to the front end of the futures curve and diversifies exposure across maturities. By diversifying exposure across multiple maturities, the index seeks to mitigate the impact of contango. The fund will be the first in the Morningstar Commodities Broad Basket category to use the index as its primary prospectus benchmark.

The CMCI is diversified across 26 commodities and five maturities and is rebalanced monthly to reduce the risk of overconcentration in any one commodity. Unlike traditional indexes, the CMCI is diversified along the entire futures curve and uses a continuous roll.

The fund's expense ratio for its class A shares are contractually capped at 0.95% until May 2012.

ING Corporate Leaders Celebrates 75th Anniversary
ING Corporate Leaders
LEXCX celebrated its 75th anniversary in November.

The fund launched Nov. 18, 1935, during Franklin Roosevelt's first term as president. Only 26 mutual funds in the United States have been around longer.

The fund follows a distinctive strategy. When the fund was started, its founders chose 30 stocks that they thought would prosper for decades to come. The list they came up with looked much like the Dow Jones Index. Its holdings would change mainly because of mergers or spin-offs or if a company stopped paying regular dividends.

This original list included many railroad and utility companies, some of which are still around today. At least eight of the fund's original holdings are still in the fund today: Union Pacific UNP, AT&T T, E.I. du Pont de Nemours & Company DD, Eastman Kodak EK, General Electric GE, Procter & Gamble PG, Sears SHLD, and U.S. Steel X.

With $427 million in assets, it is one of the smaller funds that's celebrated a 75th birthday, even though its long-term record is better than the S&P 500 Index's. Its results have surpassed that of the S&P 500 in 24 of the 31 rolling 10-year periods since 1971. Since Jan. 1, 1971, through the beginning of 2011, the fund gained 11.1% annually compared with 10.15% for the index.

Fairholme Allocation Fund
FAAFX opened to investors Jan. 3. The fund will invest in a focused portfolio of equity, fixed-income, and cash and cash-equivalent securities. The proportion of the fund's portfolio invested in each asset class will vary over time. This is the firm's third mutual fund.

Wallace R. Weitz & Company recently launched the multi-cap Weitz Research Fund WRESX. It will be managed by the members of the firm's research analyst team, with each analyst responsible for selecting investments within their assigned portions of the portfolio. The fund was originally launched April 1, 2005, as a private partnership.

Effective Jan. 7, Matthews Asian Growth & Income MACSX will close to most new investors. This fund, which invests mostly in dividend-paying stocks and convertible bonds, had swelled to $4 billion after $1.6 billion flowed into it during the past two years. This marks the second closing for Matthews in as many months. In November 2010, the firm closed Matthews Asia Small Companies MSMLX.

Osterweis announced that Matt Berler has been promoted to president and CEO of the firm. John Osterweis, the company's founder, became chairman at the beginning of 2011 and will retain his CIO title. Osterweis and Berler have managed the firm together for the past three years.

TCW Emerging Markets Local Currency Income TGWNX recently opened to new investors. The fund invests in emerging-markets sovereign and corporate bonds denominated in local currencies. It is expected to own bonds across 10 to 25 emerging-markets countries and will hedge currencies on an opportunistic basis. The fund is managed by Dave Robbins and Penny Foley, who also manage the $1.5 billion TCW Emerging Markets Income TGINX.

On Jan. 7, WHG SMidCap WHGMX will close to new investors.

FMI recently launched its first international fund. FMI International FMIJX normally will invest in the equity of 15 to 25 large-cap internationally domiciled companies.

DWS Dreman Small Cap Value KDSAX will close to new investors Jan. 31. The fund closed previously in late 2006 and reopened in early 2009.

MFS reduced the 12b-1 fee to 0.25% on its two remaining funds that previously had 0.35% maximums, MFS Massachusetts Investors Trust MITTX and MFS Massachusetts Investors Growth Stock MIGFX.

Everence Capital Management said it will launch MMA Praxis International Index MPLAX this week. MMA Praxis International Index is a socially screened index fund that includes emerging markets, and it is the only socially screened fund that uses the MSCI All Country World ex-U.S. Index.PAGEBREAK

American Beacon Emerging Markets AEMAX added Brandes Investment Partners as a subadvisor to the fund. Brandes' portion of the fund will be managed by Alphonse Chan, Douglas Edman, Christopher Garrett, Louis Lau, Steven Leonard, Greg Rippel, and Gerardo Zamorano.

Effective Dec. 31, 2010, Davidson Fixed Income Management is the subadvisor for Tax-Free Trust of Oregon ORTFX. The fund will be managed by Christopher Johns.

Effective Jan. 1, 2011, Robert Lincoln is no longer on the management team of Walden Social Equity WSEFX. The fund is now managed by William Apfel.

Charles Hebard is no longer portfolio manager of Fidelity Blue Chip Value FBCVX. The fund is now managed by Michael Chren.

Timothy Rankin joined the management team of Mutual Global Discovery TEDIX, Keith Luh joined the management team of Mutual Quest TEQIX, and Richard Cetlin joined the management team of Mutual Financial Services TFSIX.

Effective Jan. 1, 2011, Richard Earnest retired from the management teams of HighMark Large Cap Value HMERX and HighMark Value Momentum HMVLX. The funds are now managed by Todd Lowenstein and Keith Stribling.

The John Hancock Lifestyle series (John Hancock 2 Lifestyle Aggressive JALAX) added QS Investors as a subadvisor to the funds. The series also replaced managed Scott Warlow and Steve Orlich with Bob Boyda, Steve Medina, and Bruce Speca.

Effective Jan. 1, 2011, John Hancock International Allocation JAIAX added Bob Boyda, Steve Medina, Bruce Speca, and Scott Warlow to its management team.

The board of trustees of Legg Mason Lifestyle Allocation 100% LMLAX approved the reorganization of the fund into Legg Mason Lifestyle Allocation 85% LANIX. The reorganization is expected to occur April 21, 2011.

Kenneth Smith is no longer a portfolio manager for Munder Large Cap Value MUGAX. He is replaced on the management team by Robert Crosby.

Scott Romans is no longer manager of Nuveen Louisiana Municipal Bond FTLAX, Nuveen Arizona Municipal Bond FAZTX, Nuveen New Mexico Municipal Bond FNMTX, Nuveen Colorado Municipal Bond FCOTX, Nuveen Kansas Municipal Bond FKSTX, Nuveen Wisconsin Municipal Bond FWIAX, and Nuveen Missouri Municipal Bond FMOTX. Nuveen Louisiana Municipal Bond, Nuveen Kansas Municipal Bond, and Nuveen Wisconsin Municipal Bond are now managed by Steve Hlavin. Nuveen Arizona Municipal Bond and Nuveen New Mexico Municipal Bond are now managed by Michael Hamilton. Nuveen Colorado Municipal Bond and Nuveen Missouri Municipal Bond are now managed by Christopher Drahn.

Cathryn Steeves is no longer manager of Nuveen Pennsylvania Municipal Bond FPNTX, Nuveen Maryland Municipal Bond NMDAX, and Nuveen Virginia Municipal Bond FVATX. Nuveen Maryland Municipal Bond and Nuveen Virginia Municipal Bond are now managed by Thomas Spalding Jr., and Nuveen Pennsylvania Municipal Bond is now managed by Paul Brennan.

Andrew Stenwall, Wassim Abourjeili, Christian Romon, Emmanuel Labrinos, and Steve Lee are no longer managers of Nuveen Short Duration Bond NSDAX, Nuveen Multi-Strategy Core Bond NCBAX, and Nuveen High Yield Bond NHYAX. Nuveen Short Duration Bond is now managed by Chris Neuharth, Brenda Briceno, and Peter Agrimson. Nuveen Multi-Strategy Core Bond is now managed by Timothy Palmer, Jeffrey Ebert, and Marie Newcome. Nuveen High Yield Bond is now managed by John Fruit and Jeffrey Schmitz.

Douglas White joined the management team of Nuveen All-American Municipal Bond FLAAX. The fund is now managed by White and John Miller.

The board of trustees of Oppenheimer Principal Protected Main Street II OAPMX approved a proposal to reorganize the fund into Oppenheimer Main Street MSIGX. Given shareholder approval, the reorganization is expected to take place March 25, 2011.

TCW Conservative Allocation TGPCX, TCW Moderate Allocation TGPMX, and TCW Aggressive Allocation changed their names to TCW Global Conservative Allocation, TCW Global Moderate Allocation, and TCW Global Aggressive Allocation.

James Hassett is no longer a manager for TCW Core Fixed-Income TGCFX or TCW High-Yield Bond TGHYX. TCW Core Fixed-Income is now managed by Tad Rivelle. TCW High-Yield Bond is now managed by Jamie Farnham and Gino Nucci.

ING Solution series (ING Solution Aggressive Growth, IAGIX) added ING International Growth to its portfolio of underlying funds. ING International Growth is subadvised by Baillie Gifford Overseas and T. Rowe Price.

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