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Insider-Trading Investigation Stirs Fund Anxiety

Plus, largest mid-cap value fund to close, Vanguard CIO cautions bond investors, more.

Morningstar Analysts, 11/29/2010

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A new insider-trading scandal that could ensnare the mutual fund industry broke this week. Some prominent fund companies and asset managers, including Janus and Wellington Management, have been named in news reports of the imbroglio, but it's still not clear if or how they will be implicated or if other fund firms will get dragged into it. Stay tuned for further developments.

Largest Mid-Cap Value Fund to Close
Perkins Mid Cap Value JDPAX, the largest fund in the mid-cap value category, with $13 billion in assets, will close to new individual retail investors Dec. 31.

The fund has taken in more than $928 million in new money this year alone, after taking in $1.1 billion in 2008 and $1.4 billion in 2009.

Strong results explain the significant shareholder interest. Through Nov. 23, the fund's 10.3% annualized return over the past 10 years puts the fund in the top 5% of the category and easily outpaces the 7.3% return that the typical peer has experienced over the same period.

During 2008's financial meltdown, the fund stayed nearly 10 percentage points ahead of its typical rival, and it performed similarly well during the bear market earlier last decade.

The fund has continued to take in money this year because of its excellent long-term performance and despite recent results. Its 8.1% year-to-date return lags those of the Russell Mid Cap Value Index and 92% of the mid-value category.

Current shareholders can still invest in the fund as well as reinvest any dividends or capital gains distributions.

Vanguard CIO Expects Modest Bonds Returns
Vanguard CIO Gus Sauter recently warned investors that bond returns over the next 10 years will be nothing like the roughly 6% annual return experienced over the previous 10.

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