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NASCAR-Themed Fund Runs Out of Fuel

Plus, American Beacon introduces a new fund, Fidelity cuts B shares, and more.

Morningstar Analysts, 06/14/2010

After nearly 12 years of "investing in the companies that support America's #1 spectator sport," the board of StockCar Stocks Index SCARX has decided to liquidate the fund by Aug. 1, 2010. Evidently, the fund's strategy of investing in companies that support NASCAR's Sprint Cup Series, while charging a hefty 1.50% fee failed to attract shareholders. Since its inception, the fund's net assets did not reach much above $6 million. From a performance standpoint, however, the fund's 10-year annualized return of 3.21% topped 73% of its peers in the large-value category.

American Beacon Launches New "Liquidity Premium" Funds
American Beacon Advisors launched two new mutual funds that seek to capture excess returns by investing in illiquid securities.

American Beacon Zebra Large Cap Equity AZLAX and Small Cap Equity AZSAX use a proprietary strategy to capture equity returns based on the liquidity premium. In theory, shareholders should be compensated for owning more illiquid securities in the same way they should be compensated for owning riskier securities. Zebra Capital, the funds' subadvisor, believes this premium isn't captured by more traditional investment strategies.

Founded in 2001, Zebra Capital's co-founders are Roger Ibbotson, Ph.D., chairman and chief investment officer, and Zhiwu Chen, director of research. They are both professors of finance at Yale University and will both be comanagers on the fund.

Ibbotson sold his consulting company, Ibbotson Associates, to Morningstar in 2006. Ibbotson currently acts in a management advisory role for Morningstar.

Zebra selects securities by analyzing their liquidity metrics (such as turnover and trading volume) relative to their fundamentals. It uses these observable, relative liquidity measures to construct a portfolio that invests more heavily in stocks with strong fundamentals that are traded less often than stocks with comparable traits.

The funds' strategy is designed to generate higher returns over time, driven by three factors: Less liquid stocks generally trade at a discount; individual stocks move in and out of favor, reverting toward mean liquidity; and a potential benefit from general worldwide increases in the liquidity of markets.

Neither fund will charge a redemption fee even though large and sudden outflows of shareholder capital could have a dramatic effect given each fund's makeup of relatively illiquid securities.

The A share class for the Small Cap and Large Cap funds will be capped at 1.49% and 1.29%, respectively, through June 1, 2011.

Fidelity Cuts Class B Shares
As of Sept. 1, 2010, Fidelity's Class B shares for its Advisor funds will close to new and additional purchases. Current holders of Class B shares will be able to reinvest dividend and capital gain distributions until the B shares are eventually converted to Class A shares.

Fidelity's closing of B shares follows similar move by several other firms. B shares charge back-end loads and typically have higher expense ratios than front-end load A shares. Following the financial crisis of 2008, many shops eliminated their B shares as a cost-cutting measure. The earliest funds to cut their B shares were Franklin-Templeton and Dreyfus in 2005 and 2006, respectively. PAGEBREAK

Rare, Tenured Fidelity Select Fund Manager Replaced
Ryan Oldam replaced James McElligott as sole portfolio manager of Fidelity Select Natural Gas FSNGX. McElligott managed the fund for five years. Manager turnover is commonplace at Fidelity's Select funds, but McElligott's five-year tenure was among the longer manager stays. McElligott will remain as an equity research analyst at Fidelity, shifting his coverage to food and beverage companies.

RiverSource Quant Funds Undergo Manager Changes
RiverSource portfolio manager Gina Mourtzinou announced she will leave the firm July 2, 2010, according to a recent filing. Mourtzinou joined RiverSource eight years ago and managed several of the firm's quantitative funds, including RiverSource Disciplined Equity AQEAX, RiverSource Disciplined Large Cap Growth RDLAX, RiverSource Disciplined Large Cap Value RLCAX, RiverSource Disciplined Small & Mid Cap Equity RDSAX, RiverSource Disciplined Small Cap Value RDVAX, and RiverSource Strategic Allocation IMRFX.

Her departure comes in the wake of RiverSource's acquisition of the Columbia funds. Mourtzinou's comanager at RiverSource and cofounder of the quant strategies used on the funds, Dimitris Bertsimas, was recently replaced by Brian Condon from Columbia. Condon will become the sole portfolio manager of the RiverSource Disciplined funds. Columbia' asset-allocation team will replace RiverSource Strategic Allocation's squad.

The board of SunAmerica Alternative Strategies SUNAX approved the addition of a managed futures strategy to the fund's current investment strategies. The fund uses a quantitative process to provide exposure to commodities and hedge funds, while also investing in government debt and other fixed-income securities.

Michael Manzo replaced Christopher Baggini on the portfolio-management team of Aberdeen Equity Long-Short MLSAX.

Brian Barney and Christopher Harshman joined James Evans on the portfolio-management team of Eaton Vance Tax-Advantaged Bond Strategies Intermediate Term STIIX. In addition, Joseph Davolio and Christopher Harshman joined James Evans on the portfolio-management team of Eaton Vance Tax-Advantaged Bond Strategies Long Term EILTX.

Effective June 15, 2010, Ryan Brown will replace Steven Sapra on the portfolio-management team of Quant Long/Short QGIAX.

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