Have these three funds taken one step forward and two steps back?
We follow significant manager changes at Morningstar, and it's instructive to check in on some of those funds down the line and see what kind of impact the new skippers have on their charges. Here are three funds for which those changes raise some concerns.
Fidelity Growth & Income
Catudal's strategy is nothing like Cohen's; he keeps the fund's sector weightings close to those of the S&P 500 Index and attempts to outperform through modest bets on individual firms. His former charge, Fidelity Stock Selector
Vanguard U.S. Value
After its June 2000 launch, this fund got off to a great start under subadvisor Grantham, Mayo & Van Otterloo. But in 2006 and early 2007, GMO's time-tested quantitative approach stumbled, and Vanguard added AXA Rosenberg, another quant manager, to the fund. GMO was subsequently shown the door in early 2008, and Vanguard's quant group took over one third of the fund. From late February 2008, when GMO departed, the fund slightly lagged its typical peer in the brutal downturn that ended March 9, 2009, and has since lagged the group norm by 2 percentage points. (All told, the fund lands in the category's bottom third since GMO left.) The rally was led by speculative fare, which is not this fund's focus, but it should've held up better in the downturn.
One possible reason for that poor performance, and an event that could lead to more changes at this fund: AXA Rosenberg recently revealed that a coding error that affected information flow between the firm's risk model and its portfolio-optimization process was discovered in June 2009, but wasn't corrected until between September and mid-November. The fallout has been substantial already: Firm founder and chairman Barr Rosenberg has taken a 30-day leave and research director Thomas Mead will resign within a year. And on April 30, 2010, the board of Charles Schwab's Laudus Rosenberg funds (which the firm subadvises) said it was immediately closing the four funds to new investors and would liquidate them July 30. Meanwhile, Vanguard said it is evaluating the situation at Barr Rosenberg, which subadvises not only U.S. Value, but also Vanguard Market Neutral
Fidelity Blue Chip Growth
Sonu Kalra took over this large-growth fund in July 2009 from Jennifer Uhrig, who posted middling returns during her three-year tenure. (Blame that on a benchmark-hugging strategy.) The fund has certainly perked up under Kalra: It's beaten the category norm by 12 percentage points, as the rally that began in March 2009 has rolled on. Kalra came to this fund from Fidelity OTC
To be fair, Kalra hasn't loaded up on junky companies here; some of the fund's big winners include solid growth plays such as Apple
A version of this article previously ran in Morningstar FundInvestor.
Greg Carlson is a mutual fund analyst with Morningstar.