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Fairholme Raises Minimum Investment

New T. Rowe Price fund, new indexing methodology patent, and more.

Morningstar Analysts, 11/23/2009

Starting Dec. 1, new investors will need $10,000 instead of $2,500 to start regular and IRA accounts at Bruce Berkowitz's Fairholme FAIRX fund. The fund's minimum for additional investments will remain $1,000.

Fairholme is imposing the new higher minimum in the wake of saying it will launch a new focused bond fund that also will have a $10,000 minimum. Berkowitz prefers a higher investment minimum because it helps keep the fund's total expense ratio lower for all investors. Smaller accounts are more costly for fund firms than bigger ones.

T. Rowe Price Launching Global Infrastructure Fund
T. Rowe Price TROW announced it will launch its Global Infrastructure fund in January 2010. The fund will invest in companies that are capitalizing on the infrastructure build-out of emerging economies, such as ABB ABB, Siemens SI, Komatsu, and General Electric GE.

Like other global infrastructure funds, it should fall into the Morningstar world-stock category. The expense ratio will be 1.10% after fee waivers, which is in line with what competitors charge. Like many other T. Rowe funds, this fund will have a 2% redemption fee if sold within 90 days of purchase.

The portfolio manager will be Susanta Mazumdar, who has been an analyst in Asia with T. Rowe Price since joining the firm in 2006. He has focused on energy and infrastructure companies. Before that, he was director of equity research at UBS India, where he started in 2000.

This new fund is in line with T. Rowe Price's main priority of global expansion with keen interest in emerging markets, says Morningstar fund analyst Harry Milling. T. Rowe recently invested in an Indian asset-management firm. The newly minted head of T. Rowe Price International is London-based Chris Alderson, who headed T. Rowe Price Emerging Markets Stock PRMSX before assuming his new role this past March.PAGEBREAK

Fundamental Index Methodology Awarded Patent
Asset-management companies everywhere are trying to patent their investment techniques--for both bond and stock funds. Research Affiliates LLC, founded by Robert Arnott, is the latest to announce that the United States Patent and Trademark Office has approved a patent for the company's Research Affiliates Fundamental Index indexing methodology, which selects and weights securities using fundamental measures of company size--such as dividends, cash flow, sales, and book value--rather than market capitalization. Research Affiliates says it has granted licenses to more than 20 other firms to use the RAFI methodology to run more than $25 billion.

A current Supreme Court case over a denied patent for a financial strategy could affect the RAFI patent. The court won't rule on Bilski v. Kappos until mid-2010, but the decision may affect not only previously awarded patents, like the one issued for the RAFI strategy, but also many other pending financial patents.

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