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Longleaf Partners International Loses a Veteran Manager

Plus, Vanguard's new bond index funds and ETFs and Morgan Stanley reopens a star manager's funds after he leaves.

Morningstar Analysts, 08/17/2009

Morningstar's fund analysts cover 2,000 mutual funds. Their full analyst reports, including Stewardship Grades, are available in Morningstar Principia Mutual Funds Advanced and Morningstar Advisor Workstation Office Edition.

Andrew McDermott, who has been managing Longleaf Partners International LLINX since its 1998 inception along with Longleaf stalwarts Mason Hawkins and Staley Cates, is leaving advisor Southeastern Asset Management this autumn. Hawkins and Cates will remain as the fund's managers.

The London-based McDermott has played a major role on the International fund. He is listed as a manager only on that fund--unlike Hawkins and Cates, who are listed on all three Longleaf Partners funds. But Hawkins and Cates have been closely involved in the International fund's management as well. In fact, Longleaf International shares several holdings with the Longleaf domestic funds they manage, Partners LLPFX and Partners Small Cap LLSCX. Meanwhile, the main analysts on International, Scott Cobb and Ken Siazon, will take a larger role on the fund, though they have not been named comanagers at this time. Cobb, based in London, has been promoted to head of European research, and Siazon, based in Singapore and Tokyo, to head of Asian research. Cobb and Siazon each joined Southeastern Asset Management in 2006 after a number of years at other firms.

McDermott will officially be taken off Longleaf International as of Aug. 31. A Longleaf spokesperson says, though, that in an independent capacity he will continue to work with Southeastern Asset Management in their efforts to help shape the pending merger between Japanese insurers NipponKoa and Sompo. (Southeastern is a major shareholder of both firms.) He may also do similar work in conjunction with Southeastern in the future.

The spokesperson said that Southeastern has known of McDermott's desire to leave London and pursue other career directions for several years and had hired analysts and groomed them with that in mind but had thought McDermott's departure would not occur for some time yet. Key reasons for the acceleration of those plans, according to the spokesperson, were the importance and complexity of the NipponKoa/Sompo merger and McDermott's desire to focus his attention both on that issue and, more broadly, on efforts to improve corporate governance in Japan.

Vanguard to Launch Bond Sector Funds
Vanguard will add to its lineup of traditional open-end bond index funds and ETFs later this year with three new funds tracking broad benchmarks for government bonds, three tracking broad benchmarks for corporate bonds, and one new fund aping a mortgage-backed securities index.

The fund launches, which Vanguard announced Tuesday, will expand the family's passive fixed-income stable of ETFs and regular funds to 12 each. Like all of Vanguard's ETFs, the new offerings will be share classes of the open-end funds. The new funds also mark Vanguard's first foray into stand-alone government, corporate, and MBS sector index funds. The traditional mutual fund shares of the new funds, however, likely will be off-limits to most retail investors because the offerings will require a $1 million minimum investment. That's a higher minimum investment than the $100,000 Vanguard requires for its open-end equity sector index funds.

The new funds include Vanguard Short-Term Government, Intermediate-Term Government, Long-Term Government, Short-Term Corporate, Intermediate-Term Corporate, Long-Term Corporate, and Mortgage-Backed Securities. They all will track Barclays Capital indexes of varying duration in their respective sectors. The ETF and Signal share classes, or traditional mutual fund share classes, will charge an expense ratio of 0.15%. A separate institutional traditional mutual fund share class with an even higher $5 million minimum investment will offer a 0.09% expense ratio.PAGEBREAK

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