Plus, Putnam cuts expenses, outlooks from Bill Gross and Jeremy Grantham, and more.
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.
Value investment shop Tweedy, Browne announced on Thursday that longtime managing director Chris Browne has stepped back from day-to-day responsibilities at the firm. He had served as one of five portfolio managers on Tweedy, Browne Value
Although losing Browne's experience and skill set on a day-to-day basis is certainly a disappointment for fund shareholders, Morningstar remains confident in the funds. Associate director of fund analysis Bridget B. Hughes, who has covered Tweedy, Browne for more than five years, says, "The managers have long worked collaboratively, and many of the analysts have been with Tweedy for some time. It's truly a team effort here, and the remaining investment prowess is still impressive."
Putnam Cuts Management Fees
This week, Putnam Management announced that it is lowering expenses for all Putnam funds by reducing their management-fee portion. Bond and asset-allocation funds will be impacted the most: Management fees for bond funds will be cut 13%, and asset-allocation funds' fees will decrease 10%. Putnam is also introducing fund family breakpoints, which are discounts tied to overall asset growth at the firm. While many mutual funds offer management-fee breakpoints as a fund's assets reach certain levels, it is less common for those breakpoints to be tied to a collection of funds. Finally, management fees for Putnam's U.S. growth funds, international funds, and Global Equity
Vanguard Wellington Expenses to Rise
Meanwhile, Vanguard CEO Bill McNabb noted in a recent letter to shareholders that the expense ratio for the investor share class of 80-year-old Vanguard Wellington
Bill Gross on Fees and New Normal GDP
Bill Gross of PIMCO released his August Investment Outlook on Wednesday. Gross criticizes the high fees charged by many fund managers, especially in light of the big cut fees will take out of returns in PIMCO's "New Normal," which envisions returns dropping to around 6%. He also predicts a new normal nominal GDP of 3% (versus the 5% GDP growth we've experienced for the past 15 or so years), leading to "lower profit growth, permanently higher unemployment, capped consumer spending growth rates and an increasing involvement of the government sector, which substantially changes the character of the American capitalistic model."
Jeremy Grantham's quarterly letter also came out this week. The GMO chairman reports that the firm reduced its seven-year forecasted return for the S&P 500 Index to 4.8% real compared with its 5.7% estimate at fair value, suggesting the S&P 500 is currently above fair value. He also writes that U.S. blue chips are a great bargain right now and suggests that emerging-markets equities will "sustain and increase their overpriced level relative to the rest of the world." Grantham also discuses what he terms the biggest factor limiting future growth: the scarcity of resources.
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