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Another Fidelity Exec Jumps Ship to Putnam

Plus, Oppenheimer's latest lawsuit, PIMCO's newest fund, and more.

Morningstar Analysts, 04/20/2009

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.

Walter Donovan has resigned as head of Fidelity's equity division to become chief investment officer at Putnam Investments. Donovan started at Fidelity in 1995 as director and head trader of the taxable fixed-income team and subsequently held various leadership roles on the bond side before being named president of the equity division in 2007. In that role, he oversaw the firm's dramatic expansion of its analyst ranks, including the hiring of experienced outsiders and the creation of the analyst career path. He succeeds Kevin Cronin as chief investment officer, who left Putnam in October 2008 for personal reasons.

Donovan is not the first Fidelity executive to move across town to Putnam. Since Bob Reynolds was named Putnam's new CEO in July 2008, he has recruited several of his former Fidelity colleagues to join the Boston-based firm, including senior managing director and CFO Clare Richer, managing director and controller Andra Bolotin, and portfolio manager David Glancy. Despite the influx of new faces, plenty of challenges remain for Reynolds and his ranks as they try to reinvigorate the firm's long-struggling fund lineup and improve deep-rooted cultural problems that have plagued Putnam for years.

Oppenheimer Slapped with a Suit
After several of OppenheimerFunds' bond funds tanked during 2008, the firm's latest challenge may be in court. The state of Oregon has sued the firm, which it had enlisted to manage part of its 529 college savings plan, claiming that excessive risk-taking in Oppenheimer Core Bond OPIGX was unwarranted and led to severe losses. The intermediate-term bond fund lost 36% in 2008 after risky bets on commercial mortgage-backed securities went awry. The suit states that the fund, billed as a conservative offering, overstepped its boundaries by using derivatives and knowingly made risky decisions that were inappropriate for a college savings plan. Oppenheimer denies any wrongdoing and is planning to defend itself against the claims.

The troubled fund was part of several other states' college savings plans, including Texas, Illinois, Maine, and New Mexico. Illinois is currently trying to work with the other states to negotiate a settlement. Meanwhile, the firm is also facing lawsuits stemming from losses in Oppenheimer Champion Income OPCHX and Oppenheimer California Municipal OPCAX.PAGEBREAK

Muni Debuts
The $747 billion PIMCO is planning to launch PIMCO Muni GO Fund. As its name suggests, the new municipal fund will invest mostly in general-obligation bonds, but it can also stash 20% of its assets in prerefunded bonds, Treasuries, and money market instruments. John Cummings, who in late 2008 replaced Mark McCray as lead manager of all the firm's municipal offerings after middling performance, will lead the effort.

Santa Fe, N.M.-based Thornburg Investment Management launched Thornburg Strategic Municipal Income TSSAX on April 14. The new high-yield muni fund will invest in bonds with a range of maturities and credit qualities. Firm veteran George Strickland and Josh Gonze, who have a mixed record at other Thornburg muni offerings, will run the new fund. Christopher Ryon, who joined the firm in mid-2008 from Vanguard, is also listed as comanager. Costs are steep: After fee waivers, the A share will sell for 1.25%.

T. Rowe Price Manager to Retire
Frances Dydasco, lead manager of Fund Analyst Pick T. Rowe Price New Asia PRASX, will retire from the firm in August for personal reasons. Ahn Lu, who has been with the firm for eight years and was recently named comanager, will assume sole responsibility in August.

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