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Star Manager's Team Leaving with Him

Plus, Vanguard expenses will rise, and more.

Morningstar Analysts, 03/30/2009

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.

Morgan Stanley has confirmed our expectations and announced that star manager Hassan Elmasry will take his team with him when he leaves later this year to start his own firm. Elmasry, however, will delay his departure until June 15; the firm had previously said he would leave at the end of April. In the meantime, Morgan Stanley is searching for a team to take over the funds and expects to announce a new squad before May.

Elmasry and his team currently run multiple Morgan Stanley funds in the United States, U.K., Australia, and Luxembourg, including Van Kampen Global Franchise VGFAX (and its Morgan Stanley clone), Van Kampen American Franchise VAFAX, and Van Kampen Global Value MGEAX. We still think his departure is a significant blow to the funds he runs and to Morgan Stanley's efforts to build its credibility as an asset manager. That his team is also leaving with him further diminishes the appeal of the funds they run. Those leaving with Elmasry include Michael Allison, Paras Dodhia, Jayson Vowles, and John Kelly-Jones. In other words, Morgan Stanley will be starting from scratch on these offerings, though they say the funds will "continue to focus on high quality companies with dominant intangible assets that possess inherent sustainable competitive advantages."

For investors here, there would seem to be little reason to stay around once Elmasry and his team set up shop and offer their new funds, assuming that the new offerings carry reasonable fees and will be available to U.S. investors.  If Elmasry's funds become available in the U.S., we will let readers know in Fund Times.

RiverSource Fixed-Income Manager Leaving Firm
Another prominent manager is also leaving his firm. Jamie Jackson, who comanaged four RiverSource fixed-income funds, has decided to pursue other options. He was responsible for Treasuries, agencies, and broad interest-rate strategies for RiverSource Diversified Bond INBNX, a $3.2 billion fund. Jackson was the sole manager on RiverSource Inflation Protected APSAX, and comanaged with Todd White on RiverSource Short Duration US Government IFINX, among other funds. Todd White, a comanager with Jackson on many funds, will now take the lead on many of the funds.

Western Asset Management Lets Support Staff Go
Western Asset Management has laid off approximately 100 employees, or 10% of its staff, to help bring costs under control. According to the firm, no investment professionals were laid off. The company has seen its assets under management drop more than 15% to around $515 billion from the end of 2007 until the end of last year.

Higher Fees--at Vanguard?
As analyst Dan Culloton noted last week, the unthinkable has come to pass: Vanguard expense have increased in part because of falling asset levels at many of its funds.

DWS to Liquidate Three Funds
On or about June 5, 2009, DWS Core Plus Allocation CORAX, DWS Micro Cap SMFAX, and DWS Disciplined Long/Short Value LSVLX will be liquidated. None of the funds has been a stand-out. The Core Plus fund is relatively small with $18 million in assets and has been a poor performer since its inception. The Micro Cap fund is a bit larger but also has lagged since its 2002 inception. It has been in the top half of its Morningstar small-growth category in only one of the previous six calendar years. Finally, the Long/Short fund has been a disappointment, falling more than 40% in 2008.

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