Plus, Federated Investors plans to merge funds.
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.
As Wall Street closes out on a year of record losses, a number of fund shops have issued press releases and updates in recent weeks: Many offered their takes on the state of the economy, and others offered predictions and best picks for 2009.
Bob Turner, CIO of Turner Investments and lead manager of the firm's large-cap growth funds, firmly believes that "forced liquidations by institutional investors, mutual funds, and hedge funds, among others, have been at least partly responsible for the market overshooting on the downside" and that "investors are underestimating the impact of the massive monetary and fiscal stimulus that the federal government has applied to the economy." He predicts that the U.S. economy will start to recover by mid-2009 and that company earnings will improve throughout next year.
Manager John Hussman of Hussman Strategic Growth HSGFX and Hussman Strategic Total Return HSTRX also thinks that stocks are undervalued but remains cautious, saying he is "very aware of the tendency for valuations to overshoot as much to the downside as they often do to the upside." Hence, much of Strategic Growth's equity exposure remains hedged out with S&P 500 puts. For conservative-allocation offering Strategic Total Return, Hussman opts to keep the bulk of the fund's assets in Treasury Inflation-Protected Securities, "largely because TIPS prices now reflect the prospect of sustained deflation over the next decade." Both Hussman funds have held up well in this turbulent year.
Bob Greer, product manager of asset-allocation offering PIMCO All Asset PASDX, says that subadvisor Research Affiliates' quantitative models indicate that "the worst of the credit squeeze, the dislocation in the credit markets and the plunge in financial service sector stocks is behind us." But "we are already in a consumer-led recession, which is the other shoe that has not dropped in the market, and stock prices are not yet fully discounting the impact of this on companies outside the financial services sector," he warned. Research Affiliates thinks that TIPs are attractive investments for reasons similar to Hussman's. The firm also likes local-currency, emerging-markets debt, because many of these countries have fiscal and current-account surpluses and are well positioned to deal with additional internal and external market shocks.
Bill Gross is also cautiously optimistic in his latest investment look: "Dow 5,000? We don't have to go there if current domestic and global policies are focused on asset price support and eventual recapitalization of lending institutions. But 14,000 is a stretch as well."
Curtain to Close on Federated Fund
Pending shareholder approval, the $9 million Federated Stock and California Muni SCFAX will merge with larger sibling Federated Muni and Stock Advantage FMUAX. Federated Investors says that the two-year-old Stock and California Muni offering has not been as well received in the market as was anticipated. The same team runs both funds and keeps a rough 60%/40% split between stocks and bonds. However, as its name implies, Stock and California Muni's bond sleeve invests solely in California-issued muni bonds, which are exempt from both federal and California income taxes, and Muni and Stock Advantage's bond portion invests in national muni bonds, which are only exempt from federal taxes. The acquiring fund's A and C shares are cheaper, though. A special shareholders meeting will be held March 25, 2009.
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