Plus, RiverSource managers depart for Putnam and more fund reopenings.
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.
Artisan Mid Value ARTQX and Analyst Pick Artisan International Value ARTKX swung open their doors to new investors yesterday. Parent company Artisan Partners has done a good job controlling asset growth in recent years, closing the $3.2 billion Mid Value in August 2005 and the $1 billion all-cap International Value in March 2007 to protect their managers' ability to run compact portfolios. Unlike many offerings that have reopened in the past year, performance hasn't been an issue here. Both Artisan funds have held up better than the competition since the beginning of the credit crunch in the summer of 2007. However, International Value has experienced outflows, and both funds' managers--like many of their value-oriented peers--want to take advantage of the recent market volatility to invest in new ideas.
We think this is a great opportunity for investors to gain access to two proven funds. In fact, managers Scott Satterwhite, James Kieffer, and George Sertl of Mid Cap Value (they also run Artisan Small Cap Value ARTVX) and David Samra and Dan O'Keefe of International Value are early contenders for Morningstar's 2008 Domestic-Stock Manager of the Year and International-Stock Manager of the Year awards, respectively. Both funds' teams adhere to strict value disciplines and place heavy emphasis on balance-sheet health and business fundamentals. Those biases have led the teams to tread lightly in banking stocks, shielding the funds from the industry's meltdown. Both funds have shined over the long haul and come with reasonable expenses. (Mid Cap Value charges 1.2% and International Value charges 1.23%.) Furthermore, we like that the fund shop has always acted as a good steward and put shareholders' interests first.
RiverSource Managers Jump Ship to Putnam
In an effort to turn around its long-suffering large-cap lineup, Putnam has hired Riversource Investments managers Nick Thakore and Robert Ewing to run Putnam Voyager PVOYX and Putnam Fund for Growth & Income PGRWX, respectively. Thakore ran RiverSource Growth INIDX and Ewing ran Riversource Large Cap Value ALVAX. Together the managers also oversaw RiverSource Balanced INMUX, RiverSource Large Cap Equity ALEAX, RiverSource Global Technology AXIAX and RiverSource 130/30 US Equity RUSAX. Similar to Putnam's CEO Bob Reynolds, who has been on the job since June, both managers are Fidelity alumni. Thakore briefly managed Fidelity Trend FTRNX and Fidelity Fund FFIDX and Ewing ran the equity sleeve of Fidelity Balanced FBALX prior to joining RiverSource in 2002.
We have mixed feelings about these shuffles. While we don't recommend Putnam Fund for Growth & Income and Putnam Voyager, we question if the recent hires are truly upgrades for the funds. We liked Thakore's growth-at-a-reasonable-price approach at RiverSource Growth, but his track record there has been poor due to off-the-mark sector bets. That fund has tilted away from the energy sector in recent years, hampering performance when energy stocks continue to rise. When energy prices and stocks tumbled recently, the fund failed to perform any better due to management's hefty bet on media and telecom stocks, which have tanked for the year to date through Oct. 22. Ewing's record at RiverSource Large Cap Value has been poor, too. He was adding to that fund's stake in Freddie Mac FRE, Lehman Brothers, and Wachovia WB as recently as July, the latest available portfolio date.PAGEBREAK
These changes also send shockwaves through both organizations. Jeff Knight and Robert Schoen, who were named lead managers of Putnam Voyager in January, will no longer work on that fund. Eric Harthun, who was responsible for fundamental research on Putnam Fund for Growth & Income, will return to Putnam Small Cap Value PSLAX, where he served as comanager from 2002 to 2006. RiverSource hasn't said who's taking over Thakore and Ewing's funds yet.
Wasatch Reopens Micro-Cap Funds
Wasatch Fund recently reopened Wasatch Micro Cap WMICX, Wasatch Micro Cap Value WAMVX, and Wasatch International Opportunities WAIOX. The $360-million flagship offering Micro Cap has been closed since 2000, and the $98 million Micro Cap Value and $56-million International Opportunities have been closed since June. All three funds have underperformed their respective rivals for the year to date, and assets under management have fallen from peak levels. The teams believe micro-cap stocks are trading at extremely attractive valuations right now. In the company's press release, manager Dan Chace of Micro Cap said, "It is impossible to know precisely when the markets will reach bottom, but we believe this is an excellent time for investors with a long-term horizon to put money to work and are therefore re-opening our funds." While we like Wasatch's micro-cap research capabilities, we're turned off by the funds' high expenses: Micro Cap charges 2.14%, and Micro Value and International Opportunities levy 2.25%.
FPA Manager Spots Opportunities in Today's Turbulent Market
Add Eric Ende of FPA Paramount FPRAX to the ever-expanding list of proven managers who think recent market volatility has presented good buying opportunities. (See Grantham: Stocks Haven't Been This Cheap since 1987.) In his October market outlook, Ende says that many stocks in and out of the fund are attractively priced based on a multiyear time horizon, especially energy stocks, which have fallen off so sharply in recent months that their prices now reflect "a far more dire future scenario than is likely to occur." He and comanager Steven Geist are considering adding to the fund's energy exposure. Paramount has been holding up well against competition for the year to date, and it has generated competitive long-term returns under the duo's watch.
Osterweis Estimates Capital Gain Distributions
Osterweis Capital predicts that mid-blend Analyst Pick Osterweis Fund OSTFX and multisector-bond Osterweis Strategic Income OSTIX will make year-end distributions of approximately 3% and 2%, respectively, of their recent net asset values. As of Oct. 22, Osterweis Fund has a NAV of $19.30 and Osterweis Strategic Income a NAV of $10.01.