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American Funds Plans Rare Rollout

Plus, AMG's shopping spree, manager changes, and more.

Morningstar Analysts, 07/28/2008

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.

A new fund is on its way from American Funds. In keeping with the firm's record of avoiding trendy or overly narrow fund launches, the new fund, called American Funds International Growth and Income, will invest in a broad range of companies abroad, including some in the developing world. Management plans to limit the fund's stake in domestic stocks to 10% or less of the total pie.

Rollouts for this mutual fund titan have been few and far between in recent years. In fact, the only funds that American has introduced in the past 10 years have been American Funds New World NEWFX in 1999, American Funds Short-Term Bond Fund of America ASBAX in 2006, and its series of target-date funds last year. Although the firm has a number of established domestic-stock funds and a trio of funds that fall into Morningstar's world-stock category, American Funds EuroPacific Growth AEPGX is its only other foreign large-cap offering.

Initially, the fund will divide its assets among three portfolio counselors from Capital Research and Management's skilled ranks: Steven Watson, Carl Kawaja, and Andrew Suzman, who already have 18, 17, and 15 years of experience, respectively, as portfolio managers and research analysts at the firm. Watson has run a slice of moderate-allocation fund American Funds Income Fund of America AMECX since 1994 and world-stock offering American Funds New Perspective ANWPX since late 2005. Kawaja has also managed a portion of New Perspective along with the emerging-markets-focused American Funds New World since 1999, and he took on management duties at EuroPacific Growth in 2001. Suzman has picked stocks at Income Fund of America since 1995.

According to Capital Research custom, each manager will run his separate portfolio independent from the others. Unlike some of its siblings, the fund will not include a portfolio of stocks run by the research team. The firm has not yet disclosed the fund's expected annual costs.

AMG Expands Collection
Affiliated Managers Group has agreed to purchase a 60% equity interest in New Jersey-based international boutique, Harding Loevner. Founded in 1989, the shop currently manages $6 billion in international, developing markets, and global strategies. The firm is best known for its diversified emerging-markets fund, Harding Loevner Emerging Markets HLEMX, which is approaching its 10-year anniversary. Manager Rusty Johnson and team built a successful long-term record here by employing the firm's trademark high-quality growth style in buying not only established companies but also lesser-known stocks and mid-caps. With $2.2 billion in assets, the fund dwarfs its next largest charge, the foreign large-growth offering Harding Loevner International Equity HLMIX.PAGEBREAK

We don't expect this transaction to have a noticeable impact at the fund level. AMG's more than 20 affiliates--including such distinguished money managers as Third Avenue; Tweedy, Browne; and Friess Associates (advisor to the Brandywine funds)--operate independently. The firm also announced that its leadership team has committed to remain onboard for a decade or more, and long-term employment contracts are in place. With the rest of the investment team continuing on, shareholders can expect business as usual here.

AMG will also acquire Boston-based Gannett Welsh & Kotler, an asset-management unit of the Bank of New York Mellon. The 34-year-old shop runs more than $7 billion in municipal-bond, core taxable fixed-income, and small- and multicap equity strategies. Gannett Welsh & Kotler also manages three mutual funds in the BNY Hamilton fund family: BNY Hamilton Multi-Cap Equity BKMCX, BNY Hamilton Small Cap Core Equity BNPAX, and BNY Hamilton Municipal Enhanced Yield BEYIX. AMG will purchase the Bank of New York Mellon's entire ownership interest in the firm.

Target-Retirement Manager Leaves PIMCO
After a few short months running PIMCO's newly minted target-retirement funds, manager Jamil Baz has left the bond shop to join London-based hedge fund GLG Partners. Baz's tenure with the firm is also relatively brief, having joined PIMCO in April 2007. Vineer Bhansali has taken over Baz's responsibilities on the funds. Bhansali, who first joined PIMCO in 2000, is an executive vice president of the firm and a senior member of the portfolio-management group. This is Bhansali's first time managing a mutual fund.

The PIMCO RealRetirement fund series, which totals five funds with target dates ranging from 2010 to 2050, launched on March 31, 2008. With sizable exposures to commodities, real estate, and inflation-protected bonds supplementing the funds' mix of stock and bond holdings, these funds offer a twist on the more traditional target-retirement formula.

MetWest Gets New Chief
There's a new top executive at fixed-income shop Metropolitan West Asset Management, advisor to Morningstar Analyst Pick Metropolitan West Total Return Bond MWTIX. David Lippman, a member of the Los Angeles-based firm's portfolio-management team since 2001, takes over the role from Scott Dubchansky, who has served in the CEO role since the firm's formation in 1996. While overseeing MetWest's strategy and operations, Lippman remains involved in the investment decision making as a portfolio manager and member of the credit and structured product committees. Dubchansky is continuing on as managing director and partner of the firm, as well as chairman and principal executive officer of the fund board.PAGEBREAK

SSgA Reopens Fund, Launches ETFs
The $3.7 billion in assets SSgA Emerging Markets SSEMX will reopen its doors to investors Aug. 1, 2008. Advisor State Street Global Advisors first closed the fund Aug. 1, 2007, in an effort to slow the pace of inflows. With more than 300 holdings spread across all countries in the MSCI Emerging Markets Index, the fund is one of the most broadly diversified options for dedicated exposure to developing economies.

State Street also unveiled 10 new international-sector exchange-traded funds to its SPDR ETF lineup. The new offerings will only invest in non-U.S. companies, and they'll track a series of S&P indexes divvied up according to the Global Industry Classification System. The ETFs, which began trading on the American Stock Exchange this week, each cost an annual 0.50% of assets.

Bold Bank-Loan Fund Loses Manager
Changes are under way for Van Kampen's bank-loan efforts. Christina Jamieson, lead manager at Van Kampen Senior Loan XPRTX since 2002 and co-head of the firm's bank-loan team, will retire in October 2008. Starting Aug. 1, she will begin to transition her day-to-day duties to Philip Yarrow, her comanager since March 2007. Supporting Yarrow here are two new comanagers, Gerard Fogarty and Jeff Scott, who started at Van Kampen in 2007 and 2005, respectively. Although the bank-loan group previously operated independently from Van Kampen's broader fixed-income efforts, the team will now report directly to the firm's fixed-income group.

Bank-loan funds have struggled since the credit crisis took its first swing at bond markets one year ago. On average, funds in this niche field have shed 4.8% of their value for the 12 months through July 23, the worst showing for a taxable-bond-fund category over this past year. But this fund, stung by its use of leverage and a few issuer defaults, fell harder than most, losing 9.4% during this same stretch.

Federated Fund Bulks Up
Two comanagers have joined the team running mid-cap growth offering Federated Kaufmann KAUFX. John Leibee and Jonathan Gold now share the load with lead managers Lawrence Auriana and Hans Utsch, who've led the efforts here together since the fund first launched in 1986, and comanagers Jonathan Art and Mark Bauknight, who joined the fund in 2003. Gold previously worked as a senior analyst at the firm since 2004. Leibee joined the firm in May 2008 after a brief stint at Ospraie Management, an asset-management firm focused on commodities and industrials, and more than two decades at Citigroup Global Markets. Leibee was simultaneously named a comanager on the fund's fledgling large-growth sibling Federated Kaufmann Large Cap KLCAX

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