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RiverSource to Buy Seligman

Plus, changes at Evergreen, Janus, and more.

Morningstar Analysts, 07/14/2008

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.

RiverSource, the U.S. investment management arm of Ameriprise Financial, plans to purchase J. & W. Seligman & Co., advisor to the Seligman funds, for $440 million. According to a news release, the Seligman funds will retain their investment management teams, acting as a boutique within the RiverSource stable of funds. RiverSource hasn't detailed any plans to rationalize the combined fund lineup, although, given the amount of overlap resulting from the acquisition, fund mergers remain a possibility down the line. For the most part, RiverSource funds are reasonably priced, and it remains to be seen if shareholders in the more expensive Seligman funds will benefit from a welcome price cut. The transaction will likely close in the fourth quarter of 2008.

Evergreen Names New Chiefs
Evergreen Investments, Wachovia's asset-management unit, recently announced two key executive changes. CEO Dennis Ferro will retire at year-end, and Peter Cieszko will take his place. Cieszko currently runs the advisor's global distribution efforts, and he will help Ferro transition into his new role over the next six months. Cieszko joined Evergreen in July 2006 after running U.S. retail distribution for Citigroup Asset Management, leaving shortly after the firm was purchased by Legg Mason. The firm will also fill its year-long CIO vacancy in August with David Germany, who joins Evergreen after more than 20 years at Morgan Stanley and predecessors. Germany most recently led Morgan Stanley's fixed-income efforts.

These changes follow a slew of investment personnel changes in recent years and poor results for several of the firm's fixed-income offerings during the credit crisis. The talent drain has touched both the equity and fixed-income funds. Notable managers Liu-Er Chen, Tim O'Brien, and Dana Erikson have joined rival firms and others have left for unknown destinations. Investments in structured mortgage and asset-backed holdings have also weighed on a number of the firm's bond funds, particularly Evergreen Ultra Short Opportunities, whose net asset value fell a staggering 22% before it liquidated in June.

Janus Increases Appetite for Value
Janus plans to up its stake in Chicago-based value shop Perkins, Wolf, McDonnell and Company. The Denver firm originally bought a 30% ownership stake in PWM in 2003, bringing the advisor's distinguished Janus Small Cap Value JSIVX and Janus Mid Cap Value JMCVX funds into Janus' growth-leaning stable of offerings. The proposed acquisition will increase the Denver asset manager's stake in PWM to 80% at a price of $90 million.

We'd expect business as usual for Janus Small Cap Value and Janus Mid Cap Value, which CEO Bob Perkins and team have run in the same disciplined style since their respective launch dates in 1987 and 1998. Once the acquisition closes in late 2008, Janus plans to launch a new large-cap Perkins-run offering--Janus Adviser Perkins Large Cap Value--based on an existing institutional strategy. A few name changes are also in store: The advisor will change its name to Perkins Investment Management, and the funds themselves will sport the Perkins handle instead of Janus.

Muni Boss Migrates to New Mexico
Starting July 14, former Vanguard municipal-bond fund manager Christopher Ryon will join George Strickland and the rest of the municipal-bond team at Santa Fe, N.M.-based Thornburg Investment Management. Before leaving Vanguard in November 2007, Ryon managed several of the firm's muni funds, including a pair of Morningstar Analyst Picks: Vanguard Intermediate-Term Tax-Exempt VWITX (since 1991) and Vanguard Long-Term Tax-Exempt VWLTX (since 1996). Like Vanguard, Thornburg is known for its appealingly straight-forward, conservative approach to muni management. But in stark contrast to the Vanguard lineup, the Thornburg muni offerings are some of the most expensive broker-sold options around. With a price tag of 0.98% a year on its more accessible A shares, for instance, Thornburg Intermediate Municipal THIMX costs more than 90% of its front-load category rivals.

A Retirement Income Oddity
Following big-timers Vanguard and Fidelity into the managed-payout arena, boutique asset manager Baron Funds offers its own variation on the same theme. The firm, which specializes in small- and midcap-growth strategies, recently converted a pre-existing partnership into Baron Retirement Income Fund, which will cost an estimated 1.35% of assets annually.

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