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Fund Times: Former First Eagle Manager Flies Again

Plus: More manager changes, new funds, a new Fidelity CIO, and more.

Morningstar Analysts, 05/19/2008

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.

Private wealth management firm International Value Advisors welcomed former First Eagle Global SGENX and First Eagle Overseas SGOVX manager Charles de Vaulx this week. De Vaulx joins IVA after departing abruptly from asset manager Arnhold and S. Bleichroeder Advisers, the advisor to many funds in the First Eagle family, in 2007. De Vaulx had been hand-picked by that firm's previous executives as its leader after promising tenures as manager or comanager of First Eagle Global and Overseas, where he worked with Jean-Marie Eveillard.

De Vaulx's move to join IVA is not surprising. IVA launched in late 2007 after several veteran managers left Arnhold and S. Bleichroeder to start their own business. This group of managers employs a value-oriented go-anywhere approach. They seek strong companies throughout the world whose stocks look under-priced and seek to preserve capital in tougher markets. Indeed, funds such as First Eagle Global boasted positive returns during the 2000 to 2002 bear market when this group of managers worked at Arnhold and S. Bleichroeder.

USAA Plans New Global Fund, Target-Retirement Fund Lineup
USAA will launch a lineup of target-date retirement funds soon. In a recent filing it laid the groundwork for a target-retirement income fund, as well as funds with target dates of 2020, 2030, 2040, and 2050. The retirement-income fund will invest 30% in equities and 70% in bonds and cash. Funds with target dates further out will have more-aggressive allocations. The 2050 fund, for example, will start with all of its money in equities. Each fund will hold a mix of about a dozen underlying USAA funds, whose subadvisors include MFS and Marsico Capital. These funds of funds will not charge management fees on top of those of the underlying funds. So, taking into account USAA's plan to waive operating expenses for at least two years, the funds' expense ratios are projected to fall between 0.53% and 0.85%.

USAA also will launch a Global Opportunities fund this summer. Designed as a go-anywhere, absolute return strategy similar to that of a hedge fund with an emphasis on curbing downside risk, the fund will have at least five subadvisors. USAA will oversee asset allocation among global and domestic equities, bonds, and index-option strategies. It also will manage the fund's allocation to global real estate, bonds, and cash. Some of the fund's investments may be in equity-index ETFs alongside individual stocks. USAA projects a 0.99% expense ratio, which may vary slightly based on actual expenses of underlying ETFs.

Fidelity Creates New CIO Position
Fidelity appointed Fidelity Small Cap Value FCPVX manager Thomas Hense its first CIO of small-cap portfolios and CIO of Fidelity's high-income division, where he will replace Rob Lawrence, who will retire at the end of June.

Fidelity Small Cap Retirement FSCRX manager Charles Myers will replace Hense at Small Cap Value and continue to run his fund. He has been a small-cap specialist at Fidelity for his entire tenure of nearly 10 years there.PAGEBREAK

Wasatch Loses Two Managers
Wasatch Advisors will lose two portfolio managers next week when John Mazanec and Noor Kamruddin leave to pursue opportunities in Houston and San Francisco, respectively. Mazanec has been one of two lead comanagers of Wasatch Small Cap Value WMCVX since January 2002. Kamruddin has been sole manager of specialty-technology fund Wasatch Global Science & Technology WAGTX since January 2006. Small Cap Value's other lead comanager, Jim Larkins, will become the fund's sole leader. Small Cap Value has posted above-average returns on Mazanec's nine-year watch and, while his departure is a blow, we're still confident in the fund. Firm founder and CIO Dr. Samuel Stuart will take over the Global Science & Technology fund. The firm's more than 40 analysts will help. Still, we're disappointed to see the fund lose its second manager since mid-2007.

Third Avenue Fund Reopens Next Week
Third Avenue Small-Cap Value TASCX reopens next week. After receiving a large influx of cash during 2005, the fund had closed in early 2006, and it now stands at about $1.8 billion in assets. Curtis Jensen, the fund's manager since 1997 and co-CIO at Third Avenue, says his team sees more and more opportunities to make attractive long-term investments among small caps, and he does not yet want to sell most current holdings. The announcement is not surprising given that small-value funds lost nearly 7% in each of 2007's fourth quarter and 2008's first quarter. Indeed, several long-closed funds from up and down the market-cap spectrum, from strong shops have reopened recently saying they saw opportunities created by recent market turmoil.

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