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Fund Times: Posner Calls It Quits at Legg Mason

Plus, a loss for Oberweis, new offerings at Schwab, and more.

Morningstar Analysts, 03/17/2008

Legg Mason announced yesterday that Brian Posner, chief executive and co-CIO of its ClearBridge Advisors asset-management unit, will leave the firm at the end of the month after two years in the role. Peter Bain, a senior vice president at Legg Mason, will step in as interim chairman, and Hersh Cohen stays on as sole CIO. Legg Mason established ClearBridge Advisors when it bought Citigroup's Smith Barney asset-management business in early 2006, and the funds run by ClearBridge wear the Legg Mason Partners moniker.

During his tenure at ClearBridge, Posner attempted to unite the former Smith Barney managers under a single cooperative investment culture. It's too early to say whether Posner's initiative has been successful, although he did make strides in streamlining the Legg Mason Partners' fund lineup, which previously was repetitive and bulky.

On the fund level, Posner's exit directly impacts Legg Mason Partners Capital SACPX, which he has run with comanager Brian Angerame for almost two years. Although Angerame's continued presence here should provide continuity, the fund has failed to impress during the pair's brief tenure. Before joining ClearBridge, Posner had previous stints as a portfolio manager for Fidelity and Warburg Pincus before starting a hedge fund in 2000.

Oberweis Loses Election, Assets
Political victory was short-lived for ex-growth fund manager, Jim Oberweis. After winning the Republican primary for the U.S. Congressional seat held by former House Speaker Dennis Hastert (R-Ill.), Oberweis lost the election this week to Democratic underdog Bill Foster. Oberweis had previously made multiple runs for office, and this latest defeat marks his fourth high-profile loss in six years. Foster, by comparison, is new to the political arena, and his victory is particularly noteworthy, given the 14th district's history as a GOP stronghold. During the contentious campaign, Foster pilloried Oberweis Asset Management, which is now run by Oberweis' son James W. Oberweis, in ads that criticized the firm's investment in Chinese firms.

Oberweis Asset Management has had its own share of problems lately, as recent market volatility has made many investors skittish. In January alone, the firm's assets under management dropped almost 40%, to $817 million.

Housing Crisis Spurs Change at DWS
It's the end of an era for a trio of DWS funds subadvised by Baltimore-based Alex. Brown Investment Management. The fund board approved a proposal by Deutsche Asset Management, advisor to the DWS Scudder funds, to end a long-standing relationship with Alex. Brown. Alex. Brown had run DWS Equity Partners FLEPX and DWS Value Builder FLVBX since they first launched more than a decade ago, and DWS Communications TISHX for more than two decades. In 2007, Equity Partners and Value Builder were stung by a hefty stake in financials and housing-related stocks such as Countrywide Financial CFC. Surprisingly, that bet dragged the Communications fund down as well, as it had long devoted a slice of assets to financials names. The team at Alex. Brown is made up of experienced investors, but their appetite for unloved areas combined with a concentrated approach made for a bumpy ride at all three offerings.PAGEBREAK

This change is just the latest step in Deutsche's ongoing effort to whip its equity funds, which are the result of a series of acquisitions that took place earlier in the decade, into shape. Equity Partners will be comanaged by Thomas Schuessler and David Hone. At the start of 2007, the Frankfurt, Germany-based Schuessler replaced longtime manager Tom Sassi on DWS Large Cap Value KDCAX after Sassi's approach fell into a three-year slump. David Hone has managed DWS Equity Income SDDAX, another of the firm's large-cap value offerings, since 2002. He'll also run Value Builder in a more moderate style than manager Hoby Buppert employed. Whereas Buppert held a slug of high-yield bonds in the fund's fixed-income sleeve, Hone will stash 25% of assets in the more temperate DWS Short Duration Plus PPIAX. Ralph Oberbannscheidt, the head of Deutsche's telecom research team, will take over duties at the Communications fund. He's managed and co-led several sector funds for European investors but lacks a lengthy public track record in the United States.

Deutsche's subadvisory relationship with renowned investor David Dreman's firm appears safe for the time being. Deutsche plans to merge its small-cap laggard, DWS Small Cap Value SAAUX, into DWS Dreman Mid Cap Value MIDVX later this year. The fund had been run by an in-house quant team for the past two years, and market volatility in 2007 was decidedly unkind to their strategy (the fund lost 18% for the year). Shareholders are expected to vote on the proposal in June.

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