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Fund Times: Dodge & Cox's Latest Moves

Plus, Fidelity's newest fund, new subadvisors elsewhere, and more.

Morningstar Analysts, 02/25/2008

Dodge & Cox thinks the euro and pound may be significantly overvalued versus the United States dollar. That was the gist of a page's worth of management discussion in Dodge & Cox International Stock's DODFX 2007 end-of-year annual report. As a result, it has decided to hedge assets denominated in those currencies. Dodge & Cox came to this decision by closely evaluated the long-term fundamentals of the aforementioned currencies. Their multiyear rise against the U.S. dollar benefited absolute returns in recent years, but it also means the fund now carries more currency risk than in the past. Dodge & Cox isn't a shop to make this sort of move without being very confident in its outlook for these currencies and a belief that they are significantly overheated.

Fidelity Launches Broker-Sold Mega-Cap Fund
Fidelity Advisor Mega Cap Stock is now available. An advisor-sold clone of Fidelity Mega Cap Stock FGRTX (formerly Fidelity Growth & Income II), this fund is managed by Richard Mace, who is backed by a team of dedicated mega-cap analysts. The group will rely on more than just fundamental research in building this portfolio. They'll also consider input from custom-built (for mega-caps) quantitative and technical models, and they'll layer top-down, macroeconomic-driven thinking into the fund's construction.

Mace has managed several Fidelity funds since joining the firm in 1987. One of his biggest recent charges was Fidelity Overseas FOSFX. That fund saw inconsistent performance under Mace, especially in the earlier part of this decade, as he made significant bets on stocks in volatile sectors such as semiconductors. For more on Fidelity, check out our Fidelity Fund Family Report.

Fidelity Survey Reveals Still-Healthy Interest in IRAs
According to a survey conducted by Fidelity Investments and National Financial, recent stock-market volatility and concern over increasing oil prices hasn't dispirited U.S. investors to the point that they're socking away cash under mattresses. The survey found that at about 60% of IRA owners either already have made a year-2007 contribution to their IRA, or plan to do so before the April 15 deadline. And nearly one third of respondents increased their year-over-year contribution amount. But the survey noted a key bit of feedback it heard from many participants: They wished they were saving more for retirement.

Van Wagoner Funds Get New Management
Van Wagoner has asked shareholders to approve new subadvisors on three funds: Van Wagoner Small Cap Growth VWMCX, Growth Opportunities VWGOX, and Emerging Growth VWEGX. Firm founder Garrett Van Wagoner currently manages all three funds. He emerged as a hot stock-picker during the late-90's tech-stock boom but his funds have since performed horribly in both absolute and relative terms. This proposal would make Van Wagoner Capital Management the fund's advisor, with Husic Capital Management the subadvisor of Growth Opportunities and Insight Capital Research & Management the subadvisor of the other two offerings. Van Wagoner also announced plans to bring its Post-Venture, Technology, and Mid-cap Growth funds out of liquidation and back into contention, but it's still unclear which firm will manage those funds.

Unless these funds' expense ratios decline dramatically, they will remain an awful deal. Their levies range from 3.7% to 5.3%, as assets have dwindled to a combined $30 million. It begs the question of whether shareholders would be better off had Van Wagoner sold his shop to a larger operation with both a proven track record and funds with lower expenses. As for one of the new subadvisors, Frank Husic of Husic Capital ran Vanguard Capital Opportunity VHCOX from its 1995 inception through early 1998, but Vanguard replaced him with the fund's current subadvisor, Primecap, after rocky performance.

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