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Fund Times: Big Changes at the Top for BlackRock

Plus, news from Third Avenue, Fidelity, Barclays, and more.

Morningstar Analysts, 12/17/2007

BlackRock announced today that Keith Anderson, one of its cofounders, will leave the firm in March 2008 and will likely start his own investment fund. Most recently, Anderson has served as BlackRock's vice chairman and its global chief investment officer for fixed income. Scott Amero, an 18-year employee of BlackRock, replaces him in both roles. Amero was already co-leader (with Anderson) of BlackRock's fixed-income efforts. Joining Amero as a new co-head of fixed-income portfolio management is Peter Fisher, chairman of BlackRock Asia. And, following the company's tradition of team management and keeping up with its growth, BlackRock will add four other veterans to its fixed-income leadership team.

We think BlackRock will make this transition smoothly, though there's no denying that Anderson's departure represents a great loss of talent. But BlackRock is offering just what investors could hope for in such a situation. The remaining team is extremely strong--more than 30 of its over 100 portfolio managers have been employees of the company for 10 years or more. All things considered, BlackRock funds shareholders' money is still in very good hands.

Third Avenue Creates Opportunity by Re-opening Foreign Fund
In a category where good, still-open funds are tough to come by, Third Avenue is giving investors a break. It is reopening foreign small/mid-value fund Third Avenue International Value TAVIX on Dec. 20, 2007 (after the fund's 2007 distribution). Similar to the logic driving Longleaf Partners' reopening--discussed below--Third Avenue seeks to raise cash to capitalize on newly created opportunities from financial markets' turbulent summer and fall without selling other fund holdings. This fund, managed by Amit Wadhwaney since its 2001 inception and now about $2.3 billion in size, previously closed in mid-2005 after significant inflows. So it's likely that this action is temporary.

In an added twist, Third Avenue's press release mentions new opportunities that the team has found in markets it previously left untouched. For example, investors here shouldn't be surprised to see stocks from countries such as Poland, Thailand, or South Korea, to name a few, joining the portfolio. Third Avenue recently opened a Singapore office to bolster its international capabilities.

Bad News for ETNs?
The U.S. Treasury Department and Barclays Bank are at odds over tax treatment of exchanged-traded notes. Last week, Treasury weighed in with its opinion that ETNs should not receive favorable tax treatment. Barclays launched ETNs in mid-2006 as a way for investors to gain cleaner access to commodities, without derivatives. With an ETN, the issuer takes possession of a commodity, such as gold, and issues exchange-traded notes representing shares in the commodity. As gold's value fluctuates on an intraday basis, so does that of the shares. Barclays touted the possible tax-advantaged nature of ETNs as a significant part of their appeal. ETN returns, it predicted, would only be taxed when investors sold shares, even as intermittent reinvested dividends increased the overall value of the investment.

The decision about tax treatment of ETNs will be in lawmakers' hands, but weighing in on both sides of the issue are various trade groups representing both Barclays--receiving support from the Securities Industry and Financial Markets Association--and the broader mutual fund community via the Investment Company Institute. For example, the ICI says ETNs are fundamentally similar to traditional mutual funds and therefore should not receive favorable tax treatment. Ironically, the second objective of the ICI's stated mission includes "increasing tax-deferred savings opportunities" in addition to "ensuring fair tax treatment for fund investors." In addition to crying foul about the innovation behind ETNs, the ICI could rally for better tax treatment of all traditional mutual funds. Such a coup wouldn't just level the playing field for cash-rich asset-management companies, it would truly benefit all investors.PAGEBREAK

Templeton Funds See Manager Shuffle
Murdo Murchison, the most-senior comanager of world-stock fund Templeton Growth TEPLX, is leaving the fund to return to Scotland, though he will continue to work for Templeton in a consultant role. Under Murchison's watch, this flagship fund, which now holds nearly $40 billion in assets, returned 10% annually from 2001 through November 2007. That performance was significantly better than the fund's typical competitor and came with less volatility. Cindy Sweeting, now Templeton's director of research, replaces Murchison, joining comanagers Lisa Myers and the recently added Tucker Scott. Sweeting had previously comanaged smaller-cap international funds for Templeton.

Dale Winner is also leaving Templeton. An employee there since 1995, he had just become a comanager of Templeton World TEMWX. Templeton World is now managed by the same team as Templeton Growth, including Sweeting.

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