Plus, Evergreen's SEC settlement, a new fund, mergers, and more.
Advisor Litman/Gregory is reopening Masters' Select International MSILX. The fund closed three years ago after several years of strong returns relative to peers in the foreign large-blend category. Since that time, the run has continued, courtesy of five separate subadvisory teams including the likes of Third Avenue Management and Marsico Capital Management. All told, the fund's five-year annualized return of 24.8% tops more than 90% of rivals.
Despite these successes, the fund saw net redemptions in 12 of the past 15 months, according to a news release. So, this move by Litman/Gregory isn't necessarily intended to grow assets, but to keep the subadvisors' cash flows at least neutral or slightly positive so the managers don't have to make unnecessary trades to meet redemptions. Overall, the fund remains a modest $2 billion in size, so investors have a good opportunity to buy access to its subadvisor teams at a reasonable 1.06% expense ratio.
Federated Plans Newest Large-Cap Fund
Federated Investors' latest fund will debut in early December. Federated Kaufmann Large Cap will focus on stocks in the Russell 1000 Index, and it will be managed by the same four-person group now at mid-growth fund Federated Kaufmann KAUFX and small-growth fund Federated Kaufmann Small Cap FKASX. At each of these funds, the team has overcome above-average expenses to deliver strong long-term results. Also, Kaufmann holds 23% of assets in foreign stocks, while Kaufmann Small Cap holds 17% in them. Such experience is reassuring, as this new fund will allow as much as 30% of assets in overseas fare. Initial expenses at the new offering will be about 1.42%.
Evergreen, SEC Settle Market-Timing Allegations
Evergreen Investments, a subsidiary of Wachovia Corporation WB, has settled with the SEC on allegations of market-timing dating back to 2001. Evergreen will pay a total of $32 million in fines and penalties to be distributed to affected fund shareholders, while Wachovia will pay an additional $500,000. Details in the company's and SEC settlement announcement indicate that between 1999 and early 2003, an Evergreen executive and other personnel conspired with a Wachovia broker to let one of the broker's clients market-time Evergreen funds. The firm's news release indicates that the funds involved were Evergreen Mid Cap Growth EKAAX (formerly known as Small Company Growth) and Evergreen Municipal Bond EKEAX.PAGEBREAK
RiverSource Proposes Mergers, Promotes Muni Manager
RiverSource Investments will consolidate its fund family in early 2008. RiverSource Core Bond ACBAX will merge into RiverSource Diversified Bond INBNX. Both funds compete in the intermediate bond category, share the same managers, and have similar expenses. Diversified Bond's performance has been strong since its current team took over in 2003, and there's little reason for concern here. Another positive move: Laggard large-value fund RiverSource Value AVLAX will merge into RiverSource Diversified Equity Income INDZX. Diversified Equity Income's longest-tenured manager, Warren Spitz (along with newer comanagers), has built a strong record there since taking over in late 2000. Finally, RiverSource International Equity AAICX will merge into RiverSource Disciplined International Equity RSDIX. Shareholders lose access to subadvisor Marsico Capital Management and talented manager James Gendelman, but the in-house team that manages Disciplined International Equity has fared quite well itself, not to mention, it's the cheaper of the two offerings.
In its muni lineup, RiverSource's single-state funds for Massachusetts, Ohio, and Michigan will merge into RiverSource Tax-Exempt High Income INHYX. Despite the fund's name, it resides in the muni national long category and only invests about 25% of assets in bonds rated below A; most of them are BBB fare. Shareholders should evaluate long-term tax implications, as the Tax-Exempt High-Income's national focus means that it invests in plenty of bonds outside their home states. And there's another reason to rethink investment here and approach with caution: Manager Rick LaCoff, who only took over in mid-2006, just left unexpectedly. RiverSource promoted one of its muni-sector team members, Catherine Stienstra, to portfolio manager.
Aberdeen Buys Nationwide Team and Funds
The U.S. subsidiary of the U.K.'s Aberdeen Asset Management, which goes by the same name, is acquiring part of Nationwide Financial Services' mutual fund business. The deal should close at the start of October and will include Nationwide's team of domestic-stock portfolio managers, analysts, and traders. It also includes the $7 billion in assets this team manages in domestic equities via more than 30 mutual funds and trusts, which this team will continue to manage.
Changes at AllianceBernstein
Paul Rissman, former manager of AllianceBernstein Growth & Income CABDX and AllianceBernstein Balanced Shares CABNX and current head of the firm's growth business, will retire Jan. 30, according to the firm. Rissman, who also once oversaw the firm's growth analysts and managers and their CIO, is leaving to pursue other interests, the company said. Lisa Shalett, the former head of Sanford C. Bernstein's sell-side research operation who replaced Rissman as AllianceBernstein's growth CIO earlier this year, will take over as head of the overall growth business.