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Fund Times: Veteran Oppenheimer Manager Retires

Plus, news on more LBO frenzy, growing foreign-fund flows, and more.

Morningstar Analysts, 06/04/2007

OppenheimerFunds veteran Bill Wilby will retire from the firm after 16 years service, as well as from his management duties at the $8 billion Oppenheimer Capital Appreciation OPTFX, where he and comanager Marc Baylin took over in October 2005. Since July 2005, Wilby also aided in the development of equity investment strategies at Oppenheimer, in his capacity as director of equities. Baylin remains on the job.

Wilby's retirement is a loss for the firm and for the Capital Appreciation fund. Wilby is a savvy growth investor, particularly in the international arena. For more than a dozen years Wilby delivered strong results in a variety of market conditions at Oppenheimer Global OPPAX. He did so by employing an uncommon macro-level investment strategy. For instance, Wilby searched out companies most likely to benefit from rising mass affluence, the development of new technologies, or global aging dynamics. He didn't comanage Capital Appreciation long, but he had already put his stamp on that portfolio as well.

That said, we don't think investors should panic over Wilby's departure. Not only has Baylin worked alongside Wilby here for more than 18 months, he has a good level of experience overall. Prior to joining Oppenheimer in September 2005, Baylin led J.P. Morgan's large-growth team, and worked at T. Rowe Price as an analyst and portfolio manager for T. Rowe Price New America Growth PRWAX for nearly a decade. Oppenheimer also recently hired two new senior analysts to back the growth team.

Archstone LBO Benefits Funds
The frenzy of leveraged buyouts continued with the recent bid for real estate investment trust Archstone-Smith ASN. On May 29, the firm agreed to be sold to a private equity partnership led by real estate investment firm Tishman Speyer and Lehman Brothers. The group will pay $60.75 per share, or more than $22 billion, including firm debt, with the sale to close in the third quarter of 2007. The announcement caused the REIT's stock to spike nearly 20% in the days following the announcement of the deal.

A few of the real estate funds we most respect had sizable positions in Archstone, and have likely benefited handsomely from the buyout offer. T. Rowe Price Real Estate TRREX recently had 3.2% of fund assets in Archstone, and JPMorgan U.S. Real Estate SUSIX had an even heftier 4.4% stake. Although the REIT sector has been struggling in recent months, a spate of buyouts like this could substantially aid returns.

Investors Continue to Dine on Foreign  Fare
According to preliminary estimates from industry observers, April saw international and globally focused mutual funds lead all categories in terms of added fund flows. In fact, according to the Investment Company Institute, international equity funds saw nearly $16.6 billion in inflows that month. This amount is more than double the level invested in this area of the market in March, and it represents a majority of the inflows into equity offerings.

Funds in the foreign large-blend, foreign large-value, world-stock, and foreign large-growth categories would be the offerings attracting some of the largest amounts of new money. This is not unexpected, as these categories have produced strong results in recent years, far in excess of those put up by their domestic counterparts. Also not surprising is the fact that one of the best-selling funds in April, and indeed for the year so far, is Dodge & Cox International Stock DODFX, one of our favorites.

Pioneer's New Catastrophic-Focused Offering Launched
Pioneer Investments has launched an unusual closed-end fund, Pioneer Diversified High Income Trust HNW, that allows investors access to so-called "catastrophe bonds." Insurers use these bonds to help mitigate the risk of natural disasters, such as earthquakes and hurricanes. In addition to these securities, the fund will also invest in global high-yield bonds and floating-rate bank loans.

The offering will be comanaged by Andrew Feltus, of Pioneer High-Yield TAHYX and Pioneer Global High-Yield PGHYX, who'll run the global high-yield bond segment; Jonathan Sharkey, of Pioneer Floating Rate Trust PHD, who'll run the bank-loan segment; and Charles Melchreit, of Pioneer Government Income AMGEX and Pioneer Short-Term Income STABX, will handle the overall asset allocation decisions. The catastrophe bonds used in the fund will be selected by subadvisor Montpelier Capital, and fund expenses will be capped at 1.34%. All told, this will certainly be an interesting fund to follow.

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