Plus, railroads boost Marsico funds, and more.
In the high-yield bond category's second high-profile manager departure in as many weeks, PIMCO lost one of its veterans to retirement this week.
On the heels of Margie Patel's resignation last month from Pioneer High Yield
Under Kennedy, the fund's five-year annualized return through April 11, 2007, only met its high-yield bond category average, but he achieved those results while better protecting shareholders from credit risk than the fund's typical competitor did. For example, the fund recently held about 91% of assets in B or BB bonds, the highest rated 'junk-bond' tiers, while its average rival held 79% of assets in such securities. That conservative look held the fund back in recent years, as the market rewarded investors who took on more credit risk. Low-quality junk bonds have rallied for several straight years, creating an uphill battle for conservative portfolios such as this one.
We'd be surprised if Hudoff changes this fund's conservative tack. In mid-2005, he noted to Morningstar his concern about rich valuations in the high-yield asset class. Thus, today the fund remains strongly positioned for an economic slow-down.
Berkshire's Railroad Bet Helps Marsico Capital
Several Marsico-advised funds received some good news Monday after Warren Buffett's Berkshire Hathway
Many of the nation's biggest advisors, such as Fidelity Investments and Capital Research & Management (advisor to American Funds) own Burlington Northern. But Marsico funds own more meaningful positions in the railroad--they're larger, as a percent of total assets--than those of nearly all large-growth competitors. For example, Marisco Focus
The Marsico team notes several reasons for this bet, which it began making in 2005 and has held ever since. Although the railroad business probably isn't the most prominent growth industry in many investors' minds, this team looked closely at Burlington Northern after its research of coal and agriculture companies showed increasing railroad volume in coming years. They also appreciated the pricing power that Burlington Northern and Union Pacific
RS Fund Gets New Manager
Effective May 1, Jim Callinan will replace John Seabern as lead manager of RS Diversified Growth