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Fund Times: Pioneer Loses Star High-Yield Manager

Plus, First Data buyout boosts funds, manager changes at Fidelity, and more.

Morningstar Analysts, 04/09/2007

Longtime, highly respected manager Margie Patel resigned March 30 from Pioneer High Yield TAHYX. Pioneer replaced Patel with a management team that has had success elsewhere. New manager Andrew Feltus has delivered impressive performance at Pioneer Global High Yield PGHYX. He is joined by Tracy Wright, who has worked as an analyst of high-yield and distressed companies.

From High Yield's inception, Patel ran the fund in a distinctive, and contrarian, value-oriented style. She sought industries with improving prospects and attempted to avoid those corporate sectors that were overly troubled. This analysis led her to avoid in the early 2000s the telecommunications sector, which was a sizable part of the high-yield market before suffering disastrous performance.

Patel's early use of alternatives to high-yield corporate bonds, such as convertible securities and equities, helped the fund move very differently from category peers, often to investors benefit. For instance, from the fund's inception in 1998 to the end of 2002, returns here were cumulatively more than 50%, while the category suffered a loss of 3.5% over the period. The avoidance of an imploding telecom sector and the deft use of converts drove much of that performance. To be sure, there were times when the fund underperformed, but Patel keenly stayed one step ahead of much of the competition. More recently, for example, she showed considerable talent in running an equity fund, Pioneer Equity Opportunity PEOFX, giving us confidence in the increasing role stocks played in the high-yield fund. In fact, the mid-value Equity Opportunity was one of the top performers in its category over the past 12 months. Timothy Horan will now take over there.

We're disappointed about Patel's loss at one of Pioneer's larger funds, but we're curious to see where she ends up. Investors should take a wait-and-see approach.

First Data Buyout Boosts Funds
First Data Corp.
's FDC acceptance of a buyout offer earlier this week will substantially boost several funds' returns--especially those that made it a big holding. Only five funds--including Matrix Advisors Value MAVFX and Fidelity Fifty FFTYX--held more than 4% of assets in First Data as its stock jumped over 20% on the announcement.

Sure to be disappointed were managers Bill Nygren and Henry Berghoef of Oakmark Select OAKLX. The two-man team sold First Data in late 2006 to free assets for a greater investment in First Data spin-off Western Union WU. Even so, they remain confident in their new position's prospects: In their most recent shareholder report, they cited several factors they believe will increase demand for Western Union's services, including its dominant market position in international money transfers.

Fidelity Shuffles Managers at Two Niche Funds
Fidelity Japan
FJPNX and Fidelity Select Materials FSDPX get new managers this week. At the Japan fund, Robert Rowland succeeds Yoko Ishibashi, who managed the fund for nearly seven years but failed to post inspiring results during that time. Rowland comes aboard with 15 years of experience focusing on the Japanese market, including seven years as manager of Japanese equity funds available to overseas investors.

Select Materials' new manager, Duffy Fischer, succeeds Jody J. Simes, its skipper since mid-2003. Fisher is in only his second year at Fidelity, though he gathered seven years of experience and industrials sector knowledge as a sell-side analyst at Goldman Sachs. He also manages Fidelity Select Chemicals FSCHX, which he took over in December. This change isn't too surprising: In 2006, Fidelity began efforts to place experienced sector analysts as managers in its Select funds lineup.PAGEBREAK

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