Fund Times: American Century Loses Another Top Executive

Bill Lyons will retire from his post as president and CEO of American Century Investments March 1. Lyons has been CEO for more than six years, as part of his nearly 20-year career at the Kansas City, Mo.-based asset manager. Jonathan Thomas will replace Lyons in both roles. Thomas is much newer to American Century, but he brings plenty of industry knowledge to the job. He arrived in 2005 after serving as a managing director and global COO for Morgan Stanley's investments division.

This is the latest in a string of high-profiled departures from American Century. Enrique Chang, formerly of Munder Capital Management, took over the chief investment officer role after Mark Mallon announced his retirement in October. And CIO for small/mid-cap growth and sector funds Harold Bradley will leave the firm at the end of January after serving as comanager of American Century Select AASLX, American Century New Opportunities TWNOX, and American Century New Opportunities II ANOAX. Finally, one of the firm's largest funds, large-growth offering American Century Ultra TWCUX, lost longtime manager Bruce Wimberly in 2006.

DWS Changes Two Large-Cap Funds' Managers
DWS will replace Thomas Sassi and Steven Scrudato, managers of the $1.9 billion DWS Large Cap Value KDCAX, with Germany-based manager Thomas Schuessler. Schuessler is entering his sixth year at Deutsche Asset Management and his 11th at Deutsche Bank. He'll take over the fund Feb. 5, and he'll try to turn around performance after three straight years of bottom-quintile returns in the large-value category.

The company also announced changes at large-blend fund DWS Growth & Income SUWAX. DWS replaced Theresa Gusman and two comanagers Jan. 23 after less than two years at the helm. Gusman and company failed to post top-half returns in the large-blend category during their tenure, finishing behind 68% of peers in 2006. A three-person team will take over. Robert Wang, managing director of Deutsche Asset Management, Jin Chen, and Julie Abbett (both also directors) will manage the fund using the quantitative tools employed at several other DWS offerings. All three have been with the company for several years.

IShares Proposes High-Yield Bond ETF
Barclays Global Investors plans a new fixed-income ETF tracking about 50 high-yield corporate issuers found in the iBoxx Liquid High Yield Index. The iShares iBoxx High Yield Corporate Bond Fund will come to market amid increased demand that's caused several fund families to propose bond ETFs. Among them are a few other offerings proposed by Barclays, as well as four investment-grade funds planned by Vanguard. So far, Vanguard is the cost leader in fixed-income ETFs, as its offerings will charge only 0.11%.

Current market conditions don't favor lots of high-yield exposure through either a traditional mutual fund or an ETF. Junk debt has performed strongly in recent years, narrowing income spreads between high-yield and investment-grade bonds to near-record lows. That trend is causing an increasing number of fixed-income managers to assert that, on average, junk bonds' lowered income levels no longer compensate investors for their credit risk. So, we urge investors to approach this sector with extreme caution.PAGEBREAK

John Hancock to Merge Two Struggling Equity Funds
Boston-based John Hancock plans to merge John Hancock Focused Equity JFVAX into John Hancock Mid Cap Equity JCEAX. Both funds compete in the mid-growth category and have the same comanagers: Alan North and Henry Mehlman. Focused Equity shareholders will benefit from a lower expense ratio--1.38% versus 1.5%--though better performance isn't guaranteed. Both funds posted streaky returns, at best, in recent years.

Kelmoore Settles With SEC After Misleading Investors
Boutique asset manager Kelmoore Investment Company agreed to a $100,000 settlement with the SEC after an investigation into misleading expense disclosures. Had the company accurately disclosed brokerage and other fees, expenses on its funds may have exceeded 3% instead its purported 1% levy. Investors considering any of Kelmoore's three funds should explore other options. All three Kelmoore funds charge 2% or more for A shares; such high expenses likely contributed to each fund's bottom-quintile five-year record in its respective category.