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Fund Times: Numeric Funds to Liquidate

Plus, news on the Wasatch funds' reopening, new funds from Aston, and more.

Morningstar Analysts, 01/22/2007

Numeric Investors decided to get out of the mutual fund business. On Feb. 23, it will liquidate all of its retail mutual funds. Numeric is closing the funds because they compose only 3.5% of its business (about $450 million out of $13 billion), and three of the four funds are closed to new investors, so there's no opportunity for growth. The offerings that will be liquidated are N/I Numeric Investors Growth NISGX, N/I Numeric Investors Emerging Growth NIMCX, N/I Numeric Investors Mid Cap NIGVX, and N/I Numeric Investors Small Cap Value NISVX. The closings will allow the firm to focus on its separate account business. Numeric has separate accounts that employ the same strategies as the funds, but it also runs large-cap, market-neutral, and other strategies.

This is a surprise and a real disappointment because the advisor runs some excellent quantitative funds, it has shown itself to be a shareholder-friendly shop, and many of these fund's strongest peers are closed. Also, investors should note that those that hold the funds in taxable accounts may receive significant capital gains distributions as a result of the liquidation. Possible replacements for Growth and Emerging Growth include Bridgeway Small-Cap Growth BRSGX. For the Mid Cap fund, we suggest Vanguard Strategic Equity VSEQX, and for the Small Cap Value portfolio, we suggest Bridgeway Small-Cap Value BRSVX.

Wasatch Funds to Reopen
Wasatch Advisors will reopen a few long closed funds Jan. 31 to both existing shareholders and Registered Investment Advisors. Three of the funds, Wasatch Small Cap Growth WAAEX, Wasatch Small Cap Value WMCVX, and Wasatch Core Growth WGROX, have been closed since 2001, so this is an unusual opportunity to buy the funds. The advisor announced that Wasatch International Growth WAIGX and Wasatch Ultra Growth WAMCX also would reopen on that date.

Wasatch thinks it can handle a modest inflow of new money without jeopardizing its strategy. The limited reopening of these funds makes some good offerings available in an area in which many good funds have closed.

New Funds from Aston
Aston Asset Management will launch two new funds. The first, Aston/River Road Small-Mid Cap Fund, will be run by James Shircliff, Andrew Beck, and Henry Sanders, III, of subadvisor River Road Asset Management. This team's other charge was the best-performing small-cap value category fund in 2006, Aston/River Road Small Cap Value ARSVX, which is now closed to all investors. That fund's record is less than two years old, but the managers have run separate accounts in a similar style since 1998, consistently delivering strong risk-adjusted returns.

The second offering from Aston is the Aston/Optimum Large Cap Opportunity Fund, which will be run by Andrew Goodwin III and Keith Pinsoneault, of subadvisor Optimum Investment Advisors. The pair plans to run the fund using both top-down sector rotation as well as bottom-up security selection.PAGEBREAK

Pioneer's Management Losses Mount
Longtime Pioneer Investment Management portfolio managers Chris Galizio and Steve Balter are leaving the firm to join Fidelity's Pyramis Global Advisors. The pair ran Pioneer Growth Shares MOMGX, Pioneer Focused Equity ASECX, and Pioneer Mid-Cap Growth PITHX. Both managers had worked at Pioneer off and on since the 1990s and had managed these funds for few years. Andrew Achenson, who manages Pioneer Independence, and Tim Mulrenan, an institutional account manager, will replace them at all three funds. These changes, when combined with the recent departure of the small-cap team, raise some concerns for the stability of Pioneer's equity operation.

Fidelity to Merge Regional Fund into Broader Mandate
Fidelity Investments has filed regulatory documents to merge the $470 million regionally focused Fidelity Nordic Fund FNORX into Fidelity Europe FIEUX, both managed by Trygve Toraasen. Should shareholders approve, the merger is expected to take place in June. Generally speaking, we think it's risky to focus on one region of the world, so while we won't morn the Nordic fund, we're not convinced the Europe fund makes more sense than a broadly diversified international offering.

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