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Fund Times: Marty Whitman Names Successor

Plus, Deutsche Asset Management settles market-timing charges, and more.

Morningstar Analysts, 01/03/2007

Manager Marty Whitman, who started mid-blend fund Third Avenue Value TAVFX in 1990, named his successor. In a recent shareholder letter, Whitman said Third Avenue Management's Ian Lapey will eventually lead the fund (though he gave no date for when the manager change will occur).

Whitman is the architect of a formidable track record during his tenure at the fund. Its 10-year annualized return of 13.6% through Dec. 27, 2006, tops more than 80% of its category rivals, its volatility is below average, and its annual turnover consistently falls below 25%. Lapey joined Third Avenue in 2001 and manages the Canadian-offered AIC Global Focused fund. (Third Avenue is the subadvisor to this offering.) He employs a style similar to Whitman's that stresses bottom-up security selection based on fundamental analysis.

Morgan Stanley to Close Two Popular Real Estate Funds
Morgan Stanley plans to close both its Morgan Stanley Institutional International Real Estate MSUAX and its Morgan Stanley Institutional U.S. Real Estate MSUSX funds to new investors Jan. 12. Current investors may still add to the funds.

These closings should benefit shareholders. According to Morningstar's equity analysts, only a small handful of REITs are undervalued at current prices: The close comes after a multiyear streak of strong asset growth and red-hot performance in the real estate fund category. Additionally, the REIT industry has seen an increasing number of leveraged buyouts by private equity funds that compete directly with mutual funds. Combined, these trends make it tougher for managers who have lots of new cash to find REIT stocks offering good appreciation potential without too much risk.

Deutsche Asset Management Settles Market-Timing Charges
Deutsche Asset Management settled its market-timing case with the SEC and New York Attorney General's office last month. The advisor agreed to pay $122 million in penalties for alleged market-timing in some of the DWS Scudder funds it subadvises. Under the agreement, all $122 million will be distributed to affected shareholders, in a manner to be determined by an outside distribution consultant.

DAMI's settlement also agreed to keep existing management-fee cuts in place for another five years. The advisor will also form internal ethics and compliance committees, and the company expects it will settle its market-timing case with the Illinois Secretary of State soon. That agreement will likely include paying a $4 million investor-education contribution and an additional $2 million to the state's Securities Audit and Enforcement Fund.

Aston/ABN Amro Changes Managers, Plans New Funds
Aston Funds recently announced Bernard Myszkowski's retirement from Aston/ABN AMRO Growth CTGIX. Myszkowski was the fund's manager since its September 1999 inception and was joined by current comanager Richard Drake a few months later. A new comanager, Steven Sherman, will join Drake in 2007. This will be Sherman's first role as portfolio comanager. He previously covered technology and health-care stocks as an analyst.

Aston also plans to launch two new offerings in early 2007. Its new Aston/ABN AMRO International fund will launch with an expense ratio of 1.55%. Andrew King and Daniel Hemmant of ABN AMRO Asset Management will lead this offering and will invest in growth-oriented, emerging-markets securities. They both have more than 10 years of international investing experience.

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