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Fund Times: Key Management Team Departs Nicholas-Applegate

Plus, news on an ETF that tracks oil, MFS, Turner, Guinness Atkinson, and more.

Morningstar Analysts, 04/03/2006

Stacey Nutt and five other members of Nicholas-Applegate's systematic equity team have left the firm to form ClariVest Asset Management LLC. Nicholas-Applegate CIO and managing director Horacio Valeiras, who has stepped in to lead the systematic team for now, terminated Nutt on March 9 when it became clear to him that Nutt had made plans to launch his own firm. Nutt and Nicholas-Applegate are in arbitration proceedings. The split was reportedly spurred by a failure to agree on a new compensation plan.

The loss is significant for Nicholas-Applegate. Collectively, Nutt, David Pavan, Todd Wolter, David Vaughn, Frank Feng, and Aerus Tran composed about half of the systematic team. That said, Valeiras is doing all the right things at this point. He's seeking out new team members and concentrating efforts on existing products (rather than expansion). In a heavily quantitative process like the one the systematic team uses at funds such as Nicholas-Applegate Growth Equity NAPGX, the models will remain in place and ought to work fine over the short term and midterm. The concern is more long term: If the firm can't find strong replacements, the quant models could degrade over time.

An ETF Pure Oil Play?

Victoria Bay Asset Management LLC, a registered commodity pool operator, will oversee an ETF that tracks the price of crude oil beginning this week. The fund will be traded on the American Stock Exchange and will reflect ownership in United States Oil Fund, LP. The goal of this investment vehicle, according to the investment objective laid out in its prospectus, is to track "the spot price of West Texas Intermediate light, sweet crude oil delivered to Cushing, Oklahoma," less fund expenses, of course.

The fund's manager, Nicholas Gerber, who also runs Ameristock AMSTX, will invest in various types of futures contracts traded on the New York Mercantile Exchange, as well as cash-settled options and forward contracts on oil, to try to match the commodity's price. While investors might find this type of commodity play enticing, given the recent runup in oil prices, we're wary of such narrowly focused ETFs and think that the timing of this offering might be particularly bad, with oil already at near-historic highs. In the end, we'd like to remind investors that correctly calling the price trends of commodities is difficult, if not impossible, over the long term, and thus this fund would be inappropriate for most investors.

MFS Adds Comanagers

MFS promoted Nevin Chitkara from analyst to comanager on MFS Value MEIAX. Chitkara will run the portfolio alongside Steve Gorham beginning May 1. Chitkara will also join Gorham on the other portfolios he comanages, MFS Total Return MSFRX and MFS Global Total Return MFWTX. Chitkara has been with MFS for nine years, researching the food, beverage, tobacco, transportation, and telecom industries.

This month, Gary Lasman will become comanager of MFS Municipal High-Income MMHYX, aiding the fund's current manager, Geoffrey Schechter, as he takes on additional duties with MFS' taxable-bond group. Lasman brings eight years' experience as a municipal-bond analyst, since 2002 with MFS and prior to that with the Liberty Funds Group.

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