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Fund Times: Oakmark Managers Reflect on 2005 and Beyond

Plus, news on Fidelity, Gabelli, SunAmerica, Artisan, TIAA-CREF, more.

Morningstar Analysts, 01/13/2006

<P> <P><EM>Get fund news delivered to your e-mailbox every Monday. Sign up for our free </EM><A href="http://advisor.morningstar.com/products/enews.asp" ><EM>Fund Times e-newsletter</EM></A><EM>.</EM> <P>In their year-end letter to shareholders released last week, the managers of <STRONG>Oakmark Global</STRONG> <?XML:NAMESPACE PREFIX = MSTR /?><MSTR:SECURITY>OAKGX</MSTR:SECURITY>, Clyde McGregor and Rob Taylor, discuss some of the more interesting results for the fund in 2005 and thoughts on the future. Fundowners enjoyed a cumulative 13.2% return, which places the fund above typical world-stock funds in 2005. One of the notable wins for the fund was Burlington Resources <MSTR:SECURITY>BR</MSTR:SECURITY>, the fund's largest holding, which blasted up 99% for the year. It was helped late in the year by an announcement that ConocoPhillips <MSTR:SECURITY>COP</MSTR:SECURITY> would acquire it. <P>Looking forward to 2006, in typical value style they picked up several names recently that disappointed Wall Street's earnings, but remain solid in their view, companies such as Brunswick <MSTR:SECURITY>BC</MSTR:SECURITY>, Dell <MSTR:SECURITY>DELL</MSTR:SECURITY>, Washington Post <MSTR:SECURITY>WPO</MSTR:SECURITY>, and Trinity Mirror. The letter states, "In each instance [the managers] evaluated that the earnings reports were irrelevant to the companies' long-term business values." They are especially bullish on Dell, which they see as a company that's in the logistics business and assembles products with "unparalleled" healthy financial characteristics. To read the full report, <A href="http://www.oakmark.com/opencommentary.asp?commentary_id=375&news_from=c&fund_id=0" target="_blank" >click here</A>.</P> <P><STRONG>First Fidelity Manager Changes of 2006</STRONG></P> <P>Fidelity named Matthew Lentz as new manager of <STRONG>Fidelity International Real Estate</STRONG> <MSTR:SECURITY>FIREX</MSTR:SECURITY>. Lentz replaces Steven Buller, who will continues to run the successful Fidelity Real Estate <MSTR:SECURITY>FRESX</MSTR:SECURITY>. Lentz has worked at Fidelity as an analyst since 2002 (and at Goldman Sachs as a REIT research analyst before that). Lentz has no record managing public mutual funds, but we are somewhat heartened by the fact that he has worked with Buller on international real estate securities and this fund in particular for the past 16 months.</P> <P><STRONG>Gabelli Funds Renamed GAMCO</STRONG></P> <P>Gabelli Funds is rebranding the funds not run by firm founder Mario Gabelli, which will involve eight funds changing their names from Gabelli to GAMCO. The new names will mirror the advisor's parent company name, GAMCO Investors <MSTR:SECURITY>GBL</MSTR:SECURITY>.</P> <P>The eight funds affected are: <STRONG>GAMCO Growth</STRONG> <MSTR:SECURITY>GGCAX</MSTR:SECURITY>, <STRONG>GAMCO International Growth</STRONG> <MSTR:SECURITY>GAIGX</MSTR:SECURITY>, <STRONG>GAMCO Gold</STRONG> <MSTR:SECURITY>GOLDX</MSTR:SECURITY>, <STRONG>GAMCO Global Telecommunications</STRONG> <MSTR:SECURITY>GTCAX</MSTR:SECURITY>, <STRONG>GAMCO Global Growth</STRONG> <MSTR:SECURITY>GICPX</MSTR:SECURITY>, <STRONG>GAMCO Global Opportunity</STRONG> <MSTR:SECURITY>GOCAX</MSTR:SECURITY>, <STRONG>GAMCO Global Convertible Securities</STRONG> <MSTR:SECURITY>GAGCX</MSTR:SECURITY>, and <STRONG>GAMCO Mathers</STRONG> <MSTR:SECURITY>MATRX</MSTR:SECURITY>. </P> <P>The company says the impetus behind the change is to create a clearer distinction between funds that use the Gabelli "absolute return, Private Market Value with a Catalyst" style, and other GAMCO Investor funds. However, it's notable that  Gabelli Blue Chip Value <MSTR:SECURITY>GBCAX</MSTR:SECURITY> is not run in a value style similar to other Gabelli funds, and yet as of now it will not be rebranded.</P> <P><STRONG>SunAmerica Drops Perkins as Subadvisor</STRONG></P> <P>The board of directors of <STRONG>SunAmerica Focused Mid-Cap Value</STRONG> <MSTR:SECURITY>F05Z3M</MSTR:SECURITY> ended its contract with Janus subadvisor Perkins, Wolf, McDonnell & Co. in favor of Kinetics Asset Management.</P> <P>Kinetics currently advises six mutual funds, most of which are technology sector funds. Perkins currently manages the successful  Janus Mid Cap Value <MSTR:SECURITY>JMCVX</MSTR:SECURITY>, which has bested 80% of its mid-value rivals despite the challenging environment over the past five years.</P> <P>This may be the first time that the manager of a Morningstar Fund Analyst Pick has been replaced by the manager of a Fund Analyst Pan--in this case, <A href="http://quicktake.morningstar.com/Fund/MorningstarAnalysis.asp?Country=USA&Symbol=WWWFX&fdtab=analysis" >Kinetics Internet</A> <MSTR:SECURITY>WWWFX</MSTR:SECURITY>.</P> <P><STRONG>Artisan Launches New Fund</STRONG></P> <P>Artisan is launching <STRONG>Artisan Opportunistic Value Fund</STRONG>, the firm's eighth offering and first new entrant since 2002. It will be the firm's only fund to combine domestic and international investments.</P> <P>The fund will be run by Scott Satterwhite, Jim Kieffer, and George Sertl, the first two of whom comanage Artisan Mid Cap Value <MSTR:SECURITY>ARTQX</MSTR:SECURITY> and Artisan Small Cap Value <MSTR:SECURITY>ARTVX</MSTR:SECURITY>, two of this fund shop's successful offerings. (Sertl serves as analyst for both these funds.) Though this team has mostly distinguished itself through investing in domestic small-to-mid-cap territory, this new charge will expand management's horizons, as it allows them to invest "primarily in common stocks of larger U.S. companies [those with a market capitalization of at least $5 billion at the time of purchase], but also has the flexibility to [allow them to] invest up to 25% of its assets in non-U.S. securities." The international investments may be in both developed and emerging markets, and they have no market-capitalization restrictions.</P> <P>It's also interesting to note that they will be targeting a part of the market where Artisan is largely unrepresented. The firm's other funds largely buy domestic and international small- and mid-cap stocks, with the exception of the large-cap-focused  Artisan International <MSTR:SECURITY>ARTIX</MSTR:SECURITY>.</P> <P><STRONG>Top Managers Say Goodbye to Old Mutual</STRONG></P> <P>Change abounds at Old Mutual these days. Last September <A href="http://quicktake.morningstar.com/Fund/MorningstarAnalysis.asp?Country=USA&Symbol=CFIMX&fdtab=analysis" >Clipper Fund</A> <MSTR:SECURITY>CFIMX</MSTR:SECURITY> managers James Gipson, Michael Sandler, and Bruce Veaco, of Old Mutual affiliate Pacific Financial Research, announced they would leave the firm on Jan. 1. Now Old Mutual has announced its intention to sell, pending shareholder approval, First Pacific Advisors and its six funds with $10 billion in assets under management. The buyer is Resolute LLP, a firm founded by Robert Rodriguez and partners, of FPA itself. As such, we don't think the sale will make much difference to the funds' investors.</P> <P><STRONG>Show-Me State Shows TIAA-CREF the Door</STRONG></P> <P>TIAA-CREF has managed the Missouri state 529 plan, known as the Missouri Savings for Tuition program (MOST), since its inception in 1999. But after state officials put the contract up for competitive bidding, TIAA-CREF has been replaced. Upromise Inc., the 529 program manager, with Vanguard Group and American Century, serving as the investment advisors, won the bid.</P> <P>Under the terms of the winning bid, the MOST plan will offer more investment options to Missourians at a lower cost. Most of the Vanguard options will reportedly be priced at 0.62%, for example, lower than the current 0.65% charged by TIAA-CREF, and lower than the costs of all the other Upromise/Vanguard state plans, with the exception of New York (0.58%).</P> <P><STRONG>New Management for MFS New Endeavor</STRONG></P> <P>Manager David Sette-Ducati, who had run <STRONG>MFS New Endeavor</STRONG> <MSTR:SECURITY>MECAX</MSTR:SECURITY> since September 2000, stepped down Jan. 6. A team of small and mid-cap research analysts, who will be overseen by MFS vice president and associate portfolio manager Camille Humphries-Lee, will replace him. We think the move is aimed at providing more MFS research analysts with experience in running money.</P> <P><STRONG>Fund Closures at Royce, Lord Abbett</STRONG></P> <P><STRONG>Royce Premier Fund</STRONG> <MSTR:SECURITY>RYPRX</MSTR:SECURITY> closed to new investors Jan. 10. One of the five largest funds in the small-blend category, with $4 billion in assets, the fund's asset base is a concern of ours, although we think the fund is a solid option.</P> <P>Also, <STRONG>Lord Abbett Small-Cap Blend</STRONG> <MSTR:SECURITY>LSBAX</MSTR:SECURITY> has announced that it will close to new investors Jan. 31, at $1.2 billion in assets.</P>


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