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Fund Times: Big Fund Firms Get Bigger

Plus, news on TIAA-CREF, Columbia, Torray, Fidelity, Gabelli, more.

Morningstar Analysts, 01/02/2006

<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> <P>The largest fund families continued to grow and attract significant assets through November 2005, according to data from the Financial Research Corp.</P> <P>The total assets under management increased by an average of 15% for the top 25 largest fund families. Thirteen of the top 25 firms enjoyed double-digit growth between 2004 and 2005. The news was even cheerier at ETF provider Barclays, which captured a 56% year-over-year increase. It manages $166 billion in assets.</P> <P>The three largest fund companies continued to add significant stakes to their kingdoms. Vanguard only added 15% but is still the largest money manager at $787 billion in total assets; American, which gained 23%, brings its total to $757 billion (three of its funds represents 36% of that total number); and  Fidelity increased its assets 18% to $726 billion under management. </P> <P><STRONG>TIAA-CREF May Backdoor Fee Hikes</STRONG></P> <P>Showing disregard for the will of fundholders, TIAA-CREF and its fund board plan to get a fee hike through one way or the other. Fundholders rejected a request to raise fees at the funds, so TIAA-CREF is asking them to vote again in January. </P> <P>Should that vote fail, TIAA-CREF is launching new higher-fee mutual funds so that it can then merge the lower-cost funds into them. What's particularly striking about this move is the board of directors, which is supposed to look out for the best interests of TIAA-CREF fundholders, signed off on the backdoor approach. </P> <P>Fund mergers also require a shareholder vote, so management will have to successfully fend off at least two more votes to raise the fees. </P> <P><STRONG>Managers to Depart Columbia</STRONG></P> <P><STRONG>Columbia International Stock</STRONG> <?XML:NAMESPACE PREFIX = MSTR /?><MSTR:SECURITY>CISAX</MSTR:SECURITY> will lose two of its three managers. Penelope Burgess and Deborah Snee, who have worked on the fund since July 2004, will no longer comanage the fund effective Jan. 6. This change comes just two months after Frederick Copper was brought in as lead manager. Copper first joined Columbia in September. Prior to that, he worked for Putnam Investments and  Wellington Management Co. Copper ran domestic small-cap value funds at Putnam, but he has no public record managing international funds. </P> <P>Snee and Burgess will also leave <STRONG>Columbia Greater China</STRONG> <MSTR:SECURITY>NGCAX</MSTR:SECURITY>, leaving Copper and Jasmine Huang as the remaining managers on that fund. </P> <P><STRONG>Torray vs. Torray</STRONG></P> <P><STRONG>Torray Institutional</STRONG> <MSTR:SECURITY>TORRX</MSTR:SECURITY> took a hit as a shareholder who owned two thirds of the fund's total assets redeemed his shares. The fund now has just $400 million in assets, down from $1.2 billion.</P> <P>The redemption caused Torray Institutional to lag its retail sibling, <STRONG>Torray Fund</STRONG> <MSTR:SECURITY>TORYX</MSTR:SECURITY>, by 100 basis points for the year-to-date period through Dec. 27, despite having an expense advantage. The fund's performance were dragged down by trading costs and the accumulation of cash in an up market while the managers unloaded positions to meet the redemption.</P> <P><STRONG>Mutual Fund Board Changes at Fidelity</STRONG></P> <P>Fidelity made some changes to its mutual fund boards, the<EM> Boston Globe</EM> recently reported.</P> <P>Abigail Johnson, who headed the fund group until earlier this year when she was moved to head the employer services group, resigned, and independent director Marvin Mann will retire because he's reaching the mandatory retirement age of 72. The<EM> Globe</EM> reported that Mann will be replaced by former CIA director Robert Gates, who will likely become chairman of the funds' board when the independent chairman rule takes effect. </P> <P>Fidelity won't replace Johnson, thus putting the board in compliance with a pending SEC rule that would require most fund boards to be at least 75% independent. </P> <P><STRONG>Gabelli  Reportedly Behind Cellular Bids</STRONG></P> <P><EM>The Wall Street Journal</EM> reported that fund manager Mario Gabelli was behind several small companies that won bids for cellular spectrum licenses that were later sold at a big profit.</P> <P>The bidders qualified for "very small business" status, which entitled them to a 25% bidding discount and a low-interest loan. Gabelli affiliates owned 49.9% of most of the bidding firms, but they were able to qualify for the discounts because the rules required only that the majority owner be a "very small business." </P> <P>The deals are the subject of a lawsuit by a whistleblower who hopes to recover a portion of the money that he claims the government lost due to the discount and the low interest loans. </P> <P><STRONG>Etc.</STRONG></P> <P>Westwood funds has filed with the SEC to launch two new funds. <STRONG>WHG Income Opportunity Fund</STRONG> will invest in bonds and dividend-paying stocks. <STRONG>WHG SMidCap Fund</STRONG> will invest in stocks with market capitalizations between $500 million and $10 billion. </P> <P>Barclays Global Investors reports that not a single iShares fund distributed capital gains in 2005, thus protecting shareholders come April 15. On the downside, a recent filing shows that portfolio managers Carl Gilchrist and Lisa Chen owned no shares of the 22 regional iShares funds they manage as of the end of August.</P>


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