Two of these three new skippers have struggled in the early going.
Manager changes are somewhat common events--only rarely does a month go by without at least a few important departures--and these events deserve attention. Not only could the incoming skipper be a considerable upgrade or downgrade over the outgoing one in terms of talent, but he or she could also be planning to make modifications to the fund's strategy.
Initial assessments are only the starting point, though. New managers often prove to possess considerably more or less skill than their resumes suggest. And their plans to keep their predecessors' strategies largely or completely intact sometimes evolve into moderate or even major restructurings of the approach over time. Therefore, it's crucial to monitor both the performance and the portfolio moves of new skippers for at least a few years after they take the helm.
With that in mind, we're going to assess the early efforts of the new managers at three well-known large-cap funds: American Century Ultra TWCUX, Oppenheimer Main Street MSIGX, and Lord Abbett Affiliated LAFFX.
American Century Ultra
This large-growth fund's April 2009 manager change was a promising one. The new lead managers, Keith Lee and Michael Li, were American Century veterans who were already serving as comanagers on this fund. Lee and Li had a couple of years of experience as lead managers on another large-growth offering at the firm, American Century Select TWCIX, where they delivered relatively attractive results during their time in charge.
Lee and Li use the same basic strategy on both funds. They use a combination of quantitative screens and fundamental analysis to locate quality growers with robust earnings, price momentum, and other strengths; they avoid big sector and industry bets; and they move at a moderate pace. But in the case of American Century Ultra, they're more willing to own really fast-growing firms with high price tags.
As the U.S. market has gyrated since the spring of 2009, Lee and Li have put the somewhat bolder approach to good use: The fund's 17.5% annualized return was roughly 2 percentage points better than the large-growth average. They have also posted solid results at American Century Select over the past two years, and that fund has an impressive record over their full tenure as lead managers. This fund will likely struggle at times, but it has bright long-term prospects.
Oppenheimer Main Street
There were several reasons for optimism when Mani Govil took the helm of this front-load large-blend offering in May 2009. For starters, Govil already had 14 years of core-equity portfolio-management experience under his belt. He had delivered impressive returns as the skipper of RS Large Cap Alpha GPFAX from mid-2005 through early 2009. And the 11-person team that assisted him on that fund moved to Oppenheimer with him.
Govil was also bringing the strategy he used to earn superior returns at his former charge along. That strategy is both sound and distinctive. Govil pursues three types of issues: firms with sustainable competitive advantages over their rivals; companies that are in unexceptional businesses but that execute very well; and promising turnaround plays. He also sets his standards high. The result is a high-quality portfolio of 50-100 names that stands out from the large-blend crowd.