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Key Marsico Manager Leaves Firm

Former Wasatch managers give it a go on their own and more . . .

Morningstar Fund Analysts, 09/30/2011

Cory Gilchrist, lead manager of  Marsico 21st Century MXXIX and Marsico Global MGLBX, left the firm as of today. His departure punctuates a period of rocky performance on his funds that arose from macro views that clashed with the rest of the firm's. Gilchrist's exit may foreshadow significant changes in the funds' investment styles.

During his tenure at Marsico, Gilchrist was known for his bold investment style. He combined both macroeconomic and fundamental analysis in his stock picks, and he has held optimistic global economic forecasts in the past few years. Meanwhile, founder Tom Marsico and other colleagues, like fellow portfolio manager James Gendelman, believed economic growth will be more subdued. Marsico's and Gendelman's more-bearish macro views could materially shift Marsico Global's portfolio, especially its comparatively high stake in the consumer cyclical sector.

Indeed, dramatic sector weights in Gilchrist's funds reflected his daring macroeconomic views. In the past several years, Gilchrist's approach led to streaky performance. Marsico 21st Century, which has $575 million in assets, led its large-growth peers from 2003 through 2007. After 2008's market meltdown, returns have struggled to get back on track. Gilchrist's large bets on financial-services stocks versus peers have been partly to blame. Marsico Global, with $123 million in assets, has not experienced as dramatic a swing but has also struggled so far this year partly because of stock selection.

Marsico and Gendelman will assume responsibility for Marsico Global. While Gilchrist's departure is disruptive, Marsico and Gendelman are experienced portfolio managers, with Marsico running Marsico Growth MGRIX and Marsico Focus MFOCX since 1997 and Gendelman running Marsico International Opportunities MIOFX since 2000. While these strategies also have had their rough times, they have managed to hold on to solid 10-year records.

Bigger uncertainty looms for Marsico 21st Century, which will be taken over by Brandon Geisler, a Marsico research analyst with no portfolio management experience. Geisler has been an analyst at Marsico since 2006 and previously was an equity analyst at Goldman Sachs. Meanwhile, it seems Gilchrist's departure from Marsico signals that there is a limit to the firm's patience with lackluster performance when it arises from views that strongly differ from the firm's. For his part, Gilchrist says he has no immediate professional plans.

Goldman Sachs' Quant CIO to Retire
Goldman Sachs Asset Management announced that Katinka Domotorffy, CIO and head of the firm's Quantitative Investment Strategies team, will retire at year-end, the latest in a string of manager departures, generating uncertainty over the firm's quantitative strategies.

Domotorffy joined Goldman Sachs in 1998 and became the head of the Quantitative Investment Strategies group in 2009, replacing former CIOs Mark Carhart and Raymond Iwanowski. During her tenure, she was on the management team of more than 20 funds, including the Goldman Sachs Retirement series. Many of these funds have struggled in the trailing three- and five-year periods. For instance, the Retirement funds rank near the bottom of their respective categories in the trailing three-year periods.

After Domotorffy's departure, her comanagers on the affected funds will assume her fund management responsibilities. However, the continued executive turnover in this sleeve of Goldman Sachs Asset Management could indicate changes ahead.

Morningstar fund analysts cover more than 1,700 mutual funds and write regular commentary covering fund industry news, fund investing trends, picks, portfolio planning, international investing, and more.

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