Plus, Fairholme's Berkowitz will defend stock picks and more ...
It's that time of the year when publicly traded mutual fund companies start to reveal how much they are paying the people in the corner offices. In a recent filing Franklin Resources BEN, the parent firm of the Franklin Templeton mutual fund family, revealed CEO Gregory Johnson pulled down $9.9 million last year--a 47% jump from 2010 and more than double what he took home in 2009. Most of the increase was due to hefty stock options. Morningstar Footnoted explored the pay package and an earlier special dividend in detail here. Four of the firm's top executives also saw increases, with the largest going to executive vice president of global distribution Vijay Advani, whose $5.8 million in 2011 was up from $3.8 million in 2010. The compensation hikes came in a solid year for the firm, which included increases in assets under management, revenue and earnings, and a continued emphasis on international expansion.
Johnson wasn't the only fund company CEO receiving company stock. A recent BlackRock BLK filing shows founder Laurence Fink was awarded 39,056 shares valued at $7.2 million and an additional 32,766 valued at $3.8 million (that are subject to performance benchmarks). Fink's compensation will probably rise since the filing doesn't mention his salary. He made a total of $23.8 million in 2010, according to The Wall Street Journal.
Fund companies such as Janus JNS and T. Rowe Price TROW have yet to reveal their 2011 compensation figures.
Berkowitz Set to Defend Portfolio Choices
Though Fairholme FAIRX has posted strong returns so far in 2012, the fund's dismal 2011 still weighs on its trailing one- and three-year results and popularity. About $6.8 billion exited the fund last year and cut its asset base in half as it lost 32.4%--more than it dropped in the 2008 downturn--as financial holdings such as Bank of America BAC and American International Group AIG plunged. Bruce Berkowitz, manager of the fund, whose 10-year record still sits atop the large-value category, will try to calm shareholders' nerves with an interview on Feb. 8, 2012, that will be moderated by the firm’s new research chief Fred Fraenkel and posted on the fund's website. Berkowitz is sure to discuss why he has stood by last year's disappointments, though many of them such as Sears Holdings SHLD and Bank of America have rebounded sharply this month. Investors can submit questions through the fund's investor relations email address: email@example.com
Bridgeway Tweaks Process
Bridgeway Ultra-Small Company BRUSX, which has focused on the tiniest U.S. stocks (those in the lowest decile of the New York Stock Exchange by market capitalization), has modified its prospectus to include companies in the second-lowest decile of the NYSE as well. Lead manager John Montgomery made the change to better reflect the fund's actual holdings. Its quantitative stock-picking models often continue to hold stocks in this volatile universe when they appreciate and rise into the second-lowest decile. Recently 40% of the fund's assets were in such stocks. He says the new language will also give the fund the flexibility to occasionally buy a stock in that second-lowest decile in order to better match the recommendations of the quant models. The fund's miniscule $160 million average market capitalization--the lowest in Morningstar's small-growth category--isn't expected to change much as a result of this modification.
Invesco Consolidation Continues
A year and a half after it acquired Van Kampen Funds from Morgan Stanley, Invesco continues to tidy its fund lineup. The firm recently said it will merge three funds with overlapping mandates, pending shareholder approval. Invesco has conducted dozens of similar mergers since buying Van Kampen in 2010.
Invesco High Income Muni AHMAX will merge into Invesco Van Kampen High Yield Municipal ACTFX. High Income Muni shareholders shouldn't expect much change. The same management team runs both funds using similar strategies (although Van Kampen High Yield Municipal owns some bonds subject to the Alternative Minimum Tax that Invesco High Income Muni avoided). High Income Muni shareholders could see lower fees, though, because the $4.9 billion Van Kampen High Yield Municipal is cheaper.
In addition, Invesco plans to merge former Morgan Stanley funds Invesco US Mid Cap Value MMCAX and Invesco Van Kampen American Value MSAJX. The same team has run the funds using similar strategies since 2003. There shouldn't be much change besides a slight fee decrease.
The firm also intends to merge Invesco Commodities Strategy COAIX into Invesco Balanced Risk Commodity Strategy BRCNX. The funds share management teams and similar fees, but Invesco Commodities Strategy has closely tracked its Dow-Jones-UBS Commodity Total Return Index benchmark, while Invesco Van Kampen Balanced Risk Commodity Strategy is more actively managed.
New Indexes Focus on Sovereign Debt
Rob Arnott, founder of Research Affiliates, announced his firm is partnering with Citigroup C to bring its fundamental indexing strategy to the sovereign debt market. The new indexes will weight countries based on gross domestic product, energy consumption, population, and land area. The indexes, says Research Affiliates, would not only reflect a nation's ability to service its debt, they would also emphasis younger, resource-rich countries like Australia. For now, there aren't investable retail products based on the indexes, but keep an eye out for one soon. PowerShares, PIMCO, and Schwab SCHW all offer fundamental equity and bond index funds.
Name Change at Fidelity
Fidelity is changing the name of Fidelity Equity-Income II FEQTX to Fidelity Equity Dividend Income fund. Its new manager Scott Offen, who took over the fund in November 2011, has sought to increase the fund's dividend yield relative to his predecessor Stephen Peterson, who managed the fund from January 2009 through October 2011. The fund is also adding a supplementary benchmark, the MSCI US IM High Div Yield Index, which it will likely track in some important respects such as sector weightings and yield characteristics. This is a step away from the generic Russell 3000 Value approach the fund had taken previously.
Fidelity’s Charles Myers has left the teams behind Fidelity Stock Selector Small Cap FDSCX and Fidelity Series Small Cap Opportunities FSOPX. He'll continue to run Fidelity Advisor Small Cap Value FCVAX and Fidelity Small Cap Discovery FSCRX, both of which he has managed since 2008 and 2006, respectively.
Manning & Napier has promoted senior analysts Ebrahim Busheri, who heads the firm's emerging-markets growth team, and Christopher Petrosino, a quant manager and comanager of Manning & Napier Dividend Focus MNDFX to its Senior Research Group, which sets broad strategy goals for the firm's equity, target-date, and allocation funds.
Elizabeth Bramwell--lead portfolio manager for Sentinel Capital Growth SICGX, Sentinel Growth Leaders SIGLX, and Sentinel Sustainable Growth Opportunities CEGIX--will retire in March 2012. Kelli Hill, who before joining the firm in April 2011 ran Old Mutual Large Cap Growth OILLX will take the reins at each fund.
Guggenheim Investments, the investment management arm of financial services firm Guggenheim Partners, has launched a municipal-bond fund, Guggenheim Municipal Income GIJAX two months on the heels of three fund launches in late 2011. The firm now offers four fixed-income funds, with a total of $233 in assets. The fund will be led by chief investment officer Scott Minerd, who is named on Guggenheim's other three funds, along with two comanagers.
Eaton Vance has announced the launch of two new alternative strategy funds to be subadvised by its subsidiary, Parametric Portfolio Associates. Eaton Vance Parametric Structured Currency EAPSX and Eaton Vance Parametric Structured Absolute Return fund will be run by Parametric veterans Thomas Seto and David Stein.
Christopher Kelleher, a portfolio manager with Virtus Investment Partners, has assumed a new role at Virtus subadvisor Newfleet Asset Management. Kelleher will comanage fixed income assets for Virtus Tactical Allocation NAINX along with closed-end and variable insurance portfolios. Previously, Kelleher worked on the team behind Virtus Multi-Sector Short-Term Bond NARAX.
Vanguard has promoted Martha King and Chris McIsaac to its executive leadership team as managing directors of the firm. King oversaw the expansion of Vanguard's Financial Advisor Services business, while McIsaac served for many years as the head of Vanguard's portfolio review department, which oversees external advisors and new fund development.
Michael Yogg, who managed Putnam Global Utilities PUGIX for over a decade, has left the firm. George Gianarikas, who joined Putnam as an analyst in 2009 after stints at RiverSource and Wellington Management, will take over. Gianarikas is the firm's lead technology analyst and serves on the management team at Putnam Research PNRAX.
Senior fund analysts Greg Carlson and Chris Davis and mutual fund analyst Shannon Kirwin contributed to this report.