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Tradewinds Leader Sets Sail

Putnam loses key executive and more. 

Morningstar Fund Analysts, 03/16/2012

David Iben, Tradewinds' chief investment officer and co-president, will leave the firm at the end of June to join Vinik Asset Management.

His departure is a major loss for the firm and shareholders of its funds. Iben helped create Tradewinds in 2006 when it was spun out of NWQ Investment Management. (Both are subsidiaries of Nuveen.) He was responsible for building up Tradewind's 14-member analyst team and devising a structure in which each fund could own only stocks that had been accepted onto a firmwide "approved list." Iben, who oversaw this list and was an integral member of the investment process, had a strong record running a separate account since 1999 and funds like Nuveen Tradewinds Value Opportunities NVOAX and Nuveen Tradewinds Global All-Cap NWGAX. His separate account, which was run similar to the Value Opportunities fund, returned 16.5% annualized gross of fees the past 10 years through Feb. 29, 2012, besting all large-cap blend funds. Firmwide assets grew to $34.3 billion as of Dec. 31, 2011.

Tradewinds has not yet announced who will take over Iben's funds. Unfortunately, there is no natural successor at Value Opportunities and Global All-Cap since Iben managed both himself, with input from his analyst team. None of those 14 analysts has the public record running funds Iben amassed.

Meanwhile, Tradewinds will split Iben's larger management duties among several people. Constance Lawton, who shared the co-president title with Iben, will become the firm's sole president. Emily Alejos and Drew Thelen will share the CIO role. Both Alejos and Thelan joined Tradewinds in 2006 as equity analysts. Alejos has comanaged Nuveen Tradewinds Emerging Markets NTEAX since its 2008 inception, but that fund's 22.1% annualized gain from its launch through March 14, 2012, trails more than three fourths of its diversified emerging-markets peers. Thelen has run Nuveen Tradewinds Small-Cap Opportunities NTSAX since its 2011 launch. Alejos' and Thelen's public track records are too short to inspire much confidence.

This isn't the firm's first major departure. In mid-2009, Paul Hechmer left to build his own asset-management firm, del Rey Global Investors. Hechmer, who worked with Iben at NWQ and helped found Tradewinds, successfully managed Nuveen Tradewinds International Value NAIGX and its NWQ predecessor for seven years. When Hechmer left, analysts Peter Boardman and Alberto Jimenez Crespo took over. Iben was around to smooth that transition, but now his departure lessens the Tradewinds lineup's appeal.

Iben is joining hedge fund firm Vinik Asset Management. The firm was founded by Jeffrey Vinik, who ran Fidelity Magellan FMAGX for four years in the 1990s.

Putnam Loses Key Executive
Charles Schwab Corp. SCHW announced it hired Jeffrey Carney to run its retail branch network. Carney was recently a managing director at Putnam Investments in charge of marketing. At Schwab, Carney will work on growing the firm's network of more than 300 branches. Those outlets serve as the main interface between the firm and its clients and are a key source of information on clients’ needs. Carney was part of a wave of executives that first joined Putnam in 2008 when Robert Reynolds, the former vice chairman and chief operating officer of crosstown rival Fidelity, took over the ailing firm. Carney had a large hand in the launching and marketing of Putnam's controversial absolute return funds. Those funds now hold around $3 billion in assets. It's unclear whether Carney's exact role and title will be filled at some point. But Putnam did announce that Scott Sipple, another Fidelity veteran, was tapped to be the head of investment product management and development. In that role he will oversee the product management teams that work on the firm's equity, fixed-income, and global asset-allocation offerings.

Dreyfus Manager Change, Fund Happenings
Dreyfus announced several changes to its fund lineup. Peter Vaream has stepped down from managing mutual funds for Standish, the subadvisor on several Dreyfus fixed-income funds. He is no longer listed as a manager on Dreyfus Intermediate Term Income DITIX, Dreyfus Short Term Income DSTIX, Dreyfus Inflation Adjusted Securities DIASX, Dreyfus Balanced Opportunity DBOBX and Dreyfus/Standish Fixed Income SDFIX. The remaining comanagers at each of those funds remain at the helm.

The firm also announced it has added a seventh offering to its index fund lineup. The new Dreyfus ACWI-Ex U.S. Index fund will track the Morgan Stanley ACWI Index, which covers a mix of foreign developed- and emerging-equity markets. It will be run by the same team behind Dreyfus S&P 500 PEOPX and Dreyfus MidCap Index PESPX. Meanwhile, the firm will liquidate Dreyfus Diversified Large Cap DVDAX on April 26, 2012. The fund of funds, which was launched in 2009 and invests in other Dreyfus funds, has just $5.9 million in assets.

Old Mutual Funds Mergers
Shareholders recently signed off on Touchstone's acquisition of 17 Old Mutual funds. Most funds will change in name only; they will retain their strategies and subadvisors. However, this table highlights four funds where a slight change to the strategy will occur or a new management team will be put in place. For example, subadvisor Barrow, Hanley, Mewhinney & Strauss will be dropped as a subadvisor on Old Mutual Barrow Hanley Core Bond OCBIX when it is merged into Touchstone Total Return Bond TCPYX. The Touchstone fund, subadvised by Earnest Partners, is slightly more aggressive than the Barrow, Hanley fund because it can invest more in foreign currency and derivatives. Barrow, Hanley, though, remains as an advisor at the newly named Touchstone Value.

Another fund that will see changes is Old Mutual Focused OBFVX, which is now named Touchstone Focused. Longtime manager Jerome Heppelmann, who built a solid record here over 13 years, is being replaced by Fort Washington Investment Advisors. The strategy will be tweaked to allow more emerging-markets exposure.

Alternative Fund Reopens
Arbitrage Fund ARBFX will reopen to investors March 15, 2012. The fund originally closed in July 2010, after assets increased to $2.3 billion, a tenfold jump in just two years. Since then, the fund’s advisor, Water Island Capital, has beefed up its trading and analyst teams to support lead manager John Orrico. The SEC filing didn't outline a reason for the reopening. Inflows into the fund have continued while it was closed, and the fund ended February 2012 with assets just shy of $3 billion.

Target-Date Funds Increase Assets
Nearly half (47%) of participants in defined-contribution plans run by Vanguard invest in target-date offerings and 24% invest in a single target-date fund, accordning to a recent Vanguard study called Target-Date Fund Adoption in 2011. That latter statistic is a sixfold increase over the past five years, according to the company. Automatic enrollment in retirement plans and sponsors picking target-date funds as the default option in their plans are behind the popularity increase. Vanguard expects more growth. It says in five years 55% of all participants and 80% of new ones will use a target-date option.

Wells Fargo Manager Leaves Firm
Wells Fargo portfolio manager Francis Claro has left the firm. Wells Fargo announced in early March 2012 that Claro would be replaced at several funds by the team at EverKey Global Partners, a small fund shop Wells recently purchased. That move should have allowed Claro to concentrate on Wells Fargo Global Opportunities EKGAX, a fund he has helped run since 1999. Now, though, he's been removed from that charge, too. In addition, Praxis International MPIAX, a fund associated with the investment management organization of the Mennonite Church USA and subadvised by Claro, will liquidate on April 30, 2012.

Sentinel Switches Up Managers
Sentinel Sustainable Growth Opportunities WAEGX will change its name to Sentinel Sustainable Mid Cap Opportunities on March 29, 2012. The name change will also trigger new management. Current comanagers Elizabeth Bramwell and Kelli Hill are stepping down. Bramwell is retiring while Hill remains a portfolio manager at the firm. Betsy Pecor, Carole Hersam, and Matthews Spitznagle will now run the fund as a team. Pecor is comanager of Sentinel Small Company SAGWX and Sentinel Mid Cap SNTNX. Hersam and Spitznagle are analysts on the small/mid-cap team that supports Pecor's funds.

In addition, Sentinel named Dan Manion as lead manager at Sentinel Balanced SEBLX, a fund he has helped run since 2004. Jason Doiron, a senior vice president at the firm, will join Manion at Balanced and will also become a manager at Sentinel Government Securities SEGSX and Sentinel Short Maturity Government SSIGX. The firm also announced that Stacey Ho is stepping down from her manager position at Sentinel International Equity SWRLX.

Forward Launches New Fund
Forward Management is launching Forward Managed Futures Strategy (FUTRX). The fund has flexibility to go both long and short in global futures contracts in four areas: stocks, bonds, commodities, and currencies. This fund will join Forward's growing list of alternative offerings that includes eight long/short strategies.

The team behind BlackRock Asset Allocation PBAIX is tweaking its strategy to incorporate a volatility control process, and accordingly the fund will assume the new name of BlackRock Managed Volatility on May 15, 2012. Fees will rise between 8 and 12 basis points due to the changes.

Managers Global Bond MGGBX, which has been subadvised by the team behind Loomis Sayles Global Bond LSGLX since 2002, is undergoing a name and strategy makeover. The fund's management team will stay but it will be called Managers Global Income Opportunity and will be able to own more emerging markets and high-yield debt.

Van Eck will launch a new emerging-markets bond fund this May. The fund will be managed by Eric Fine, who joined the firm in 2009 after a 14 year career at Morgan Stanley. At the Wall Street firm he oversaw groups that specialized in emerging-markets research and trading.

ING Equity Dividend IEDIX will be rebranded as ING Large Cap Value, with a new focus on companies in the Russell 1000.

William Quinn has stepped off the eight-member team behind American Beacon Treasury Inflation Protected Securities ATPIX. His seven comanagers will remain onboard.

Northern Lights will launch Braver Tactical Opportunities in May 2012. It will be managed by Braver Capital Management and will have flexibility to move through equities, fixed-income, exchange-traded funds, and cash.

DWS is proposing to merge DWS S&P 500 Plus SSFFX into DWS S&P 500 Index SCPIX. S&P 500 Plus employs a derivative overlay strategy aimed at beating the benchmark. In a recent filing the fund's board explained the strategy has not performed consistently in the volatile market environment of recent years.

Jeffrey Schwartz, a senior portfolio manager with subadvisor Palisade Capital, has stepped down from managing Palisade’s sleeve of GE Institutional Small-Cap Equity GSVIX. Fellow senior portfolio manager Marc Shapiro will replace him. A total of five subadvisors each manage sleeves of the fund.

Schwab announced the closing of Schwab Premier Equity SWPSX on March 30, 2012. The fund’s board hopes to obtain shareholder permission later this year to merge Schwab Premier Equity into its larger sibling, Schwab Core Equity SWANX.

Alternative fund advisor Pyxis has announced the launch of a new fund, Pyxis Frontier Debt, which will invest primarily in sovereign debt of smaller and relatively underdeveloped emerging-markets countries.

Nicole Zatlyn has stepped down from MFS Massachusetts Investors Trust MITTX, which she has comanaged since 2005. Ted Maloney, MFS’s head of U.S. research, will take her place alongside Kevin Beatty, who joined in 2004.

Mutual fund analysts David Falkof, Shannon Kirwin, and Rob Wherry contributed to this report.

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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