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Manager Departs Ariel Appreciation

Plus, JPMorgan pays arbitration award to American Century and more.

Morningstar Fund Analysts, 03/29/2012

Matthew Sauer has stepped down as a portfolio manager at Ariel Appreciation CAAPX in order to take a similar position at Lateef Investment Management.

For Sauer, the move marks a reunion with an old colleague. James Tarkenton, a comanager of Lateef LIMAX, previously worked with Sauer at Oak Value Capital Management. Sauer was a manager of Oak Value between 2003 and 2006. (That fund is now known as RS Capital Appreciation RCAPX.) At Lateef, Sauer will be a director and portfolio manager. Lateef, a boutique firm located outside San Francisco, manages $4 billion in separate accounts and the retail mutual fund.

Sauer's departure is a blow to Ariel Appreciation, which has received a Morningstar Analyst Rating of Bronze, but not a disaster. The fund uses a team-based approach consisting of Sauer, John Rogers, Ariel's founder, and Timothy Fidler, who also helps run Ariel Focus ARFFX. Two of the three managers had to be on board with any holdings decisions. Rogers announced in a letter to clients that there are no plans to replace Sauer and that he and Fidler will remain as comanagers. Sauer's coverage list will be divvied up among the three senior members of the firm's research team. Rogers also said that plans were already in the works to hire a senior analyst before Sauer resigned. That should help fill any holes left by his exit. Ariel Appreciation is in the top 30% of the mid-cap blend peer group the past 15 years, and its strong 16% year-to-date gain through March 28, 2012, lands it in the top decile of that same category.

Tradewinds CIO Departure Triggers Fund Liquidation
Tradewinds, a subsidiary of Nuveen Investments, announced it will liquidate Nuveen Tradewinds Global All-Cap Plus NPTAX in May. The firm's CIO and co-president David Iben had run the fund since its December 2008 inception using a 130/30 strategy that held long and short positions in stocks. The filing to liquidate the fund comes just weeks after Iben announced that he will leave Tradewinds in June to join Vinik Asset Management. The fund had not gained much traction, with $51 million in assets as of March 2012.

JPMorgan Pays Arbitration Award to American Century The asset management division of JPMorgan JPM paid a $373 million arbitration award to American Century in the third quarter of 2011. New details surrounding the award were recently reported by Fortune.

American Century filed the litigation in 2009 as a result of a contract dispute with JPMorgan. Legal documents reveal American Century alleged JPMorgan breached a 2003 revenue-sharing contract that involved the placement of each firm's funds on retirement platforms. The contract required JPMorgan to promote American Century funds alongside its own in the retirement plans. But JPMorgan instead favored its own funds at the expense of American Century's, according to the documents. JPMorgan has a long history of involvement with American Century. In 1998, JPMorgan bought a 45% noncontrolling position in American Century. That position, though, was sold to Canadian bank CIBC in August 2011 when American Century exercised an option to buy back the stake.

More Changes at Hartford
Hartford announced that the mutual fund family's board of directors approved a new subadvisor for several of its funds. On or around June 30, 2012, Wellington Management will take over the day-to-day manager duties at Hartford Balanced Allocation HBAAX, Hartford Conservative Allocation HCVAX, Hartford Floating Rate HFLAX, Hartford Floating Rate High Income HFHAX, Hartford Small/Mid Cap Equity HSMAX, and at the Hartford Target Retirement series. This is part of a broader move by Hartford to shift management duties from in-house teams to Wellington. Wellington already manages Hartford Advisers ITTAX. Hartford announced that this fund will be renamed Hartford Balanced and Karen Grimes will replace Steven Irons as a portfolio manager.

The Dividend Bandwagon Keeps Rolling
It's not too late to join the dividend party, according to some fund firms. Guinness Atkinson will launch an inflation-managed dividend fund, with a global mandate to seek out income-paying equities. Elsewhere, Nuveen filed to launch two dividend-focused funds: Nuveen Santa Barbara Global Dividend Growth and Nuveen Santa Barbara International Dividend Growth. While these funds put an international spin on the dividend theme, they also follow a broader industry trend. During the past three years, 42 dividend-focused funds have launched, including 21 during the past 12 months. Dividend-focused strategies have regained popularity as investors search for income in a low-yield world.

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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