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DWS Deal Nears Finish Line

Goldman Sachs loses a value manager and more. 

Morningstar Fund Analysts, 04/05/2012

A long-awaited deal for DWS' mutual fund assets may be near. Deutsche Bank DB could sell its U.S. asset-management business as soon as mid- to late-April to Guggenheim Partners, according to several media reports. DWS declined to comment.

The business has about $535 billion in retail and institutional assets, including $46 billion in Deutsche's U.S. mutual fund arm, DWS Investments. It had been on the auction block for nearly four months when Deutsche announced on Feb. 28, 2012, that it was in exclusive negotiations with Guggenheim. Although Deutsche Bank has made no official announcements, news reports suggest Guggenheim could close the deal by the end of April, with an estimated price tag of roughly $2 billion. The deal would quintuple Guggenheim's $125 billion asset base.

Given that Deutsche Bank is retaining its European and Asian asset-management divisions, it's not yet clear how a deal would affect DWS Investments' mutual funds. DWS' management ranks are far-flung, with portfolio managers working in New York; Boston; Louisville, Ky.; and Frankfurt. If a deal goes through, the managers outside the United States could move to Guggenheim, stay with DWS' overseas operations, or be retained by the funds' board of trustees in a subadvisory capacity. DWS declined to comment on those scenarios.

Goldman Sachs Loses Value Manager
Goldman Sachs Mid Cap Value GCMAX comanager Scott Carroll, a managing director and veteran member of the firm's value equity team, has resigned. This is the team's fourth departure since 2008. The team not only has lost a manager but also its consumer staples and utilities sector specialist. Carroll's is the latest in a string of Goldman Sach's manager departures in recent years.

Carroll's teammate will divide his duties and sector responsibilities at Goldman Sachs Mid Cap Value, which received a Morningstar Analyst Rating of Neutral, and other funds. Sally Pope Davis, comanager of Neutral-rated Goldman Sachs Small Cap Value GSSMX, will cover utilities for that fund. Eric Fogarty, an analyst on the value team, will cover the sector for Goldman Sachs Large Cap Value GSLAX and Mid Cap Value. Michael Ho will take on the consumer staples coverage responsibilities for Mid Cap Value.

First-Quarter Wrap-Up: Growth Funds Riding High The S&P 500 Index's 12.6% return in the first quarter of 2012 has many investors exhaling a sigh of relief after a tense 2011. Indeed, many mutual funds enjoyed a bounce in the first three months of the year.

The average first-quarter return of 31 categories was good enough to make up for all of their individual calendar-year losses in 2011. For example, the technology category's 20.8% average gain in the first quarter was tops among Morningstar's 21 domestic-stock fund categories and up from its 7.6% 2011 loss. Large-cap growth funds benefited from the gains in that sector as well, returning an average 15.8% for the first quarter, more than 4 percentage points ahead of their large-cap value cousins. The large-cap growth group dropped 2.5% on average last year.

The upswing in performance has lifted many funds that were recently in the doghouse. Putnam Voyager PVOYX and Hartford Growth Opportunities HGOAX clocked in a 20.9% and 21.4% return, respectively, ranking them in the top 5% of the large-cap growth category for the period. Both funds were in the bottom decile of that same category in 2011. Their performance turnarounds (albeit short) can be attributed, in part, to Apple AAPL, a top holding in both funds. The shares of the technology giant jumped 48% in the first quarter because of strong product demand and a new dividend policy.

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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