Plus, Hennessy buys FBR, Miller takes another step toward retirement, and more.
The Securities and Exchange Commission this week charged OppenheimerFunds
with making misleading statements about two of its mutual funds during the 2008
financial crisis. Oppenheimer agreed to pay $35 million to settle the charges.
According to the SEC's order, Oppenheimer made misleading statements in the 2008
prospectus for Oppenheimer Champion Income OPCHX by not disclosing that the
fund could use derivatives to such an extent that they could be the primary
influence on the fund's returns. The SEC also found that Oppenheimer
disseminated misleading statements to shareholders about Champion Income
Leading up to 2008, the management team running the two funds made overly aggressive bets on mortgage-related securities. Specifically, the managers increased the funds' exposure to commercial mortgage-backed securities by entering into derivative contracts known as total return swaps. These swaps allowed the funds to add market exposure on top of the assets on their balance sheets. Those bets unraveled in 2008, and by the end of the year, Champion Income had lost 78.5% and Core Bond had dropped 35.8%.
The horrid performance prompted Oppenheimer to sack the funds' management
team and address shortfalls in its compliance and risk-management teams.
Oppenheimer also announced
in May that Champion Income will merge into Neutral-rated
BlackRock Manager Set to Retire
Robert Doll, one of
Christopher Leavy, who joined BlackRock in 2010 as chief investment officer
of U.S. fundamental equity, has assumed lead management of all Doll's charges.
Since 1999, Doll has been managing
However, Leavy will not be giving up his CIO position as he tackles the considerable challenge of improving the funds' performance. This is a concern. Doll's energies were also divided as he had the added time-consuming role of BlackRock's very public chief equity strategist. The large, core, and growth funds either lag or barely beat their peers over the trailing three-, five-, and 10-year periods.
The mediocre performance can be partly blamed on the fund's large
quantitative component, which has struggled amid the market's volatility over
the past several years. In 2010, BlackRock hired quant fund manager Peter
Leavy has worn the hat of lead fund manager before. He stitched together
respectable records at
In other news, investors in the flagging large-cap value fund will get some respite as the fund's board has agreed to waive part of the fund's administrative fee, and that will knock off 5 basis points from the fund's expense.
Miller Takes Another Step Toward Retirement
Legg Mason announced Bill Miller stepped down at
New Names, Other Changes at Legg Mason Funds
Legg Mason will begin stripping the firm's name from part of its fund lineup in August 2012.
The change will impact Western Asset, a Legg Mason affiliate, the most. More than two dozen retail funds will drop the Legg Mason name. (Western's institutional and closed-end funds and separate accounts already carry the Western name.) At the same time, four funds will be merged into larger offerings. Fees will drop and strategies will get slight tweaks in some cases. The move comes on the heels of Western adding additional share classes that will allow better access to the funds for institutional, retail, and retirement investors.
The Royce Funds, which never carried the Legg Mason name, and Legg Mason Capital Management funds will keep their current names. A Legg Mason spokesperson says the firm is evaluating if it makes sense to apply this policy to Legg's other affiliates, including Batterymarch Financial Management, Clearbridge Advisors, and Brandywine Global.
This isn't the first time Legg Mason has changed fund names. It rebranded most of the funds it acquired from Citigroup in 2006 and then, in 2009, dropped the "Legg Mason Partners" phrase while adding the affiliates' firm names.
In other Legg Mason news, Andrew Purdy has stepped down from managing several allocation funds at Legg Mason, including Legg Mason Strategic Real Return LRRAX and the firm's suite of target-retirement funds. Asset allocation analyst Patricia Duffy has been promoted to fill his place. Purdy is also no longer managing several of the firm's lifestyle allocation funds. Duffy and Y. Wayne Lin have been added as comanagers there alongside Steven Bleiberg, the chief investment officer of Legg Mason Global Asset Allocation.
Fidelity Shuffles Managers
Fidelity is moving portfolio manager Chris Sharpe off of
Joanna Bewick, Sharpe's current comanager on the three funds, will take the
lead role at each. Ford O'Neil, who heads up
Jeff Moore, current manager of
Hennessy Buys FBR
Well, that didn't take long. Hennessy Advisors HNNA announced on June 6, 2012, that it acquired FBR Fund Advisors, a family of 10 mutual funds that hold almost $2 billion in assets. It was just a week earlier that FBR revealed in an SEC filing that it hired an outside advisor to evaluate its options, "including the sale of all or a portion of the business." The acquisition is expected to close in the third quarter of 2012. A price tag for the deal was not disclosed.
The deal will drastically alter the FBR fund lineup. FBR Large
FBR Small Cap FBRYX, and FBR Mid Cap FBRMX will merge into
Hennessy Cornerstone Large Growth HFLGX, Hennessy Cornerstone Growth
HFCGX, and Hennessy
Focus 30 HFTFX,
respectively. The remaining seven funds, including FBR Focus
The deal will give Hennessy a shot in the arm. The Hennessy lineup topped out at $2.2 billion in retail assets in 2006. Since then, though, the firm has experienced five-plus years of net outflows. While revenues at FBR had been flat the past year, the overall lineup did see a small uptick in asset inflows. For example, the Gas Utility Index fund attracted $218 million in 2011. Once the transaction closes, Hennessy's lineup will consist of 16 funds holding around $2.7 billion in assets.
PIMCO Launches New Funds
PIMCO has launched three new bond funds. Two new muni funds, PIMCO California Municipal Bond and PIMCO National Intermediate Muni Bond, will be managed by Joe Deane, who took over PIMCO's muni operation in 2011 after leading Western Asset's muni team for almost two decades. Deane currently runs all of PIMCO's muni offerings, including
The third new fund to launch, PIMCO Short Asset Investment,
has been described as a shorter-duration and more-constrained version of the
Muni-Bond Manager Steps Down
Longtime American Funds muni manager Edward Nahmias is stepping down from his three state-specific muni portfolios in advance of his retirement. At
George Gianarikas has stepped down from managing Putnam Global Technology PGTAX and Putnam Global Utilities PUGIX and has left the firm. He'll be replaced at Putnam Global Technology by Brian Hertzog and at Global Utilities by Sheba Alexander. Jessica Wirth has departed Putnam Global Energy PGEAX and will be replaced by Greg Kelly. Comanager Steve Curbow will remain in place.
Schwab is bringing down expenses at Laudus Small-Cap
Reinhart Partners, which currently manages $3.8 billion, primarily in separate accounts, is launching its first open-end fund, Reinhart Mid Cap Private Market Value. Brent Jesko and Matthew Martinek, who currently run a separate account with an identical strategy, will take the helm.
Huntington is launching Huntington Income Generation, an income-focused fund of funds. The offering will invest in underlying funds managed by Huntington and will be led by Paula Jurcenko, who currently runs several of the firm's allocation funds.
The board of Allianz AGIC International Growth Opportunities ALOPX has voted to replace the fund's current subadvisor, Allianz Global Investors Capital Management, with RCM Capital Management. Andrew Neville, who currently helps run Allianz RCM Global Small-Cap DGSCX, will take over as lead manager and will be assisted by Dennis Lai and Koji Nakatsuka, who help him run Global Small-Cap.
David Powers will join Eagle Growth & Income HRCVX as a fourth portfolio manager alongside Edmund Cowart, David Blount, and John Pandtle. The in-house trio took over management of the fund in 2011 after the fund's board replaced the previous subadvisor, Thornburg Investment Management.
Munib Madni and Samuel Rhee have joined the team behind Morgan Stanley Institutional Emerging Markets MGEMX. In addition, comanager James Cheng announced that he would retire from the fund at the end of the year.
Touchstone Emerging Markets Equity TEMAX has reopened to new investors after closing in February of last year.
CMG Capital Management is launching CMG Tactical Equity Strategy, which will be partially managed by CMG founder Stephen Blumenthal and partially managed by subadvisor Scotia Partners.
Ivy International Balanced IVBAX, which will soon be renamed Ivy Global Income Allocation, is now comanaged by W. Jeffrey Surles, who joins lead manager John Maxwell.
Erik Voss was added as a portfolio manager at Invesco Summit ASMMX. He'll run the fund with its current manager, Ryan Amerman.
Columbia Management has projected that fees at Columbia Strategic Allocation IMRFX will increase by between 12 and 18 basis points.
Shareholders approved the sale of Old Mutual Heitman REIT to Fundvantage.
Victory Value SVLSX will liquidate at the end of August.
Mutual fund analysts David Falkof, Shannon Kirwin, Harry Milling, and Rob Wherry contributed to this report.