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9 of the Biggest Manager Changes So Far in 2012

Evaluating key changes at Fidelity, Third Avenue, and Legg Mason.

Russel Kinnel, 07/02/2012

Each month in Morningstar FundInvestor, I review the latest manager changes and whether they were "positive," "negative," or "neutral" (that is, the change isn't a big positive or negative) for the fund in question. Now that we are halfway into the year, I'm sharing my take on the biggest manager changes of 2012 so far. I'll also share our Morningstar Analyst Ratings on the funds in light of those changes. Even if it's a positive or negative manager change, that might not be significant enough to alter our rating.

Ariel Appreciation  CAAPX
Impact: Negative
Rating: Bronze
Change: March 23, 2012
Comanager Matt Sauer left to join a former Oak Value colleague at Lateef. Comanagers John Rogers and Tim Fidler will remain, and there are no plans to add a third portfolio manager. Our Take: This is a blow but not a disaster. Still, Sauer seemed likely to become lead manager as John Rogers had stepped in when the previous comanager left. Tim Fidler was named a comanager in November 2009, so we don't have much of a track record on him.

BlackRock Energy & Resources SSGRX 
Impact: Negative
Rating: Under Review
Change: June 22, 2012
Manager Dan Rice III left after The Wall Street Journal reported his family had a large sum of money invested in a family-run energy partnership that had business deals with some companies in the fund's portfolio. BlackRock said it knew of the partnership and potential conflicts of interest and did not have a problem with it. Nevertheless, Rice III resigned. Our Take: We're reviewing our rating, and I'm scratching my head over why BlackRock's compliance department was OK with this. It's certainly a blow to lose Rice, but comanager Denis Walsh III remains. Stay tuned for our updated rating.

Fidelity Overseas FOSFX 
Impact: Negative
Rating: Negative
Change: Jan. 10, 2012

Vincent Montemaggiore replaced Ian Hart at this fund. Hart had struggled mightily during his tenure here. Montemaggiore had produced decent results at Fidelity Select Banking FSRBX and had previously run Fidelity Select Industrial Equipment FSCGX. Our Take: Montemaggiore seems to be coming in cold on this assignment, as running a couple of U.S. sector funds doesn't seem to provide sufficient experience to run a diversified foreign fund. We rate the fund Negative, but we'll keep a close eye on the fund to see how Montemaggiore fares. As Chris Davis noted in his analysis of the fund, Montemaggiore is a Buffett fan whose investment style sets him apart from most Fidelity managers.

Fidelity Value Discovery FVDFX 
Impact: Negative
Rating: Neutral
Change: Jan. 10, 2012

Scott Offen stepped down from this fund in order to focus on his new charge, Fidelity Equity DiviĀ­dend Income FEQTX. He was replaced by Sean Gavin, who runs Fidelity Select Transportation FSRFX. Our Take: While this is good news for shareholders in Fidelity Equity Dividend Income, it's clearly bad news for shareholders in Fidelity Value Discovery as they are going from an experienced manager with a good track record to a less-experienced manager without much of a track record.

Legg Mason Capital Management Value LMVTX
Impact: Neutral
Rating: Neutral
Change: April 30, 2012

Bill Miller stepped down as lead manager at the end of April 2012, and comanager Sam Peters took over. Miller remains as chairman of Legg Mason. Legg Mason had previously announced that Peters would be Miller's successor, but it had not put a date on it. Our Take: We can't muster much enthusiasm for the fund either way. We gave the fund a Morningstar Analyst Rating of Neutral. It's a shame to see Miller go out on a down note. Peters' record at another Legg Mason fund does not inspire confidence. You are going from a manager with a long, dramatic, but ultimately middling record to one with a short and slightly subpar record. In addition, Legg's analyst staff is middling at best.

Parnassus Equity Income PRBLX 
Impact: Neutral
Rating: Bronze
Change: May 1, 2012
Benjamin Allen was named comanager on May 1. Allen has been director of research at the firm, so it's fair to say he's had a hand in the fund's past success. However, we don't have a record for him, and now this fund's record has a little less meaning as Allen and Todd Ahlsten will split coverage of the holdings but Ahlsten will retain final say over the portfolio. Our Take: The change is not dramatic, but we'll be monitoring the fund to see what impact it has. We have started the fund with a Bronze rating, given Ahlsten's strong record.

T. Rowe Price Global Stock PRGSX 
Impact: Neutral
Rating: Neutral
Change: Oct. 1, 2012

Gotta love how far in advance T. Rowe's manager changes are telegraphed. In this case, Rob Gensler is going to retire and hand the reins of T. Rowe Price Global Stock to David Eiswert on Oct. 1, 2012. Eiswert had run T. Rowe Price Global Technology PRGTX and will turn that fund over to Joshua Spencer on June 1, 2012. Our Take: For Global Stock, it is a mixed bag. Eiswert has a strong four-year track record at the tech fund, but Gensler had a strong sector-fund record when he took over Global, and his tenure at Global has been disappointing. Gensler was much more of a trader and short-term investor than most of his T. Rowe peers, so it will be interesting to see how Eiswert adapts to running a diversified fund. Will he keep the high turnover or run the fund more like other T. Rowe funds?

Third Avenue Value TAVFX 
Impact: Neutral
Rating: Silver
Change: March 1, 2012

Marty Whitman stepped down as manager of Third Avenue Value and handed the reins to comanager Ian Lapey. Whitman remains at the firm. Our Take: Third Avenue had signaled this transition was on the way, and Lapey has been a key part of the process for years. Our thesis for the fund has largely been based on Lapey in recent years. After becoming lead manager in March, Lapey quickly trimmed the fund's huge weighting in Hong Kong real estate stocks for purposes of dialing down the fund's risk level--not because he doesn't like the stocks' prospects.

Westwood LargeCap Value WHGLX 
Impact: Negative
Rating: Bronze
Change: March 5, 2012

This was another smooth transition when Susan Byrne stepped back from her role as comanager at this fund and co-chief investment officer at Westwood. Comanagers Mark Freeman and Scott Lawson remain as comanagers. Our Take: It was clear that Byrne was easing back for a while, so this was not a surprise. Moreover, Freeman and Lawson have been with the firm for 12 and nine years, respectively, and we expect them to maintain the fund's current strategy.

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Russel Kinnel is Morningstar's director of mutual fund research. He is also the editor of Morningstar FundInvestor, a monthly newsletter dedicated to helping investors pick great mutual funds, build winning portfolios, and monitor their funds for greater gains. (Click here for a free issue). Mr. Kinnel would like to hear from readers, but no financial-planning questions, please. Follow Russel on Twitter: @russkinnel.
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