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Oppenheimer, Goldman Sachs Exit Target-Date Industry

Calamos hires value team, Franklin adds managers, and more. 

Morningstar Fund Analysts, 07/05/2012

The target-date industry is getting a little smaller. Oppenheimer and Goldman Sachs are merging away and liquidating their respective lineups. Their exits are more proof that even as assets flow into these offerings, the target-date industry is dominated by a few large players.

Oppenheimer's Transition Target-Date series, which carried a Bottom rating, had about $640 million in assets at the end of March 2012. Oppenheimer Transition 2030 OTHAX, 2040 OTIAX, and 2050 OTKAX funds will merge with Oppenheimer Active Allocation OAAAX. That fund has roughly a 70%/30% mix of stock and bonds. It has lost an annualized 3.3% the past five years, landing it near the bottom of the aggressive allocation category. Oppenheimer Transition 2015 OTFAX, 2020 OTWAX, and 2025 OTDAX will merge with Oppenheimer Moderate Investor OAMIX, which features a 55%/45% mix of stocks and bonds and a similarly disappointing record. The lineup's 2010 OTTAX fund will be merged into Oppenheimer Conservative Investor OACIX. All three balanced funds are run by Oppenheimer's asset-allocation team, which also oversaw the target-date lineup.

Pending board approval, Goldman Sachs will liquidate its Retirement Strategy lineup later this year. Shares of the series will no longer be available for purchase as of July 27, 2012. The series, which was launched in 2007, had a lackluster three-year record that landed the individual funds in the bottom of their respective groups. Morningstar did not assign a rating to this lineup.

The firms' decisions show how difficult it is to succeed in the target-date space, where a few large players have dominated inflows. To survive, fund companies not only have to have distinct funds with good performance but low fees, too. Fidelity, Vanguard, and T. Rowe Price accounted for 75% of the $379 billion in assets housed in target-date lineups at the end of 2011.

Calamos Hires Value Team
Calamos Investments, a mutual fund company known primarily for its growth investing strategies, is now placing greater emphasis on its value offerings, too. The firm has hired three value equity managers away from American Independence Capital Management. Key among them is Jeff Miller, a manager on American Independence Stock ISISX since 2007 and chief strategist at AICM. His colleagues Tammy Miller and Ariel Fromer will also join Calamos. The trio will take responsibility for the stock-picking at Calamos Value CVAAX. John Calamos Sr. and Nick Calamos, co-CIOs of the firm, will remain on the fund as comanagers, responsible for the macro strategy. The other comanagers currently on the fund remain at the firm running other offerings. Miller and his comanagers leave behind a stellar record: American Independence Stock returned an annualized 3.8% under Miller's tenure, beating 98% of unique peers in the U.S. large-blend category.

Franklin Names New Comanagers
Franklin Resources, the parent firm of the Franklin, Templeton and Mutual Series fund families, announced several changes to its manager ranks. Grace Hoefig has been named as a comanager on Franklin Balance Sheet Investment FRBSX and Steven Raineri has been pegged to help run Franklin Small Cap Value FRVLX. In both cases, the new comanagers join a team that has guided the respective funds since their inceptions. Hoefig has been at Templeton since 2008 and was previously a managing director at AXIA Capital Management. Raineri has been at Franklin for seven years. He currently comanages Franklin All Cap Value FRAVX.

John Hancock Shuffles Managers
John Hancock announced it has added RS Investment Management as a second subadvisor on John Hancock Natural Resources JNRAX, joining Wellington Management. Each firm will run 50% of the fund's assets. At the same time, John Hancock also changed the fund's benchmark index to a 60%/40% split between MSCI World Energy and MSCI World Metals & Mining from a 60%/30%/10% combination of MSCI World Energy, MSCI World Metals & Mining, and MSCI World Paper & Forest Products.

Legg Mason Proposes Mergers
As part of its rebranding effort, Legg Mason has asked shareholders to approve four fund mergers. Three of the mergers combine funds with similar mandates and identical management teams: Legg Mason Western Asset Core Bond TRBAX,  Legg Mason Western Asset Core Plus Bond SHMGX, and Western Asset Limited Duration Bond WALDX will merge into Western Asset Core Bond WATFX, Western Asset Core Plus Bond WACPX, and Legg Mason Western Asset Limited Duration Bond SBSTX, respectively. The resulting funds will drop the Legg Mason name.

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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