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Two More Marsico PMs Head for the Exits

Templeton makes leadership changes, long-short fund finds new partner, and more. 

Morningstar Fund Analysts, 07/12/2012

Doug Rao, manager of Marsico Flexible Capital MFCFX and comanager of flagship funds Marsico Growth MGRIX and Marsico Focus MFOCX, is leaving Marsico Capital Management on July 20, 2012. His is the latest in a series of departures from the firm over the last two years. Jordan Laycob and Munish Malhotra, who've been at the firm since 1997 and 2004, respectively, will comanage Flexible Capital. Firm founder Tom Marsico remains lead manager and Coralie Witter comanager on Growth and Focus. Joshua Rubin, a comanager on Marsico Emerging Markets MERGX, also announced he was departing.

Rao joined Marsico Capital Management in 2005 and moved up the ranks quickly, taking over as manager of Flexible Capital in 2007. He made ample use of that fund's go-anywhere mandate, holding roughly 20% in cash in 2008 and one third of assets in non-United States stocks, including some emerging-markets picks, in 2009. Such moves helped fuel the fund's dazzling gains compared with its large-growth peers--as well as the world allocation category average--during his five-year tenure. Following Cory Gilchrist's departure last fall, Rao was the firm's most experienced U.S. equity manager after Marsico.

Rao's successors are less experienced. Laycob has been a Marsico analyst since 1997 and the firm's sole fixed-income specialist, but he's never run a fund before. Malhotra has been a comanager of the $5 million Marsico Emerging Markets fund since its late 2010 inception, but that fund has lagged its diversified emerging-markets peers and the MSCI Emerging Markets Index since its birth and it has seen a lot of manager turnover. Rubin, who had been a manager on Marsico Emerging Markets since 2010, resigned just two months after comanager Charlie Wilson left the firm.

Turnover has also struck the analyst team. Seven team members who joined between 2003 and 2008 have left since 2010. Five new analysts came on board since last year, but only one had previous investment experience. The firm's troubles attracting and retaining talented investors coincides with financial woes. Marsico bought his firm back from Bank of America BAC in a highly leveraged deal in 2007, just before the 2008 market meltdown and investor outflows depleted the firm's asset base. As a result, the company restructured its debt in 2010. The firm's inability to retain and attract experienced investors has undermined investor confidence. Indeed, the firm is on pace for its fourth straight calendar year of significant outflows. Since 2008 through the end of June 2012 the firm has seen more than $5 billion leave its mutual funds and has lost outside subadvisory deals. Recently, John Hancock fired Marsico as the subadvisor for John Hancock Funds II International Opportunities JIIOX, citing disappointing performance. John Hancock has hired a team at Invesco led by Clas Olsson to replace Marsico and eventually plans to merge the fund into John Hancock Funds II International Growth Stock JGSNX, which Olsson and his team have managed since 2010.

Franklin Templeton Announces Leadership Changes
Franklin Resources BEN, parent firm of the Franklin, Templeton and Mutual Shares fund families, named Norm Boersma as chief investment officer of Templeton Global Equity Group. He will also retain the title of president of Templeton Global Advisors Limited. Boersma's promotion comes several weeks after the death of Gary Motyl, Templeton's previous CIO. Motyl was the third investment professional hired by legendary manager Sir John Templeton. Over a 30-year career at the firm Motyl held various positions and had been CIO since 2000. Boersma worked closely with Motyl for almost 20 years. At the same time, Cindy Sweeting has been named president of Templeton Investment Counsel and remains director of portfolio management. The leadership changes shouldn't have an impact on the rest of the firm's management ranks. Heather Arnold continues to be director of research. The firm's analysts, who double as portfolio managers, all remain in place.

In other Templeton news, Sweeting and Antonio Docal were named as portfolio managers on American Beacon International Equity AAIEX. Motyl had helped run this fund before his death. Templeton is a subadvisor in addition to Causeway Capital Management and Lazard Asset Management.

Columbia Manager to Retire
Stephen D. Barbaro, lead manager at Neutral-rated Columbia Small Cap Value I CSMIX, has announced his plans to retire at the end of 2012. His comanager, Jeremy H. Javidi, assumed the role of lead manager on June 30, 2012. Barbaro will stay on the fund through the end of the year. John Barrett will continue to comanage the fund with Javidi. Columbia has temporarily closed the fund to new investors. The retirement news isn't a surprise and won't affect the fund's rating.

Long-Short Fund Could Find New Partner
Bronze-rated Marketfield MFLDX will be reorganized into a new series of MainStay Funds on Oct. 5, 2012, pending shareholder approval. If approved, the fund will be renamed Mainstay Marketfield. Marketfield Asset Management will remain in place as a subadvisor, and the fund's strategy will not be altered.

BlackRock Shuffles Managers, Merges Index Fund
Michael Carey, who has helped run BlackRock Global Opportunities BGORX since 2006, has stepped down from his role as manager. Nigel Hart, who is a managing director at BlackRock BLK and previously worked at ReachCapital Management and Putnam, will assume the comanager position. Current comanagers Ian Jamieson and Thomas Callan remain in place.

BlackRock also announced that it will merge its S&P 500 Index MDSRX and Index Equity PNIEX funds into BlackRock S&P 500 Stock WFSPX.

Etc.
Michael Kotlarz joined Oppenheimer Capital Appreciation OPTFX and Oppenheimer Equity OEQAX as a comanager on June 29, 2012.

David Pearl will no longer manage MainStay Epoch U.S. Equity EPLPX as of Sept. 17, 2012. Eric Sappenfield will join the management team. The fund's strategy will shift to focus on dividend-paying U.S. companies, and its name will change to MainStay Epoch U.S. Equity Yield.

JPMorgan Chase JPM filed to launch JPMorgan Commodities Strategy in September 2012. The fund will primarily invest in commodity-linked derivatives and fixed-income securities. Robert Michele, Peter Kocubinski, and Christopher Tufts will manage the fund. Its A-shares will cost 1.25%.

MFS filed to launch MFS High Yield Pooled on Sept. 12, 2012. The fund will primarily invest in high-income debt and can invest up to 100% in below-investment-grade bonds. David Cole and William Adams will manage the fund. The firm also filed to launch MFS Equity Income on Sept. 30, 2012. The fund will primarily invest in dividend-paying common stocks. Jonathan Sage will manage the fund.

Oleg Makhorine joined the management team of Wells Fargo Advantage Precious Metals EKWAX.

Cohen & Steers Dividend Value DVFAX will waive its expense ratio to limit fund expenses to 1.00% for A shares and 1.65% for C shares. The waiver is effective through June 30, 2014.

Robert Lau will no longer be a manager on MFS Asia Pacific Ex Japan MPXAX as of Sept. 1, 2012. Sanjay Natarajan and new manager John Tsai will take over.

Thrivent has hired DuPont Capital Management as a sixth subadvisor on Thrivent Partner Worldwide Allocation TWAAX. Rafi Zaman, DuPont's managing director for global equity, will manage DuPont's slice of the fund.

Legg Mason agreed to waive fund expenses for Legg Mason BW Diversified Large Cap Value LBWAX through Dec. 31, 2013. Under the waiver, A-, C-, FI-, R-, and I-shares are not expected to exceed 1.10%, 1.85%, 1.10%, 1.35%, and 0.85%, respectively.

MassMutual Strategic Balanced, MassMutual Value Equity, MassMutual Core Opportunities, and MassMutual Large Cap Growth liquidated in June 2012.

Madison Investment Advisors reduced fees on several of its funds. Notably, Madison Mosaic Investors MINVX, Madison Mosaic Mid Cap GTSGX, and Madison Mosaic Dividend Income BHBFX will reduce fees by 0.04%, 0.10%, and 0.30%, respectively.

Brian Hopkinson and Paul Nestro of subadvisor GE Asset Management were no longer managers on PNC International Equity PIUIX as of May 29, 2012.  Also, Bin Xiao of Polaris Capital Management joined the fund's management team on July 1, 2012. The fund now has two subadvisors and eight managers total.

Alger Small Cap Growth ALSAX and Alger Small Cap Growth Institutional ALSRX will reopen to new investors on Aug. 1, 2012.

The fund board for Pyxis Long/Short Equity HEOAX, Pyxis Long/Short Healthcare HHCAX, and Pyxis Floating Rate Opportunities HFRAX elected independent trustee Scott F. Kavanaugh as chairman of the board to replace former chairman R. Joseph Dougherty. Ethan Powell, executive vice president of Pyxis, also joined the board.

Batterymarch Financial Management no longer subadvises USAA Small Cap Stock USCAX as of July 10, 2012. USAA dropped Batterymarch because of its long-term performance history. Cambiar Investors and Granahan Investment Management will replace Batterymarch as subadvisors.

Senior mutual fund analyst Karin Anderson and mutual fund analysts Kailin Liu and Rob Wherry contributed to this report.

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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