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Vanguard Shuffles Advisory Ranks

Oakmark reopens fund, Sentinel managers head to competitor, Lord Abbett makes manager changes and more. 

Rob Wherry, 08/02/2012

Vanguard has removed AllianceBernstein as a subadvisor on Vanguard Windsor VWNDX, Vanguard International Value VTRIX, and Vanguard Global Equity VHGEX. While Vanguard didn't cite a reason for the change, lackluster performance at these funds was probably a factor. Indeed, Vanguard dropped AllianceBernstein from Vanguard US Growth VWUSX in October 2010 after almost a decade of poor performance. In addition, AllianceBernstein has been plagued by layoffs, personnel departures, and asset outflows. It currently receives a D for its Morningstar stewardship grade. Fees are expected to go up at each fund in the wake of the moves. 

At Windsor, Vanguard will replace AllianceBernstein with Pzena Investment Management. That firm will now run 28% of Windsor's assets with Wellington Management overseeing 71%. (The rest is in cash.) Pzena has helped run Vanguard funds since 2005, including Vanguard U.S. Fundamental Value, which is domiciled in Ireland, and Vanguard Emerging Markets Select Stock. Pzena has built a so-so record running Neutral-rated John Hancock Classic Value PZFVX the past 15 years. But the firm doesn't have the culture problems that AllianceBernstein did. 

The Pzena connection runs through another one of the advisory changes. Vanguard appointed ARGA Investment Management to run 21% of International Value's $6.1 billion assets. ARGA founder Rama Krishna was previously a managing principal and portfolio manager at Pzena. He founded ARGA is 2010.

Vanguard didn't have to look far for an advisor to pick up the slack at Global Equity. Current subadvisor Baillie Gifford will now run 19% of the fund's assets, up for 6% previously. Vanguard also announced that Jeremy Hosking, part of Marathon Asset Management's team on Global Equity, will retire at the end of the year. Hosking's colleagues, Neil Ostrer and William Arah, remain in place. 

Vanguard announced that expense ratios for the investor shares of Windsor and International Value are expected to increase 2 basis points to 0.41%. The expense ratio for the Investor shares of Global Equity is expected to increase by 5 basis points to 0.59%. Even after the increases, the fees are still cheap relative to peers. 

Oakmark Reopens Fund
Harris Associates, the advisor for the Oakmark fund family, announced it has reopened Oakmark Equity & Income OAKBX to all investors after closing the fund to most financial intermediaries in mid-2010. Edward Studzinski recently stepped down as a manager of the Silver-rated fund and retired from the firm. But Clyde McGregor, who has run this fund since its 1995 inception, remains in place. The fund has a strong 15-year record that lands it at the top of the moderate-allocation peer group. But recent performance has been lackluster. That record is partly to blame for the fund seeing $1.4 billion exit the past 18 months. By opening the fund to new money, Oakmark is trying to better balance the fund's cash flows so McGregor isn't forced to sell positions at inopportune times.

Sentinel Managers Leaving for Competitor
Sentinel Investments announced that Chuck Schwatz, Betsy Pecor, Matt Spitznagle, and Matt McGeary, four of the five managers behind Sentinel Small Company SAGWXSentinel Mid Cap SNTNX, Sentinel Mid Cap II SYVAX, and Sentinel Sustainable Mid Cap Opportunities MYPVX, have resigned from the firm and are heading to Eagle Asset Management, the advisor to the Eagle fund lineup. Sentinel chief executive officer Christian Thwaites; Dan Manion, the director of equity research and comanager of Sentinel Common Stock SENCX; Hilary Roper, Manion's comanager on Common Stock; and Carole Hersam, a longtime analyst at the firm; will take over managment duties at each of the funds. Hersam has supported each of the funds as an analyst and was named a comanager on Sustainable Mid Cap Opportunities in March 2012. This isn't the first time a mass defection has hit Sentinel. In 2004 Scott Brayman, then the manager of Sentinel Small Company, left to start his own firm (which became Champlain). Brayman took several members of the staff with him at the time. Schwartz, who is leaving now, was the only member of Brayman's team who didn't leave during the last round of departures. 

Lord Abbett Announces Several Manager Changes
A recent fund manager change is having a trickle-down effect at Lord Abbett. In late July 2012, the company announced it was changing the mandate and the management team behind $1.1 billion Lord Abbett Capital Structure LAMAX, an aggressive allocation fund. It will now use a combination of quantitative screens and fundamental research to find attractively priced large- and mid-cap dividend-paying stocks. It will also be renamed Lord Abbett Calibrated Dividend Growth and will join two other funds in the firm's lineup that use a similar process and naming convention (although those two offerings aren't nearly as large as this one). Walter Prahl and Rick Ruvkun will comanage the new fund. Prahl is the head of Lord Abbett's quantitative research team while Ruvkun is the current director of domestic-equity research. The offering's previous management team remains at the firm overseeing other funds.

After the changes, Ruvkun will hand over the research director title to David Linsen, who currently comanages Neutral-rated Lord Abbett Growth Opportunities LMGAX, Lord Abbett Stock Appreciation LALCX, and Lord Abbett Growth Leaders LGLAX. In turn, Linsen will step down at each of those funds to manage a team of 17 analysts. At Growth Opportunities, lead manager Paul Volovich remains in place. Volovich will also continue to comanage Stock Appreciation. But at that fund he will be joined by Tom O'Halloran, who is part of the team running Bronze-rated Lord Abbett Developing Growth and Growth Leaders. The remaining comanagers at all three of Linsen's funds remain in place.

In additional Lord Abbett news, Joel Serebransky has stepped down as a manager at Neutral-rated Lord Abbett Floating Rate LFRAX after just 11 months at the helm. The fund's rating stemmed, in part, from the fact Serebransky had experience with leveraged loans, but no prior record running a mutual fund. Serebransky has also resigned from the firm. Taking his place is Jeff Lapin, who joined Lord Abbett's taxable fixed-income team earlier this year. Lapin previously worked at Power Advisory Group, which specializes in high-yield bonds. Chris Towle, who has managed Lord Abbett Bond Debenture since 1987, will continue as a comanager at Floating Rate.

Morgan Stanley Proposes Fund Mergers
Morgan Stanley is seeking shareholder approval for five fund mergers. In each case, the company would combine two funds sharing an identical strategy and management team.  

The changes are part of an ongoing effort by Morgan Stanley to pare down what has been at times a confusing mutual fund lineup. The company has maintained parallel retail and institutional fund offerings of several strategies for many years, though the management teams and strategies in each case have been identical for almost a decade. 

While there won't be any changes to the funds' strategies or management, investors in all 10 funds will likely see fees drop as a result of the mergers. Investors in the retail funds will own a retail share class after the merger, with minimum investment requirements similar to what they currently face.

Morgan Stanley Mid Cap Growth DGRAX, which is rated Gold, will merge into the Gold-rated Morgan Stanley Institutional Mid Cap Growth MSKHX. The Silver-rated Morgan Stanley International Value Equity IVDAX will combine with its larger, Silver-rated sibling Morgan Stanley Institutional International Equity MSIQX. Morgan Stanley Global Strategist SRTAX will merge into Morgan Stanley Institutional Global Strategist MSBHX, and Morgan Stanley International INLAX is merging into Morgan Stanley Institutional Active International Allocation MSAHX. Finally, Morgan Stanley Institutional Focus Growth MSAGX will merge into Morgan Stanley Focus Growth AMODX

These changes come on the heels of two similar mergers last November, when the company merged Morgan Stanley Special Growth into Morgan Stanley Institutional Small Company Growth MSSHX and Morgan Stanley Real Estate into Morgan Stanley Institutional US Real Estate MSUHX.

Henderson Launches Dividend Fund
Henderson Global Investors is the latest company to launch a dividend-focused fund. Henderson Dividend & Income is one of more than two dozen such offerings that have been rolled out in the U.S. over the past year. These products have been popular with income-seeking investors. John Pattullo and Jenna Barnard, who currently manage Henderson Strategic Income HFAAX, and Alex Crooke and Job Curtis, who currently manage Henderson Global Equity Income HFQAX, will comanage the fund.

Aberdeen Merges, Renames Funds
Aberdeen plans to combine several of its asset-allocation funds and rebrand them with new names. Aberdeen Optimal Allocations Defensive GODAX will be merged into Aberdeen Optimal Allocations Moderate GMAAX, and the combined fund will be renamed Aberdeen Diversified Income. Aberdeen Optimal Allocations Growth GVAAX will be merged into Aberdeen Optimal Allocations Moderate Growth GMMAX, and the combined fund will be called Aberdeen Dynamic Allocation. Richard Fonash and Allison Mortensen, who currently manage all four funds, will continue to run the combined funds. Aberdeen estimates that investors in the funds will see fees drop slightly as a result.

Federated Consolidates Its Lineup
Federated is seeking approval to consolidate several newly acquired funds into its lineup. In June 2012, the company purchased four equity, two fixed-income, and two money market funds from Trustmark. If the moves are approved, Performance Large Cap Equity PFECX will merge into Federated Capital Appreciation FEDEX; Performance Leaders Equity PILZX and Performance Mid Cap Equity PCGCX will both merge into Federated Mid Cap Growth Strategies FGSAX; Performance Strategic Dividend PSDHX will merge into Federated Strategic Value Dividend SVAAX; Performance Intermediate Term Income PFFCX will merge into Federated Total Return Bond TLRAX; and Performance Short Term Government Income PFSFX will merge into Federated US Government Securities Fund: 1-3 Years FSGVX.

Another Company Closes Its Target-Date Lineup
American Independence is liquidating its Nestegg series of target-date funds. The five funds will close at the end of August and cease operations at the end of September 2012. American Independence isn't the only fund company exiting the competitive target-date universe. Click here to see why Oppenheimer and Goldman Sachs GS recently left, too.

Hancock Woos MFS Manager
John Hancock has hired John Addeo of MFS to run John Hancock High Yield TSHYX and John Hancock High Income JHAQX, adding more depth to the team after the departure of longtime lead manager Arthur Calavritinos. Calavritinos stepped off both funds in late 2011 after a disappointing showing that year and in 2008. The three comanagers who had assisted Calavritinos and had taken over the funds after his departure will remain onboard. Addeo, a former high-yield analyst, ran MFS High Income MHITX for 11 years, along with several other funds. Under his tenure, MFS High Income's 5.9% annualized return trailed three fourths of its peers in Morningstar's high-yield bond category. 

Etc.
Timothy Beyer is replacing Brian Walton on the Sterling Capital Management team that oversees a portion of Vanguard Explorer Value VEVFX.

Neutral-rated Invesco Van Kampen High Yield Municipal ACTHX will close to new investors as of Sept. 4, 2012. In April 2012 Invesco High Income Municipal merged into this fund, and while the merger did not greatly affect the asset size, Invesco Van Kampen High Yield Municipal has grown to more than $6.5 billion and is among the top-five high yield municipal-bond funds by assets. 

BlackRock is launching three short-duration bond funds: BlackRock Short-Term Treasury, BlackRock Ultra-Short Obligations, and BlackRock Short Obligations.

Dreyfus is seeking shareholder approval to merge Dreyfus/Standish Fixed Income SDFIX into Dreyfus Intermediate-Term Income DRITX in January 2013. Both funds are led by David Bowser, who runs Dreyfus/Standish Fixed Income solo and Dreyfus Intermediate-Term Income with comanager David Horsfall. The company also plans to liquidate Dreyfus/The Boston Company Large Cap Core SDEQX at the end of August 2012.

Thomas Cole, who left UBS Global Asset Management in March 2012 for a new position at Institutional Capital, has joined Jerrold Senser and Thomas Wenzel in running Institutional Capital's portion of Nuveen Multi-Manager Large-Cap Value NNGAX. In addition, Joel Drescher has been added to the team managing Symphony Asset Management's portion of the fund.

John Huber has stepped down as CIO for fixed income at RBC Global Asset Management and from his duties running Access Capital Community Investment ACCSX. His comanagers, Brian Svendahl and Todd Brux, will continue running the fund.

SEI has filed to launch SEI Emerging Markets Debt. The fund will be subadvised by teams at Ashmore Investment Management, ING Investment Management, and Stone Harbor Investment Management.

Mercer Investment Management is launching a new fund, Mercer Global Low Volatility Equity. The fund employs three subadvisors, including Acadian Asset Management, MFG Asset Management, and First Eagle Investment Management, each of which will manage a portion of the fund's assets.

Ellen Tesler, formerly a portfolio manager for Deutsche Asset Management, has joined DWS Select Alternative Allocation SELAX as a fourth comanager.

The board of Touchstone Intermediate Fixed Income TCFIX has voted to liquidate the fund later this month, citing the fund's weak recent performance, its similarity to other funds in Touchstone's lineup, and the news that the fund's majority shareholder will be pulling out.

Dreyfus has added Kayne Anderson Rudnick Investment Management as a seventh subadvisor on Dreyfus Select Managers Small Cap Value DMVAX. The advisor will take over approximately 10% of the fund's assets. 

David Sheasby has replaced James Fairweather as lead portfolio manager at Calvert International Equity CWVGX. Fairweather will remain onboard as a comanager, along with current comanager Christine Montgomery.

Van Eck has added RiverPark Advisors LLC, a long-short equity manager, as a 12th subadvisor on Van Eck Multi-Manager Alternatives. 

Ryan Jenkins, who had comanaged USX China HPCCX with Christopher Anci since early 2012, resigned. Christopher Anci will remain as sole manager.

Artio is changing Artio Global Equity's BJGQX name to Artio Select Opportunities. 

Armen Arus has been added as a comanager on the eight Transparent Value Dow Jones RBP funds. 

Global equity analyst Andrew Wheatley-Hubbard has joined BlackRock Global Dividend Income BABDX as a third comanager. 

DWS will close the 1-star-rated DWS Clean Technology WRMAX in September 2012.

BMO plans to liquidate BMO Large-Cap Focus MLIFX.  

Mutual fund analysts Shannon Kirwin and Rob Wherry contributed to this report. 

Rob Wherry is a mutual fund analyst with Morningstar.
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