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Columbia Merges Away More Poor Funds

Bart Geer takes over BlackRock Basic Value, Marsico Capital restructures its debt, and more.

Morningstar Fund Analysts, 09/21/2012

Columbia announced late last week that it will merge away 18 investment products, including 14 mutual funds, three variable portfolios, and one money market fund. The consolidation is part of the firm's ongoing efforts to rationalize its lineup following the firm's 2010 acquisition by Ameriprise Financial, owner of the RiverSource funds. Many of the mergers combine old RiverSource and Columbia funds with similar strategies and management teams, so there are no real surprises.

Columbia's average performance numbers may get a boost as the majority of the surviving funds have a relatively superior risk-adjusted performance record. For example, the 1-star rated Columbia Frontier SLFRX and Columbia Select Small Cap ESCAX funds and 2-star rated Columbia Small Cap Growth II NSCGX will merge into the three-star rated Columbia Small Cap Growth I CGOAX.

Columbia has merged away 51 open-end funds and 16 variable portfolios since it combined RiverSource. 

Bart Geer Takes Over BlackRock Basic Value
Former Putnam Equity Income PEYAX manager Bart Geer, who joined BlackRock in August, will take over the Neutral-rated BlackRock Basic Value MDBAX from the fund's retiring lead manager Kevin Rendino on Oct. 31. Comanager Carrie King remains.

Geer built a solid 10-year record at Putnam Equity Income, using a mix of computer models and fundamental stock research to earn a 7.1% annualized gain over 10 years that outpaced both its large-value peer average and the S&P 500 Index by roughly 1 percentage point.

There'll be some strategy and portfolio changes for the BlackRock fund, but it's too early to tell how drastic they'll be. Rendino hasn't strayed very far from his Russell 1000 Value Index benchmark, while Geer was willing to move away from the benchmark's sector weightings at times and kept a lower market cap average than most peers.

Marsico Capital Management Restructures Debt Again
Marsico Capital Management has undergone a second debt restructuring, cutting the firm's debt burden in half and also reducing management's equity stake to less than 40%. Following the deal, firm founder Tom Marsico retains 100% voting control of the company. Financial woes have followed the fund company since 2007 when it bought itself back from Bank of America in a highly leveraged deal.

The recent debt restructuring gives the asset manager much more runway to meet those obligations, which is a good thing since the all-equity-focused shop has seen significant outflows in recent years. Though the firm looks to be on more solid financial footing, two-plus years of significant investment team turnover have left a less experienced group of portfolio managers and analysts to run the funds. 

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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