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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. 

Janus Hires Three Fixed-Income Analysts
Janus hired three new fixed-income analysts--Craig Klein, Jason Brooks, and Corinna Lyons--as it continues to invest in its fixed-income resources. Janus' global and multiasset assets under management have grown from $7.8 billion four years ago to about $29 billion today. In late 2010, the firm launched Janus Global Bond JGBAX, as well as a global high-yield and a global investment-grade fund for investors outside the United States.

American Funds Pushes Further Into Fixed-Income Space
American Funds filed to launch three new bond funds in 2013. American Funds Global High-Income Opportunities will search for high-yielding bonds in both developed and emerging markets and, according to the filing, may investment significantly in bonds of various currencies. American Funds Inflation Linked Bond will invest at least 80% of assets in inflation-linked bonds issued by the U.S. government. American Funds Corporate Bond will invest globally and keep at least 90% in investment-grade bonds.

Like other American Funds funds, multiple managers will run independent sleeves of the funds, although the filing didn't identify the managers. The track record at the firm's current fixed-income funds is mixed; all seven have Neutral ratings.

Franklin Templeton to Purchase Hedge-Fund Manager K2
Franklin Templeton will acquire fund of hedge funds manager K2 Advisors, first purchasing a majority stake from private equity firm TA Associates and then acquiring the remainder of the firm over a multiyear period beginning in 2016. The purchase will add to Franklin's alternatives options. According to the announcement, K2 has approximately $9.3 billion in assets under management.

Principal Broadens Income Search
Principal Funds will add DDJ Capital Management as a subadvisor on the Neutral-rated Principal Global Diversified Income PGBAX on Oct. 1, according to SEC filings. The board of directors has also approved hiring Post Advisory Group as a subadvisor for the fund, subject to a Dec. 10 shareholder vote. The two new subadvisors will manage the high-yield sleeve of the fund along with Guggenheim Investment Management, which has been on the fund since September 2009. The high-yield slice of the fund has neared capacity as the fund's assets have grown to more than $5 billion as of September 2012, and management has decided to add additional subadvisors to diversify that exposure. Guggenheim will run about 20% of the high-yield portfolio, Post 10%, and DDJ 8%. The fund will no longer let any single strategy exceed 20% of assets. Two additional third-party subadvisors and Principal subsidiaries Spectrum and Principal Real Estate Investors will continue to manage the fund's other asset classes.

Fidelity Promotes Sector Analyst
Fidelity assigned Ted Davis, a June 2012 hire from AllianceBernstein, as co-portfolio manager on Fidelity Select Natural Gas FSNGX. While assignment rotations among the firm's sector-focused managers is common, Davis' new role reflects a broader trend at the firm to hire experienced analysts and get them ready for portfolio management roles.  

Dreyfus Plans for Management Changes at Fixed-Income Funds
Kevin Cronk was added as a portfolio manager for Dreyfus High Yield DPLTX. Cronk joined Dreyfus in July 2012, previously serving as comanager of Columbia's high-yield group. Zandra Zelaya will join Nancy Rogers as portfolio manager of Dreyfus Bond Market Index DBMIX effective Jan. 1, 2013. Zelaya has worked for Dreyfus' sister company, Mellon Capital, for 15 years and will be employed by Dreyfus in January 2013. In addition, Robert Bayston and Nate Pearson will join Dawn Guffey as portfolio managers for Dreyfus Short-Intermediate Government DSIGX in January.

Etc.
Buffalo filed a prospectus for a new Buffalo Dividend Focus Fund. According to the filing, John Kornitzer of Buffalo Flexible Income BUFBX and Scott Moore will manage the fund. Expenses for the fund are listed as 0.97%.

TIAA-CREF filed to launch TIAA-CREF Social Choice Bond Fund. The fund, to be managed by Stephen Liberatore of TIAA-CREF Inflation Linked Bond TIILX, and Joseph Higgins and Steven Raab of Neutral-rated TIAA-CREF Bond TIBDX. According to the filing, the fund will screen on environmental, social, and governance criteria provided by MSCI. In addition, the fund's duration will typically stay within 15% of that of its Barclays U.S. Aggregate Bond Index benchmark.

Hartford filed to launch the Hartford Quality Bond and Hartford Global Alpha funds. Wellington will subadvise both funds, with Michael Garrett (of Gold-rated Vanguard GNMA VFIIX) as manager of Quality Bond and Robert Evans and Mark Sullivan (of Hartford World Bond HWDIX). Meanwhile, Wellington's John Soukas will manage Global Alpha. Fees start at 0.55% for the Quality Bond fund and 1.20% for the Global Alpha fund.

Columbia and Huber Capital replaced Davis Selected Advisers as co-subadvisors to MassMutual Select Large Cap Value MMLAX and the fund will now benchmark against the Russell 1000 Value Index. Timberline Asset Management was added as co-subadvisor to MassMutual Select Small Cap Growth Equity MMGEX.

Goldman Sachs filed to launch a world-bond fund. According to the filing, the fund will invest in a minimum of three countries, with no more than 25% of assets in any single non-U.S. country. Iain Lindsay of Goldman Sachs Global Income GSGIX and Hugh Briscoe will manage the fund. Expenses were not listed in the filing.

David Millar is no longer listed as a comanager on JHancock Global Absolute Return Strategies JHASX.

David Tiley is no longer listed as a comanager on Ivy Cundill Global Value ICDAX.

Loomis Sayles Small Cap Growth LSSIX closed to new investors effective Sept. 14, 2012.

Nationwide filed to launch a core plus bond fund. William Bellamy of TS&W Fixed Income TSWFX will manage the fund and according to the filing by Nationwide, the fund may invest up to 20% of assets in high-yield bonds. Expenses start at 0.70%. 

Ralph Eucher is no longer listed as a member of the board of directors at Principal. Nora Everett will take over the role of chair.

Hatteras has hired KeyPoint Capital Management and White Oak Global Advisors as subadvisor to Hatteras Alpha Hedged Strategies ALPHX, Hatteras Long/Short Equity HLSAX, and Hatteras Long/Short Debt HFIAX, and Hatteras Hedged Strategies HHSIX.

Target Large Capitalization Growth TALGX added Brown Advisory as a co-subadvisor effective November 2012.

ALPS Advisors filed to launch four new ETFs based on indexes from Goldman Sachs: ALPS/GS Momentum Builder Growth Markets Index, ALPS/GS Momentum Builder Multi-Asset Index, ALPS/GS Momentum Builder Asia ex-Japan Index, and ALPS/GS Risk-Adjusted Return US Large Cap Index. Estimated expenses were not listed in the filing. See this article for more information on the new funds.

Brown Advisory filed to launch an emerging-markets fund. Somerset Capital Management is listed as the subadvisor, with Edward Lam and Edward Robertson serving as portfolio managers. The expenses for the fund start at 1.30%.

Lord Abbett's board of trustees approved the plan to combine Lord Abbett Stock Appreciation LALCX with Lord Abbett Growth Leaders LGLAX.

ING removed Thornburg as subadvisor on ING Thornburg Value IMOIX. Thornburg replaced MFS in 2006 but has suffered from subpar performance in recent years, ranking in the bottom-decile of the large-blend category for the trailing five-year period. Pending shareholder approval, the fund will merge into the Neutral-rated ING Growth and Income IIVGX, which is managed by ING managers Chris Corapi and Michael Pytosh.

Allianz AGIC Growth PGWAX will receive another facelift. According to a filing by the firm, the fund will be renamed Allianz RCM Focused Growth effective Sept. 24, 2012. RCM will be come the subadvisor, with Scott Migliori, Karen Hiatt, and David Jedlicka, of Allianz RCM Large-Cap Growth RALGX, becoming the portfolio managers. In addition, fees will be cut by 5 basis points and the target market capitalization for the fund's holdings will decrease from $5 billion to $1 billion. The fund was last revamped in October 2009 when Allianz removed subadvisor Oppenheimer.

Senior fund analysts Karin Anderson and David Kathman, fund analysts Michelle Canavan, David Falkof, Kathryn Spica, and Rob Wherry, and ETF analyst Robert Goldsborough 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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