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BlackRock Expands Fund Lineup

IShares pursues a new ETF strategy and branding initiative with a core series of funds for buy-and-hold investors, BBH Core Select nears capacity, and Vanguard rolls out a new TIPS product.

Morningstar Fund Analysts, 10/18/2012

Following last week's announcement that BlackRock would launch a new global long/short equity fund, the firm has filed to launch four additional funds this year.

The first, a multiasset real return fund, will be managed by Philip Green, Michael Fredericks, Lutz-Peter Wilke, and Justin Christofel. The fund will invest in Treasury Inflation-Protected Securities, equities, REITs, commodity-related companies, master limited partnerships, and investment-grade and junk bonds to try to beat inflation. Several firms have launched similar real return funds in recent years, although most have failed to gather significant assets as inflation has been kept at bay.

Continuing its foray into multiasset funds, BlackRock also filed to launch BlackRock Market Advantage. The fund will use a risk-factor approach to allocate among a range of asset classes, including stocks, bonds, derivatives, commodities, REITs, and cash. Ked Hogan, Philip Green, Vincent de Martel, Philip Hodges, and Ugo Montrucchio are listed as the managers.

Last, BlackRock filed to launch two short-term bond funds. BlackRock Short Obligations will be managed by Michael Evan and Richard Mejzak and will invest in U.S.-dollar-denominated investment-grade and short-term fixed- and floating-rate debt securities. BlackRock Ultra-Short Obligations fund will be managed by Thomas Kolimago and Eric Hiatt and will invest in a broad range of money market securities.

iShares Launches 4 New ETFs Targeting Portfolios' Core
IShares, the world's largest exchange-traded fund provider and part of the BlackRock family, is targeting a greater proportion of individual investors' portfolios. The firm is branding a new suite of ETFs to target buy-and-hold investors, adding "Core" to six existing ETFs and launching four new funds under the "Core" suite. Four U.S. equity, three international equity, and three fixed-income ETFs comprise the lineup. The new funds include iShares Core MSCI Total International ETF IXUS, iShares Core MSCI Emerging Markets ETF IEMG, iShares Core MSCI EAFE ETF IEFA, and iShares Core Short Term U.S. Bond ETF ISTB. The new ETFs are expected to begin trading on Oct. 22.

As more investment firms look to provide one-stop solutions to meet investors' needs, the move from iShares appears to be following, but stopping just short of, that trend. Instead of providing a packaged solution, the firm is encouraging investors to mix and match various ETFs to build a low-cost portfolio on their own.

In addition, BlackRock and iShares will combine their U.S. retail sales teams and launch a new advertising campaign emphasizing the popularity of their ETFs among investment professionals.

BBH Core Select Set to Close to New Investors
Brown Brothers Harriman & Co. announced it is ready to close BBH Core Select BBTEX to new investors. The fund has reached $3.2 billion in assets as of October 2012, and the firm vows to shutter BBH Core Select's doors once it tips $3.5 billion. The Silver-rated fund's management team has deftly navigated a nimble 30-stock portfolio, earning an 8.2% annualized return since they took over in October 2005 through September 2012, far surpassing the 4.5% and 3.4% of the S&P 500 Index and average large-blend peer, respectively, and with less volatility. Investors noticed this strong result, sending net inflows to the fund in 34 out of the past 36 months, in direct opposite of the outflows occurring at the majority of equity funds.

Brandywine Promotes from Within
Scott Gates is taking an expanded leadership role by becoming co-chief investment officer of Friess Associates, subadvisor for Brandywine BRWIX and Brandywine Blue BLUEX. He will share that title with Bill D'Alonzo, who worked closely with firm founder Foster Friess and has helped lead the firm and the funds for more than two decades. Gates joined the company in 2003 and became a research team leader in 2008 and, soon after, began serving as the primary backup to D'Alonzo for portfolio oversight.

Vanguard Adds New Inflation Protection Product
Vanguard, home of the largest inflation-related fund, Vanguard Inflation-Protected Securities VIPSX, launched a sibling product, Vanguard Short-Term Inflation-Protected Securities Index VTIPX. The new fund offers conventional shares (Investor, Admiral, and Institutional) and an ETF share class (Vanguard Short-Term Inflation-Protected Securities Index Fund VTIP), with expense ratios ranging from 0.07% to 0.20%. Unlike the flagship inflation-protection fund, which has an average duration of 8.5 years, the short-term fund will track a benchmark with an average duration of 2.7 years, providing less interest-rate risk, but also lower return potential.

Etc.
Janus filed to launch Janus Diversified Alternatives Fund, which will attempt to provide an absolute return with low correlation to stocks and bonds. The fund will use an internal multifactor process to allocate assets among equity, fixed income, commodities, and currency asset classes, tactically allocating assets based on the management's insights. According to the filing, Andrew Weisman and John Fujiwara will manage the fund. Both managers joined Janus in 2012.

Gopal Reddy will join Steven Wymer on Fidelity Advisor Growth Opportunities FAGAX. In addition, Edward Yoon was added as a comanager on Fidelity Advisor Mid Cap Growth FGCAX. Fidelity's board has also approved the reorganization of the fund into Fidelity Advisor Stock Selector Mid Cap FMCDX pending shareholder approval (Fidelity Advisor Growth Strategies FGVAX was also approved to merge into Fidelity Advisory Stock Selector Mid Cap).

Jonathan Sheridan is no longer listed as a portfolio manager on Goldman Sachs Absolute Return Tracker GARTX.

Margaret Vitrano was added as a comanager of Legg Mason ClearBridge Large Cap Growth SBLGX. Comanager Scott Glasser will be stepping down in March 2013.

Invesco Balanced-Risk Commodity Strategy BRCAX will close to new investors effective Nov. 15.

Schwab Premier Income SWIIX will soon be revamped. The fund will be renamed Schwab Intermediate-Term Bond, investing at least 80% of assets in debt securities and reducing its expense ratio from 0.63% to 0.45%.

Lee Munder has been appointed as a new, additional subadvisor on PACE International Emerging Markets Equity PWEAX, replacing subadvisors Delaware Management Company and Pzena Investment Management.

Alger will change the name of Alger Large Cap Growth Institutional ALGRX to Alger Capital Appreciation Focus at the end of the year. The fund will expand from investing in companies with a market cap of over $4 billion to those of any size, and will shrink its portfolio from 70 to 100 holdings down to 50, with a turnover goal of less than 100%.

Delaware Investments added Graham McDevitt of subadvisor Macquarie Bank as a portfolio manager on Delaware International Bond DIIFX.

Neuberger Berman filed a preliminary prospectus for Neuberger Berman New York Municipal Income. The Institutional share class will carry an expense ratio of 0.87%, just above the municipal long category average's 0.86%.

ING will liquidate ING Alternative Beta IABAX effective Dec. 7. The fund closed to new investment Oct. 12.

David Cowan of GMO replaced GMO's Sam Wilderman as the listed portfolio manager of USAA Income Stock USISX. UBS Global Asset Management's Ian McIntosh replaced UBS Global Asset Management's global head of equities, John Leonard, as listed portfolio manager of USAA Growth & Income USGRX. McIntosh previously had replaced Leonard, who remains with UBS Global Asset Management, in running UBS US Equity Alpha BEAAX.

Royce plans to liquidate Royce Mid-Cap Service RMIDX in November. The fund, which holds less than $4 million in assets, was launched in December 2009. Three of the comanagers on the fund will be assigned to other funds. Jim Stoeffel will be working with Steve McBoyle and Whitney George on Royce Smid-Cap Value RMVSX. Stoeffel also will be working with George on Royce Low Priced Stock RLPIX. Brendan Hartman will transfer to Royce Micro-Cap RMCFX, working with Jenifer Taylor. Finally, Carl Brown will be working with Chip Skinner on Royce Value Plus RYVPX.

Effective Dec. 31, Emily Baker will no longer serve as a portfolio manager of MainStay Epoch International Small Cap EPIPX. Eric Citerne, Michael Welhoelter, and William Priest will continue to serve as portfolio managers of the Fund.

Senior mutual fund analyst Karin Anderson, mutual fund analysts 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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