• / Free eNewsletters & Magazine
  • / My Account
Home>Research & Insights>Investment Insights>Funds Shedding Assets at an Alarming Pace

Related Content

  1. Videos
  2. Articles
  1. Paying Up and Paying Out

    News this week showed market players paying up for media assets, paying out for tax relief, and more.

  2. Dividends Not Just for Retirees

    A strong and growing dividend can be a great signal of a quality stock for any kind of investor.

  3. Four Key Areas for Assessing Municipal Health

    Pensions and other post-retirement benefits will continue to be a growing concern for municipal governments and muni investors for years to come, says Morningstar municipal credit analyst Rachel Barkley.

  4. Conservative and Aggressive Picks for CEF Income

    Morningstar's Cara Esser offers several closed - end funds for an income-seeker's watchlist.

Funds Shedding Assets at an Alarming Pace

A look at some funds that have lost more than half of their assets in the past year.

Michelle Canavan, 12/03/2012

It's no secret that actively managed equity funds have been besieged by outflows for the past few years. This trend has hit several funds harder than others: They've lost more than half of their assets in the past 12 months alone. Outflows can raise trading costs by forcing managers to sell stocks they don't want to and it can distract them from finding new ideas. Here's a look at some funds that have seen 50% or more of their assets flee in the past year.

Under Pressure
Artio Global Investors' flagship international offerings, Artio International Equity BJBIX and Artio International Equity II JETAX, have seen their combined asset base shrink from $35.0 billion at the end of 2007 to roughly $3.1 billion as of Oct. 31, 2012. In just the past 12 months, International Equity and International Equity II have suffered respective outflows of 63% and 76% of their assets. A prolonged slump following 2008's downturn has been the cause of those redemptions. Since the beginning of 2009 through Oct. 31, International Equity and International Equity II have lagged the foreign large-blend category average by a cumulative 28.78% and 25.06%, respectively. The funds' three- and five-year trailing returns land in the bottom decile, and 10-year trailing returns for the older International Equity are middling.

Investors simply may have lost patience or faith in the management team and process that have steered this fund since 1995. One consequence of significant outflows from a fund family's flagship strategy is pressure on the parent firm's revenue and profitability. Artio Global Investors is no exception. The advisor shuttered its four U.S. equity funds this year, presumably because their small asset bases made them a tough business case. Artio also cut 10% of its workforce in September 2011 and let another 25 employees go in June 2012. Artio's former CEO Richard Pell stepped down from that post at the end of October 2012 to devote more attention to the management of these two funds, on which he is a comanager.

Meet the New Boss
Columbia Value & Restructuring UMBIX has shed more than half of its assets since the same time last year, leaving it with roughly $2.5 billion at the end of October. No doubt the retirement of longtime manager David Williams in May 2012 was the cause. Since the fund's inception, Williams built a great track record with a unique approach before handing it off to Guy Pope, who joined as comanager in 2009. Pope also has achieved a strong track record at Columbia Contrarian Core LCCAX since March 2005, but he uses a different strategy than Williams did at Value & Restructuring, and it's not clear how well that approach will work with this fund's much larger asset base. This management change has coincided with lackluster performance in 2011 and so far this year. Investors may be looking for more proven options until Pope and his team succeed on their own terms at this Neutral-rated fund.

Crisis of Confidence
Meanwhile, Brandywine Blue's BLUEX veteran manager Bill D'Alonzo remains at the helm, but investors still seem to have lost confidence in the fund's formerly successful strategy. The fund stands at $523 million in assets, having shed about 60% of its asset base from one year ago. This one-time standout's managers aim for a concentrated portfolio, and build or exit positions quickly in an attempt to pick the winners in quarterly earnings cycles. This strategy has lagged lately, and the fund's one-, three-, five-, and 10-year trailing returns land in the bottom decile.

Whether this Neutral-rated fund, which also has lost several research team leaders, can once again produce peer-beating results is in question.

A version of this article originally ran in Morningstar FundInvestor.


Michelle Canavan is an analyst with Morningstar.

©2017 Morningstar Advisor. All right reserved.