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At BlackRock, a Host of Equity Manager Changes

Harbor Capital Appreciation gets a new comanager, some Vanguard expense ratios fall, Oppenheimer changes a value manager, Vanguard rotates some bond fund managers, a Lord Abbett small-cap blend manager leaves, and more.

Morningstar Fund Analysts, 02/28/2013

BlackRock continued to revamp its equity mutual fund lineup this week by replacing three management teams, including what was left of a U.S.-based energy and natural-resources group that last year attracted unwanted attention for an apparent conflict of interest.

The asset-management firm said it will replace the U.S.-based team that has run the $784 million BlackRock Energy & Resources SSGRX and $391 million BlackRock All-Cap Energy & Resources BACAX since their inceptions with managers from BlackRock’s London-based energy and natural-resources squad. Robin Batchelor and Poppy Allonby will replace Dennis Walsh and Dan Neumann on the funds on March 11. Walsh has been a member since 1999 of the Boston-based management team that came to BlackRock with its 2004 acquisition of State Street Research & Management. He will leave the firm with Neumann, who became a comanager last year.

For more than a decade, Batchelor and Allonby have run the Bronze-rated BGF New Energy and Silver-rated BGF World Energy funds that are sold in Europe. As of Feb. 26, 2013, both funds had trailed their category averages since inception. New Energy had fallen 3.4% annualized since April 6, 2001, while the average European Alternative Energy fund had slipped less than 1.0%. World Energy had gained 6.9% annualized since then compared with 7.9% for the typical European-based equity energy fund. Since October 2011 Batchelor and Allonby also have been part of the team that runs the still relatively new and unrated BlackRock Commodities Strategies BCSAX, which mixes exposure to commodities futures and commodity-related stocks. It also has trailed its category average--commodities-broad basket--0.82% to 1.32% through Feb. 26, though the fund has beaten the Dow Jones UBS Commodity Index's 1.5% loss.

Last year, the longtime manager of the U.S.-based Energy & Resources and All-Cap Resources funds, Dan Rice, stepped down and eventually left BlackRock after news reports revealed a potential conflict of interest. A natural gas drilling firm that Rice helped start and his sons operated had a joint venture with one of the funds' largest holdings, Alpha Natural Resources ANR; the relationship was not clearly disclosed. Though Rice’s successors, Walsh and Neumann, were veteran members of the funds' management team, the controversy and shakeup raised questions about the fund; its Morningstar Analyst rating dropped to Neutral from Bronze in June 2012. The fund still has a strong long-term record--its 13.5% annualized gain beats the 11.9% of the average equity energy fund and 12.7% rise of the S&P 1500 Energy Index, albeit with more volatility. The fund has struggled in recent years, though, posting losses and lagging its benchmark and more than three fourths of its peers in the trailing one-, three-, and five-year periods through Feb. 26, 2013.   

The unrated BlackRock Mid-Cap Growth Equity BMGAX and Neutral-rated BlackRock Small Cap Growth Equity Portfolio CSGEX also will get new management teams. Lawrence Kemp, who joined BlackRock from UBS late last year to take over BlackRock Capital Appreciation MDFGX, will take over Mid-Cap Growth Equity on March 1 from Eileen Leary and Andrew Leger, who have been listed managers on the fund since 2002 and 2005, respectively. Kemp and comanagers Kathryn Mongelli and Phil Ruvinsky, who also just joined BlackRock from analyst positions at T. Rowe Price and Sureview Capital, respectively, will try to improve the results at the fund, whose trailing one-, three-, five-, 10-, and 15-year relative returns are poor. The managers used to work together on the same growth equity investing team at UBS. Leary and Leger will leave the firm.

BlackRock's San Francisco-based Scientific Active Equity team, which currently runs collective investment trusts, will take over Small Cap Growth Equity from lead manager Andrew Thut and Mid Cap Growth Equity's Leger on May 1. Thut, who had been lead manager since 2008 and a comanager since 2004, will help with the transition but ultimately will leave the firm. This is the second big manager change in six years for this fund, whose trailing one-, three-, and five-year results are all below the category average and Russell 2000 Growth Index. BlackRock's Travis Cooke, who came to the firm with its 2009 acquisition of Barclays Global Investors, will be the fund’s new manager; but the Scientific Equity Team uses a mix of quantitative and fundamental approaches that involves many more people. The fund will remain a growth offering, but it may be more benchmark-conscious and possibly offer a lower expense ratio.

The changes are the latest among many that BlackRock has made to its fundamental equity mutual fund teams. The firm recruited managers from other firms to take over several investment teams and funds in 2012, including BlackRock Capital Appreciation, BlackRock Basic Value MDBAX, BlackRock Emerging Markets MDDCX, BlackRock Flexible Equity BMCAX, and its large-cap equity series.     

Vanguard Rotates Managers, Changes Leaders at Bond Index Group
Vanguard is rotating five members of its investment management team, continuing the firm's practice of periodically revolving key personnel to expand their experience.

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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