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Fidelity and BlackRock Broaden ETF Partnership

Fidelity has more than doubled the number of commission-free iShares ETFs available through Fidelity's brokerage platform. Also, Joe Balestrino to leave Federated, a host of manager changes at Winslow Capital, Prudential cuts ties with Marsico, and fund closings at Touchstone and Prudential.

Morningstar Fund Analysts, 03/14/2013

On Wednesday, March 13, Fidelity and BlackRock announced they are expanding the suite of iShares exchange-traded fund products available through Fidelity's brokerage platform. Since the two firms established their partnership three years ago, the number of passively managed iShares ETFs available commission-free on Fidelity's platform has risen to 30 from 25. Now, the companies are more than doubling that lineup to 65 ETFs total, increasing the assets covered by the partnership to encompass 18% of all industry assets.

In addition, Fidelity is expanding access to the iShares lineup to new audiences. Registered investment advisors will be able to buy and sell the funds commission-free in their clients' accounts through the company's Institutional Wealth Services channel. The two firms are also collaborating to develop ETF wrap solutions, which will be available through Fidelity's Portfolio Advisory Services channel.

Fidelity also emphasized that the partnership with iShares is limited to passively managed strategies. Fidelity is currently working on an in-house lineup of actively managed and "smart beta" ETFs, which have not yet launched.

Long-Tenured Bond Manager Balestrino to Leave Federated
Federated announced last week that Joe Balestrino will leave the firm, effective April 15, 2013. Balestrino currently serves as the firm's head of domestic investment-grade corporate bonds and is the lead manager on several bond funds, including flagship Federated Total Return Bond FTRBX. While Balestrino's departure is a loss, Federated's remaining fixed-income team members have plenty of experience working together, with an average tenure of 20 years at the firm. Donald T. Ellenberger, who heads Federated's yield-curve committee and currently manages government-bond and mortgage-backed-bond strategies, will take his place on Federated Total Return Bond. In addition, Mark E. Durbiano will take over the lead of Federated Strategic Income STIAX; Brian S. Ruffner will take the lead of Federated Bond FDBAX; Bryan J. Dingle will take the lead of Federated Intermediate Corporate Bond FIIFX; and Ihab L. Salib will serve as lead on Federated Unconstrained Bond FUBDX.

From October 1996 through February 2013, the fund's 6.5% annualized return outperforms its typical peer on an absolute and risk-adjusted basis. Still, during the past four calendar years, the fund has been unable to break past its category median. As lead manager, Balestrino has been responsible for sector rotations within the fund, and it can be difficult to time those shifts correctly.

Morningstar's fund analysts have placed Federated Total Return's rating "Under Review" until we have spoken with the new lead manager and gained a better understanding of how the fund will be run going forward.

Manager Changes at Winslow Capital
Winslow Capital, subadvisor to Bronze-rated MainStay Large Cap Growth MLAAX, has announced changes to its management team. Justin Kelly, senior managing director and portfolio manager, will be named chief investment officer, assuming the role from chief executive officer and founder Clark Winslow. Winslow will continue to serve as CEO and remain involved with investment management. Patrick Burton has been promoted to comanager of MainStay Large Cap Growth. Burton joined the firm in 2010 as an analyst covering the technology sector and has more than 30 years of investment experience.

In addition, Winslow Capital senior managing director and portfolio manager R. Bart Wear will be retiring from the firm, effective July 1, 2013. Wear served as comanager on MainStay Large Cap Growth and covered the financials sector for the subadvisor. Winslow Capital has hired former Thrivent Financial senior equity research analyst Stephan Petersen to take over coverage of financials stocks.

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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