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Fidelity's Christine McConnell to Retire

The conservative bank-loan fund manager plans to step away at the end of March. Also, DoubleLine recruits more professionals from TCW, Principal files for permission to market actively managed ETFs, T. Rowe Price nears launch of its world-allocation fund, Vanguard to merge away a Florida muni-bond ...

Morningstar Fund Analysts, 03/28/2013

Fidelity announced on March 26 that Christine McConnell will be leaving the previously Gold-rated Fidelity Floating Rate High Income FFRHX. According to Fidelity, McConnell, who has managed this fund since its 2000 inception, plans to retire at the end of March.

McConnell had built a solid record as one of the most conservative managers in the bank-loan category, sticking with the higher-quality and more-liquid tiers of the market, and holding an at-times large stake in cash. That served the fund well when bank-loan markets turned stormy in 2008 and more recently in the third quarter of 2011, but it left the fund lagging in strong credit markets. In 2012, the fund's 6.8% return ranked near the bottom of the bank-loan category.

Eric Mollenhauer, an 18-year veteran of Fidelity's high-income group, will replace McConnell starting April 1. Like many managers in the group, Mollenhauer got his start as a high-yield analyst. Mollenhauer served a stint as Fidelity's director of high yield and is no newcomer to managing bank-loan portfolios. He's managed Fidelity's internal and institutional bank-loan accounts since 2007 and took the lead at Fidelity Series Floating Rate High Income Fund FFHCX when it was launched in 2011. Fidelity has indicated that it will consider adding additional resources to the group in the wake of McConnell's departure.

While Mollenhauer is clearly experienced and will be backed by the same extensive analyst and trading team that supported McConnell, it will take some time to see how his style differs from McConnell's. Indeed, Mollenhauer has taken a more-aggressive approach in his short time at Fidelity Series Floating Rate High Income. For now, however, Mollenhauer has said that he is comfortable with the fund's current conservative positioning, given the recent strength of the bank-loan market, which has left many names trading at or over par.

Fledgling DoubleLine Equity Team Recruits Additional TCW Defectors
DoubleLine continues to build out the ranks of its nascent equity team with former TCW employees. On March 22, the firm hired one equity trader and three equity analysts from TCW. DoubleLine also hired one analyst with prior experience at Lazard Freres and Provident Investment Counsel. The analysts will join DoubleLine's equity team, headed by portfolio managers Husam Nazer and Brendt Stallings.

Nazer and Stallings are also TCW veterans. Nazer managed TCW Small Cap Growth TGSCX from 2005 through 2012 and comanaged TCW SMID Cap Growth TGSDX from 2010 through 2012. Stallings comanaged TCW Growth Equities TGGEX from 2004 through 2012. And the pair worked as comanagers at TCW Growth TGGIX for roughly four years through 2012. Nazer and Stallings resigned from TCW at the end of December 2012 and subsequently joined DoubleLine in January 2013.

DoubleLine is poised to launch three equity offerings to be run by Nazer and Stallings. The duo will comanage DoubleLine Equities Growth and DoubleLine Equities Technology, while Nazer will lead DoubleLine Equities Small Cap Growth, according to preliminary documents filed by the firm.

Principal Financial Files for Actively Managed ETFs
On March 22, Principal Financial Group PFG submitted paperwork with the SEC seeking permission to creative active managed exchange-traded funds.

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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