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  1. When Managers Change, So Can Ratings

    Recent manager changes at T . Rowe and Janus resulted in Analyst Rating downgrades, says Morningstar's Russ Kinnel.

  2. Rising-Rate Concerns Push Investors to Noncore Assets

    May flows data show investors are putting money to work in nontraditional fixed-income holdings, as well as emerging-markets equities, for perceived better returns.

  3. Rising-Rate Concerns Push Investors to Noncore Assets

    May flows data show investors are putting money to work in nontraditional fixed-income holdings, as well as emerging-markets equities, for perceived better returns.

  4. Investors Flock to Foreign-Stock and Noncore Bond Funds

    As rising rates and emerging markets lose momentum, fund investors are eyeing nontraditional fixed-income categories and European and Japanese equities.

A Raft of Portfolio Manager Changes at Janus

Also, Vanguard rolls out an emerging-markets bond fund, major portfolio manager departures at T. Rowe Price and FPA, Neuberger Berman to launch a China fund, and Invesco to rework its quant funds.

Morningstar Fund Analysts, 05/16/2013

Three Janus fund managers are leaving the firm, spurring even more changes in the process.

Chad Meade and Brian Schaub, who have posted stellar returns at Silver-rated Janus Triton JATTX since 2006 and Silver-rated Janus Venture JAVTX since 2010, departed on May 10. This is a big loss for the firm, as the duo had been Janus' best-performing stock fund managers over the past three and five years. Their funds have been among the few sources of net inflows within the equity-fund lineup, which has produced subpar results overall of late. The two managers have not yet announced where they will work next.

Taking Meade and Schaub's place at those small-growth funds is Jonathan Coleman, who recently stepped down as co-CIO and now will depart the Neutral-rated Janus Fund JDGAX. Coleman struggled during much of his 5.5-year tenure at the latter fund, but previously generated a fine record at Bronze-rated mid-growth offering Janus Enterprise JAENX from 2002-07--and Janus Triton invests in a mix of small- and mid-cap stocks. Janus Fund will now be run solely by Barney Wilson, who had comanaged the fund since May 2011. Wilson is the firm's assistant director of research and previously managed Janus Global Technology JATAX for five years.

The third manager to depart is Ron Sachs of Neutral-rated funds Janus Twenty JAVLX and Janus Forty JACTX. Sachs had posted poor returns at both funds since taking the helm of each in January 2008, although he previously performed well at Neutral-rated Janus Global Select (then called Orion) JORNX. He's leaving Janus at the end of May. Taking his place at Janus Twenty is veteran Marc Pinto, who has managed Neutral-rated Janus Growth & Income JAGIX since 2007, the equity portion of Silver-rated Janus Balanced JABAX since 2005, and large-growth separate accounts (including a concentrated strategy) since 2003. He'll retain his other duties.

The firm also has hired Douglas Rao to manage Janus Forty, which should differentiate it in the future from the previously identical Janus Twenty. Rao worked at Marsico Capital Management (founded by former Janus manager Tom Marsico) as an analyst and manager from 2005-12, steered Negative-rated Marsico Flexible Capital MFCFX to a fine record in a five-year tenure, and comanaged Neutral-rated flagships Marsico Growth MGRIX and Marsico Focus MFOCX for 2.5 years. Janus Forty is now expected to have a larger stake in non-U.S. stocks than Janus Twenty.

Vanguard Launches Emerging-Markets Bond Fund Amid Strong Category Inflows
More than a year after putting its emerging-markets government-bond index fund on hold because of deficiencies in existing indexes at the time, Vanguard is launching Vanguard Emerging Markets Government Bond Index Fund at the end of this month.

Vanguard's entry into the emerging-markets bond category comes as investors have flocked to such funds. Flows over the past 12 months have exceeded $25 billion. Vanguard's offering, which includes three open-end mutual fund share classes and one exchange-traded fund share class, will be the first index fund in the category of more than 75 open-end funds and fewer than 20 ETFs, though most of the existing choices don't limit their investments to U.S. dollar-denominated government bonds like Vanguard's does.

The new Vanguard fund is the firm's first international fixed-income portfolio introduced in the U.S., but Vanguard has also registered an international bond fund that will attempt to track the Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index (USD Hedged). That fund is expected to launch by the end of the second quarter, and it will include only investment-grade debt and fall into Morningstar's international-bond category. The emerging-markets bond fund will attempt to track the Barclays USD Emerging Markets RIC Capped Index. Both funds will have expense ratios substantially lower than their actively managed peers, but only the emerging-markets fund will assess a 0.75% purchase fee on its share classes (ex-ETF).

Milano Leaves T. Rowe Price
Portfolio manager Joe Milano will leave T. Rowe Price to pursue other opportunities. Milano has been with the firm since 1996 and has managed T. Rowe Price New America Growth PRWAX since 2002. The fund has returned 9.13% annualized over the past 10 years, beating out its large-growth category peers by 1.55%.

Dan Martino, who manages T. Rowe Price Media & Telecommunications PRMTX, will replace Milano as manager of T. Rowe Price New America Growth. Martino has managed the media and telecommunications fund since last 2009, and it is in the top third of its category for three-year performance. Martino will stay as a manager of T. Rowe Price Media & Telecommunications, though he will be joined by current analyst Paul Greene as comanager.

FPA's Ekstrand to Retire
FPA announced that manager Rikard Ekstrand plans to retire at the end of 2013 because of "family health reasons." Ekstrand is comanager of the closed, Silver-rated FPA Capital FPPTX. Dennis Bryan, who was named comanager in 2007, will be the lead manager. Arik Ahitov was named associate portfolio manager on the strategy.

We had viewed Ekstrand and Bryan as equals when Bob Rodriguez stepped back from lead manager duties at the fund in 2010. FPA said it plans to hire an analyst to contribute to FPA Capital's research efforts.

Northern Funds Drops Cohen & Steers as Subadvisor to Real Estate Fund
Northern Funds' Northern Multimanager Global Real Estate NMMGX dropped Cohen & Steers Capital Management as a subadvisor on May 9. The fund will keep EII Capital Management and CBRE Clarion Securities as subadvisors.

Neuberger Berman to Launch China Fund
Neuberger Berman filed to launch Neuberger Berman Greater China Equity on May 10. The fund will invest in the stocks of companies that are domiciled in or derive at least 50% of their revenues from China, Hong Kong, Macau, or Taiwan. The fund's A shares will cost 1.87%. Lihui Tang and Yulin (Frank) Yao will manage the fund.

Manager Departure at Forward Fund
Michael McLaughlin is no longer a named manager at Forward International Small Companies PISRX. Current managers Justin Hill, Oliver Knobloch, Bill Barker, Paul Broughton, Paul Herber, Jim O'Donnell, Nathan Rowader, and David Janec will continue to run the fund.

Manager Change and New Fund at USAA
Michael Allocco is no longer a named manager at USAA Small Cap Stock USCAX. The fund will retain 12 managers total from its three subadvisors--Granahan Investment Management, Cambiar Investors, and Wellington Management Company.

Also, USAA filed to launch USAA Global Managed Volatility in July 2013. The fund will invest across several asset classes and may use options for risk management. Several portfolio managers from AMCO, QS Investors, and QMA will manage the fund.

 

Invesco to Revamp Quant Funds
Invesco announced that effective July 31, Invesco U.S. Quantitative Core SCAUX and Invesco Global Quantitative Core GTNDX will receive makeovers. The former fund will be renamed Invesco Low Volatility Equity Yield and the latter will be renamed Invesco Global Low Volatility Equity Yield. Both funds will receive added support from members of the firm's global quantitative equity team and will no longer follow a benchmark-centric approach. Rather, the funds will invest with a low-volatility income focus.

More Changes for Federated's Bond Team
Federated announced on May 13 that Ihab Salib will take over as portfolio manager of Federated Emerging Market Debt IHIAX. The fund's former managers, Roberto Sanchez-Dahl and Paolo Valle, are no longer with the firm. Salib serves as Federated's head of international fixed income and has been with the firm since 1999. His track record at his other charges, including Federated International Bond FTIIX, has been relatively weak. The announcement comes on the heels of other changes at the firm's fixed-income team, including the departure of long-tenured head of investment-grade credit Joe Balestrino.

After a One-Year Search, TIAA-CREF Names New Asset Management Chief
TIAA-CREF has hired former ING executive Robert Leary to serve as the firm's head of asset management. The position had been in limbo since early 2012 when former head of asset management Scott Evans departed, citing a desire to spend more time with his family. After Evans' departure, Carol Deckbar filled in as interim head of asset management. Deckbar will return to focusing on her role as chief operating officer of asset management when Leary starts work at the firm in late June. Leary will inherit a rapidly growing business: TIAA-CREF's mutual fund assets alone have grown to more than $58 billion from $18 billion in the past five years. 

Leary most recently served as president and COO of ING U.S., where he had a hand in the firm's marketing, operations, and technology divisions, in addition to the investment management business. Leary left ING in September 2012. The announcement of Leary's new post comes one month after ING U.S. management announced a plan to rebrand the firm as Voya Financial, and just days after the firm underwent an initial public offering.

Southeastern and Icahn Propose Dell Takeover
Southeastern Asset Management, which is the advisor to the Longleaf Funds, and billionaire investor Carl Icahn have upped the ante in their desire for changes at
Dell DELL, proposing their own takeover plan that would kick out Michael Dell, the slumping PC maker's founder, while keeping the firm public.

Both the portfolio managers at Southeastern and Icahn, which together own about 13% of Dell's shares, have been enraged over a $24.4 billion plan by an investment group led by Michael Dell that would take the company private for $13.65 per share. Icahn and Southeastern have said publicly that such a proposal dramatically undervalues the company, which they believe is worth close to $24.00 per share and thus is bad for shareholders.

Their alternative takeover offer would allow Dell shareholders to remain investors and receive either $12 per share in cash or $12 worth of additional shares at $1.65 per share. Dell's board currently is reviewing the two large shareholders' offer, which would be funded with existing cash on the firm's balance sheet and another $5.2 billion in debt. Michael Dell's proposed $13.65-per-share buyout would require close to $16 billion in debt.

Why would Dell investors support what effectively is a $12.00-per-share buyout over Michael Dell's $13.65-per-share offer? The reason is that Southeastern and Icahn believe that investors would favor the risk/reward potential of the company distributing $12 per share to every investor while offering all investors a chance to participate in the company's turnaround. What's more, Southeastern and Icahn tout the fact that their plan would load significantly less debt on the company's balance sheet.

As we wrote in last week's Fund Times, Icahn and Southeastern also have been considering an attempt to install their own director nominees on the company's board. With their proposed takeover offer, they want the company's board to hold a shareholder vote on Michael Dell's proposed buyout at the same time as the company's annual meeting, when director nominees would be selected.

At press time, Dell shares were trading at $13.42 per share.

Director of mutual fund research Russel Kinnel, senior fund analysts Greg Carlson, Bridget Hughes, and Laura Lallos, and fund analysts David Falkof, Robert Goldsborough, Kailin Liu, Flynn Murphy, and Kathryn Spica 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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