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T. Rowe Expands Target-Date Business With New Series

In a tough week for Marsico, the firm is removed as a subadvisor on two separate funds. Also, Calamos plans dividend and mid-growth funds, Oppenheimer to close Discovery to new investors, and John Hancock makes a raft of portfolio-management changes.

Morningstar Fund Analysts, 05/23/2013

T. Rowe Price TROW will launch a second target-date series to complement its existing series, the Gold-rated T. Rowe Price Retirement series (launched in 2002). The new series, T. Rowe Price Target Retirement, is intended for investors who prefer a lower exposure to equities at their retirement date relative to the existing series. T. Rowe Price continues to stand by its existing series and believes that for most investors, the primary objective is to grow their savings so they can support their income needs throughout retirement. In order to achieve that goal, T. Rowe constructed the existing series' glide path (its mix of stocks and bonds over time) with an above-average exposure to stocks relative to its industry peers. T. Rowe believes some investors, however, have a different primary objective that focuses on reducing volatility at the retirement date. Some plan sponsors of defined-contribution retirement plans have similar concerns about market volatility at retirement. The new series will have a 42.5% allocation to stocks at the retirement date, which is in line with the industry average and well below the 55% equity stake of the existing series.

It's worth noting that the new series will invest across the same asset classes and underlying investment strategies as the existing series. It will also use an identical tactical-allocation strategy. The only major difference between the two series will be their glide paths. T. Rowe's existing series has been extremely successful in terms of performance and attracting assets. All of the funds in the series have trailing five-year returns through May 21, 2013, that top at least 87% of their respective category peers, and the series has the third-largest asset base in the industry with $89 billion as of April 30, 2013.

T. Rowe is not the first firm to launch a complementary target-date series. Fidelity launched an index-based version of its Freedom target-date series in 2009. John Hancock launched a second target-date series in 2010 with a different glide path from its existing Retirement Living series. In 2012, JP Morgan launched a second series that blends passive and active underlying funds to complement its existing, all-active series.

Harbor and Columbia Drop Subadvisor Marsico
Harbor Funds and Columbia Management have fired Marsico Capital Management as subadvisor to Neutral-rated Harbor International Growth HIIGX and Columbia Multi-Advisor International Equity NIIAX, respectively. Harbor hired Ballie Gifford Overseas as a subadvisor, while Columbia has split management of its fund between in-house managers and subadvisor Threadneedle International.

Departing Marsico manager James Gendelman had managed the Harbor fund since 2004 and comanaged the Columbia offering since 2000. Gendelman ran the Harbor fund as a clone of Neutral-rated Marsico International Opportunities MIOFX and contributed to the Columbia fund using his firm's trademark approach combining macroeconomic themes with bottom-up analysis. Both funds' performance lagged in recent years as Gendelman's macroeconomic calls and individual stock selections faltered. Both the Harbor and Columbia offerings trailed more than 80% of peers in the five years through May 20, 2013. Gendleman's analyst team had also undergone significant turnover in recent years with nine of the team's current 12 members joining Marsico since 2011.

At Harbor, the incoming subadvisor team includes Gerard Callahan, Iain Campbell, Joe Faraday, and Paul Faulkner, who have also subadvised ING International Growth IIGIX since 2011.

Catherine Wood Leaves AllianceBernstein
After 12 years at AllianceBernstein AB, Catherine Wood will leave the firm at the end of June. Wood led AllianceBernstein's thematic research team and managed AllianceBernstein Global Thematic Growth ALTFX and AllianceBernstein U.S. Strategic Research AURAX. She also managed several separately managed accounts for institutional clients. Wood's process used macroeconomic forecasts to develop investment themes for the portfolio. She often bet with high conviction on a theme and the funds' portfolios stood out from their respective peers'. While that approach at times produced spectacularly good results, as in 2009 when Global Thematic Growth gained 56% compared with the world-stock category average of 35%, the strategy could also backfire in a big way, such as the same fund's 24% loss in 2011 that trailed nearly all of its rivals. Her records at both funds were among the most volatile in their categories.

Wood's departure coincides with several charges to AllianceBernstein's international growth team. The thematic research team will join together with the international growth team, and Dan Roarty will lead the combined research team. Roarty joined AllianceBernstein in May 2011 and has comanaged Negative-rated AllianceBern International Growth AWPAX since late that year. The firm also has decided to further streamline the management structure of International Growth. In 2011, AllianceBernstein cut the fund's number of managers to four from six, and now it will reduce the number of managers to two: Dan Roarty and Tassos Stassopoulos. Rob Alster, a current comanager on the fund, will be leaving the firm as a result of the change. The fourth comanager, William Johnston, will stay on board as a financials analyst. The firm believes that having a more unified research effort will improve performance; the fund has trailed the majority of its peers over the past three- and five-year periods.

Oppenheimer Discovery Closing to New Investors
Bronze-rated Oppenheimer Discovery OPOCX will close to new investors on June 28, 2013. The quality-oriented small-cap growth fund had seen assets roughly double to $2 billion from $1 billion during the past three years. The fund has posted a solid record under manager Ron Zibelli by weathering downturns better than peers. The fund's returns ranked in the small-growth category's top decile in the trailing three years through May 20, 2013.

Osterweis Adds to its Fixed-Income Team
Osterweis Capital announced the firm has hired Bradley Kane to join its fixed-income team.

The hiring of Kane, a high-yield bond specialist with 20 years of investment experience who most recently was a portfolio manager and analyst at Newfleet Asset Management, is designed to strengthen the team managing Bronze-rated Osterweis Strategic Income OSTIX. Although Kane has not yet been named as a manager of that fund, we expect him to eventually be added. Kane is viewed as a way to offer another set of eyes to the work being done by the fund's comanagers Carl Kaufman and Simon Lee. What's more, Kaufman and Lee up to now have done all of the leg work on individual names held in the fund. Boosting the team has become especially important as the fund has grown in size to its current $3.5 billion in assets.

In addition, although Kaufman has no plans to retire at present, Kane could figure into succession planning on the fund in the future.

Calamos to Launch Dividend Fund, Mid-Growth Fund
Calamos Investments has filed paperwork to launch two funds: Calamos Dividend Growth and Calamos Mid Cap Growth. The Dividend Growth fund will be managed by a team of five comanagers, including John Calamos Sr., Gary Black, Jeff Miller, Ariel Fromer, and Tammy Miller. The fund's A shares are expected to carry a front load of 4.75% and a 1.35% annual expense ratio.

Calamos Mid Cap Growth will be managed by a team of nine comanagers who also manage Bronze-rated Calamos Growth CVGRX and a number of Calamos' other equity funds. The launch of a mid-cap strategy is likely due to the fact that Calamos Growth has increasingly migrated toward holding large-cap stocks in its portfolio. The fund's A shares are expected to carry a front load of 4.75% and a 1.25% annual expense ratio.

Portfolio Manager Changes at John Hancock
Last week, John Hancock announced a wave of portfolio manager changes at its funds.

Probably the biggest announcement was longtime John Hancock executive and portfolio manager Barry Evans' ascension to overseeing all of John Hancock Asset Management North America. Evans previously had been the head of John Hancock Asset Management United States and also had been a named portfolio manager on four large funds. Now, with Evans' expanded duties, he's stepped aside from comanaging John Hancock Bond Fund JHNBX, John Hancock Investment Grade Bond Fund TAUSX, Bronze-rated John Hancock Income JHFIX, and John Hancock Sovereign Investors Fund SOVIX. All of those funds' other managers continue in their roles.

Evans will remain John Hancock's global CIO of asset allocation but will hand off his role as CIO of fixed income to Christopher Conkey. Since joining the firm in 2010 from Evergreen Investment Management, Conkey has been John Hancock's CIO of global equity.

Also last week, John Hancock tapped Paul Boyne and Doug McGraw to take over the daily management of John Hancock Global Opportunities JGPAX. The fund's longtime managers, Christopher Arbuthnot and Roger Hamilton, will step aside but will remain in other portfolio management roles at the firm. Hamilton in particular will continue to be a portfolio manager for John Hancock Balanced SVBAX.

Finally, Hancock announced last week that Steve Orlich, a longtime portfolio manager, will take a long-term disability leave due to medical-related issues with his eyesight. As a result, he will step down from the management of John Hancock Alternative Asset Allocation Fund JAAAX and a variety of portfolios, including the John Hancock International Allocation Portfolio, all John Hancock Retirement Living Portfolios, all John Hancock Lifestyle Portfolios, and all John Hancock Retirement Choices Portfolios. To replace Orlich, John Hancock tapped three members of its asset allocation team--Scott McIntosh, Nathan Thooft, and Marcelle Daher--to join incumbent managers Bob Boyda and Steve Medina on all of those funds and portfolios.

Litman Gregory Adjusts Subadivsor Lineup, Merges Value Fund
Litman Gregory will merge the $83 million Litman Gregory Masters Value MSVFX into the $297 million Litman Gregory Masters Equity MSEFX in June. The firm said large shareholder redemptions and the Masters Value fund's poor 10-year track record contributed to the move. (Masters Value's 6.4% annualized 10-year return lagged the S&P 500 Index's 8.0% return through May 17, 2013.)

Litman Gregory Masters Equity also made changes to the lineup of seven subadvisors that had managed sleeves of the fund through May. The fund added subadvisor Fiduciary Management and managers Pat English and Andrew Ramer, who comanage Gold-rated FMI Large Cap FMIHX. The fund has also added Oakmark OAKMX manager Bill Nygren, who joins Harris Associates colleague Clyde McGregor in a subadvisory capacity. The fund fired subadvisors Southeastern Asset Management and Friess Associates, and their respective managers Mason Hawkins and Bill D'Alonzo. Hawkins manages Gold-rated Longleaf Partners LLPFX, and D'Alonzo manages Neutral-rated Brandywine BRWIX among other charges. Both Longleaf Partners and Brandywine fell to the bottom quartile of their respective peer groups during the trailing five- and 10-year periods through May 17, 2013.

Senior fund analysts Josh Charlson and Kevin McDevitt and fund analysts David Falkof, Robert Goldsborough, and Flynn Murphy 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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