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Lower Fees for 4 Vanguard Mutual Funds, 1 ETF

Fairholme takes a big stake in Fannie and Freddie preferreds, a manager of a Bronze-rated Oppenheimer fund departs, Templeton Frontier Markets closes to new investors, a slew of manager changes at Bridgeway, and some high-profile Janus fund managers resurface at a hedge fund.

Morningstar Fund Analysts, 05/30/2013

On Tuesday, May 28, Vanguard announced that investors in one of the firm's exchange-traded funds and five of its mutual fund share classes will benefit from lower fees, effective immediately.

Mutual funds Vanguard Dividend Appreciation Index VDAIX, Gold-rated Vanguard Dividend Growth VDIGX, Gold-rated Vanguard Energy Admiral share class VGELX and Investor share class VGENX, and Gold-rated Vanguard Precious Metals and Mining VGPMX all saw expenses fall between 2 and 5 basis points each. Vanguard Dividend Appreciation Index's fee fell to 0.20% from 0.25%, while Vanguard Dividend Growth's expense ratio slid to 0.29% from 0.31%. Vanguard Energy Admiral share class' fee dropped to 0.26% from 0.28%, while Vanguard Energy Investor share class' expense ratio fell to 0.31% from 0.34%. Vanguard Precious Metals and Mining's fee dropped to 0.26% from 0.29%.

Also, the expense ratio of Vanguard Dividend Appreciation ETF VIG fell to 0.10% from 0.13%.

Vanguard operates its funds at cost, so as asset levels rise and/or expenses fall, Vanguard likes to say that it returns any "profits" to its funds' investors in the form of lower fees.

Oppenheimer Manager Departure
Oppenheimer announced that Julie Van Cleave, the lead manager of the $5 billion, Bronze-rated Oppenheimer Capital Appreciation OPTFX, is leaving the firm as of Friday, May 31. Michael Kotlarz, who became her comanager in June 2012 and served as an analyst covering tech stocks for the Oppenheimer growth team for the four years prior, will become the sole portfolio manager of the fund as well as related strategies.

Van Cleave had a pretty good long-term record with her previous funds at Mason Street and DWS. Still, Capital Appreciation has been a mediocre performer since she took over in April 2010, delivering a 13.6% annualized return for the trailing three-year period through May 29, 2013, that ranks in the bottom quartile of the large-growth category.

Looking to Avoid Hard Close, Wasatch Implements More Restrictions on Emerging-Markets Small-Cap Fund
Neutral-rated Wasatch Emerging Markets Small Cap WAEMX has continued to receive significant inflows since implementing a soft close in February 2012, and Wasatch Advisors recently announced further restrictions on purchases of the fund in an effort to avoid a hard close. Effective June 7, individual investors who already own the fund will no longer be able to make additional purchases through Schwab or other platforms, and some--but not all--of the financial advisors who currently use the fund will no longer be able to make additional purchases. Wasatch Advisors has also asked those financial advisors who will retain access to the fund to moderate their purchases. (Existing shareholders who invest directly through Wasatch and current retirement plans will still be able to make additional investments in the fund.)

Templeton Frontier Markets Closes to New Investors
Templeton Frontier Markets TFMAX will close to new investors effective June 28, 2013. The fund will remain open to clients in discretionary investment allocation programs and there will be an option for future investments within 401(k) plans that already utilize the fund. The fund's top-decile performance during the past year no doubt has caught investors' attention, as the fund has received strong inflows throughout the past year, ending April 2013 with more than $1.1 billion in assets.

Fund Manager Changes at Bridgeway
Rasook Shaik is no longer listed as a comanager for Bridgeway's mutual funds. According to the firm, the departure was amicable and Shaik will independently be moving to a financial advisor role. Shaik's current comanagers will remain on the funds.

In addition, the firm announced several other minor manager changes to achieve uniformity across the lineup. Longtime managers John Montgomery, Elena Khoziaeva, and Michael Whipple were added as managers to the several funds, formalizing their roles. Montgomery and Khoziaeva were added to Bridgeway Managed Volatility BRBPX. That fund is still led by Richard Cancelmo, who was previously the only named portfolio manager. Whipple was added as a listed comanager to that fund, as well as to Bridgeway Omni Small-Cap Value BOSVX and Omni Tax-Managed Small-Cap Value BOTSX.

Former Janus Portfolio Managers Resurface at Denver Hedge Fund
Former Janus managers Chad Meade and Brian Schaub have joined Arrowpoint Partners, a firm headed by Janus alumni David Corkins and Karen Reidy.

Chad Meade and Brian Schaub, who had posted stellar returns at Silver-rated Janus Triton JATTX since 2006 and at Silver-rated Janus Venture JAVTX since 2010, left Janus on May 10. The departure was a big a loss for Janus, as the duo had been the company's best-performing stock fund managers over the past three and five years, respectively.

Now, both have joined Arrowpoint, which was cofounded by former Janus portfolio managers Corkins, who left Janus in 2007, and Reidy. Arrowpoint manages about $2.2 billion in assets and also employs several other former Janus portfolio managers, including Tony Yao and Minyoung Sohn.

Fidelity Selling Its BostonCoach Limo Company
According to a report last week in the Boston Globe, Fidelity Investments is selling its BostonCoach limousine and black-car service to a competing limo, car service, and tax firm in Waltham, Mass. for an undisclosed amount.

BostonCoach, which has been part of Fidelity's private equity group, is said to have been created by Fidelity chairman Edward "Ned" C. Johnson III after his frustration with waiting at the airport for a taxicab. The Globe reported that the business, which started out transporting Fidelity employees only but later expanded to have a fleet of 200 vehicles in Boston and operations in some 40 countries, long has been suffering. BostonCoach's revenue fell from $147 million in 2006 to just $83 million in 2010, which was the most recent year that the firm disclosed its revenue.

The Globe noted that Johnson long has viewed BostonCoach as a "pet project" and that he has "trained his characteristic attention to detail" on the company.

Fairholme Capital Takes $500M Preferred Stake in Fannie, Freddie
According to a May 29 CNBC report, Bruce Berkowitz's Fairholme Capital has made approximately a $500 million investment in preferred stock in Fannie Mae and Freddie Mac.

In a note to CNBC, Berkowitz also wrote that he wants to see the two mortgage giants restructured. "The time to restructure Fannie and Freddie is upon us," he wrote. "Sustaining our nation's economic recovery requires it."

Senior fund analysts William Samuel Rocco, David Kathman, and Greg Carlson and fund analysts Robert Goldsborough 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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