The Fairholme Fund sues the federal government seeking dividends from its stakes in Fannie and Freddie, Munder Capital is on the block, a former Columbia manager succeeds Michael Kobs in the management of a set of Vanguard's municipal bond funds, and Columbia brings on board a former Putnam value ...
Investors redeemed $432 million from Vanguard in June, including mutual funds, exchange-traded funds, and money market funds. The outflows at Vanguard were driven by a $7.4 billion outflow from the firm's taxable bond funds and a $2.5 billion outflow from municipal bond funds. Industrywide, those two category groups had outflows of $68 billion. Despite the outflows, the firm still managed to gain market share on the month as industry assets declined at a faster rate. While Vanguard's flows were not unusual given the acute reaction to the Fed's talk of tapering its asset purchase program, the outflow was the first firmwide outflow since December 1994. Excluding money market funds, Vanguard's outflow was $5.5 billion, while PIMCO led all firms with a $14.3 billion outflow.
Fairholme Suing U.S. Government Over Fannie, Freddie Shares
Bruce Berkowitz's Fairholme FAIRX fund is suing the United States government for the right to receive dividends from its preferred stock in Fannie Mae and Freddie Mac. In June, Fairholme had disclosed a $2.4 billion redemption value stake in the two enterprises' preferred stock. Fairholme's June 3 statement on the stake included the claim that "equitable treatment of taxpaying shareholders, including community banks, insurance companies, and mutual funds holding Preferred Stock, must be restored with dividends reinstated."
Fairholme's suits, which are being filed both in the U.S. Court of Claims and in the U.S. District Court for the District of Columbia, allege that the government has broken from the original terms of its 2008 emergency investments in Fannie Mae and Freddie Mac, unlawfully hurting preferred shareholders. Berkowitz contends that the firms, now profitable and repaying the government, are also in a position to begin paying dividends on preferred stock. "As solvent, highly profitable companies, Fannie and Freddie should honor all outstanding obligations to their investors," Berkowitz said in a July 9 news release.
Munder Capital Management Up for Sale
The private equity firm that owns Michigan-based Munder Capital Management has hired Goldman Sachs GS to oversee a sale process.
Crestview Partners and some of Munder's managers acquired Munder, which manages about $16 billion in assets, from Comerica in 2006 in a leveraged buyout that was valued at just over $300 million. Munder now runs 11 mutual funds. The largest is the $5.5 billion Munder Mid-Cap Core Growth MGOAX.
Munder could fetch $350 million-$400 million, according to a report from Reuters.
Former Columbia Manager Takes Lead at Vanguard Muni Funds
As of June 28, Michael Kobs is no longer managing a slate of Vanguard municipal bond funds. Kobs had served as comanager of Gold-rated Vanguard Tax-Managed Balanced's VTMFX bond sleeve and lead manager of Silver-rated Vanguard Intermediate-Term Tax-Exempt VWITX, Silver-rated Vanguard NY Long-Term Tax-Exempt VNYTX, and Vanguard NJ Long-Term Tax-Exempt VNJTX since July 2008. Kobs took a conservative approach to fixed-income investing and didn't stretch for yield by loading up on risky credits at his charges. As a result, his funds generally delivered steadier returns than did most rivals.
James D'Arcy is taking over for Kobs on Vanguard Tax-Managed Balanced's bond sleeve and Vanguard Intermediate-Term Tax-Exempt. D'Arcy, a former Columbia manager, led Columbia Short Term Muni Bond NSMMX from 2007 to 2011. There, he posted middle-of-the-road total returns but managed to lose less than peers in down markets. Meanwhile, Adam Ferguson and Matthew Kiselak have taken over as comanagers of New York Long-Term Tax-Exempt, and Kiselak has taken over as the sole manager of New Jersey Long-Term Tax-Exempt.
Columbia Hires Former Putnam Value-Equity Manager
Former Putnam manager Hugh Mullin has taken the reins at Columbia Diversified Equity Income INDZX. Mullin succeeds the comanager team of Steve Schroll, Paul Stocking, and Dean Ramos. Schroll, the longest-serving member of the trio, had managed the fund since early 2004. Under Schroll, the fund tallied a 7% annualized return that beat both the large-value category average and the Russell 1000 Value Index through June 2013. Schroll, Stocking, and Ramos remain managers of four additional Columbia funds, including the $5.8 billion Columbia Dividend Opportunity INUTX.
Prior to this charge, Mullin had a lackluster turn as lead manager of Putnam Fund for Growth & Income PGRWX from 1996 until he was fired in 2006. Under Mullin, the fund lagged large-value peers and the Russell 1000 Value Index with more volatility. Mullin's most recent post was serving as a director of U.S. equity sales at CLSA, Asia-Pacific Markets.
Aberdeen PM, Relationship Manager Die in Cycling Accident in England
In tragic news, two senior executives at Aberdeen Asset Management died on July 2 in an accident that took place during a charity bike ride in England.
According to news accounts and a release from Aberdeen, Aberdeen portfolio manager Andrew McMenigall, 47, and Aberdeen senior relationship manager Toby Wallace, 36, were struck by a large truck on a highway in Cornwall, England as they were on a charity bicycle ride. The ride was to raise funds for the Kirsten Scott Memorial Trust, which provides grants to young people and is named for a colleague at Aberdeen who died of cancer in 2011.
McMenigall was based in Great Britain and joined Aberdeen in 1997. He was one of five named portfolio managers on the team that manages Aberdeen international funds and that in May took over the former Artio international equity funds, which now are known as Neutral-rated Aberdeen Select International Equity BJBIX, Neutral-rated Aberdeen Select International Equity II JETAX, and Aberdeen Global Select Opportunities BJGQX. He also had been a named portfolio manager on Aberdeen International Equity GIGAX, Aberdeen Global Natural Resources GGNAX, Aberdeen Global Small Cap WVCCX, and Aberdeen Global Equity GLLAX.
Wallace, who was based in Aberdeen's Philadelphia office, had been with the firm since 2000.
In a statement, Aberdeen's CEO, Martin Gilbert, called McMenigall and Wallace "dedicated and popular members of our senior team." He added, "the fact that they died in such tragic circumstances while trying to help others less fortunate tells you much about their selflessness and humanity."
Fund analysts Robert Goldsborough, Flynn Murphy, and Michael Rawson contributed to this report.