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DWS Drops Subadvisor Dreman From Domestic-Value Funds

Plus, MFS Global Total Return adds 2 comanagers, Wasatch lures a large-cap value manager from ING, Calamos launches a dividend fund and a mid-growth fund, and American Century announces 2 promotions.

Morningstar Analysts, 08/12/2013

DWS Investments is switching the management lineup behind DWS Mid Cap Value MIDVX and the slumping, Neutral-rated DWS Small Cap Value KDSAX. In September, an in-house team led by Richard Glass will replace the Dreman Value Management team subadvising the funds. Glass spent the past three years running small- and mid-cap value and separate accounts at a firm he founded, Lockwell Investments. Prior to that, he worked at Morgan Stanley and managed Van Kampen Small Cap Value--now Invesco Small Cap Value VSCAX--from late 2001 through mid-2010. Under Glass, the fund outpaced the small-value category average and the Russell 2000 Index, losing less than both the category and the index during market declines.

Glass was named U.S. head of small- and mid-cap value equities for Deutsche Asset & Wealth Management on Aug. 5. He will be supported by two new hires: Richard Hanlon, who founded and managed Glenville Capital Management for the past six years, and Mary Schafer, who worked at Morgan Stanley and Lockwell Investments alongside Glass.

The management changes fit a growing trend of dropping subadvisors in favor of in-house management at DWS. In January 2013, DWS fired subadvisor (and former DWS manager) Oliver Kratz and his firm Global Thematic Partners from DWS Global Growth SGQAX. In May, the firm cut ties with QS Investors--which subadvised 16 DWS funds--and assigned in-house managers to the funds.

Dreman remains a subadvisor to the $183 million DWS International Value DNVAX, but losing subadvisor responsibilities for the DWS mid- and small-cap value funds is certainly a blow. Disastrous results in Dreman's large-cap strategy during the financial crisis caused DWS to cut Dreman as a subadvisor to DWS Dreman High Return Equity (now DWS Equity Dividend) KDHAX in 2009. Dreman suffered additional outflows that dropped the firm's assets under management from more than $20.0 billion in 2007 to roughly $3.3 billion as of July 2013. The loss of the DWS mid- and small-cap mandates will cause Dreman's assets to fall further, to roughly $1.3 billion.

MFS Global Total Return Boosts Its Ranks
Pilar Gomez-Bravo and Robert Persons will join the management team at MFS Global Total Return MFWTX. The $1.1 billion world-allocation fund maintains a relatively constant 60%/40% split between global stocks and global bonds, with separate teams managing the stock and bond sleeves.

Gomez-Bravo is new to MFS, joining the firm's London office as a portfolio manager and credit analyst in early 2013 from Imperial Capital. Prior to joining Imperial Capital in May 2012, she served relatively short stints as portfolio manager and head of research at Negentropy Capital and co-founded Marengo Asset Management. From June 2006 to May 2010, she served as head of European credit for Neuberger Berman. Persons has a longer tenure at MFS, having joined the firm in 2000. He has served as a fixed-income portfolio manager since 2005.

Wasatch Hires Portfolio Manager From ING
Wasatch announced that it has hired David R. Powers to manage the $1.2 billion Wasatch Large Cap Value FMIEX, replacing lead manager Ralph Shive and comanager Michael Shinnick. Shive will stay on through Sept. 30, 2013, to help with the transition. Both Shive and Shinnick will remain at the firm and continue to lead Silver-rated Wasatch Long/Short FMLSX. Wasatch acquired both funds, as well as Wasatch-1st Source Income FMEQX, in December 2008 from Indiana bank 1st Source, retaining the same management team at each fund. Shive built a strong track record at the large-cap value fund prior to its acquisition, although since then through July 2013 the fund's 3.3% annualized return has slightly trailed the 3.5% of its typical peer.

Powers helped to deliver solid results as comanager of ING Large Cap Value IEDAX. Between his December 2007 start date and May 2012, the fund's 2.4% annualized return was nearly 5 percentage points higher than its typical large-cap value peer, which lost 2.4% during the period. Powers also had a short stint at Eagle Asset Management, serving as comanager of Eagle Growth & Income HRCVX between June 2012 and July 2013 and worked at Federated Investors prior to joining ING.

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