Laudus' large-cap growth fund rehires its former manager Lawrence Kemp, Artisan Value team founder and portfolio manager Scott Satterwhite gives his three years' notice, David Herro closes Oakmark International to new investors, and more.
On Tuesday, Vanguard announced that Mitch Milias, co-founder of Primecap Management and comanager of the $36 billion, Gold-rated Vanguard Primecap VPMCX since 2002, will be retiring from portfolio management at the end of 2013. Milias also has comanaged Gold-rated funds Vanguard Primecap Core VPCCX, Primecap Odyssey Growth POGRX, and Primecap Odyssey Stock POSKX since their 2004 inceptions. He will remain with Primecap in a management role. Milias, 71, is not a portfolio manager on the Primecap team's other two funds, Gold-rated Vanguard Capital Opportunity VHCOX and Gold-rated Primecap Odyssey Aggressive Growth POAGX, so they will not be directly affected.
The loss of an experienced manager like Milias is never a good thing, but these funds should be just fine, given their deep benches and decentralized management structures. Primecap still will have four portfolio managers on the funds, including co-founder Theo Kolokotrones and 25-year veteran Joel Fried. Each of them independently manages sleeves of the various funds, supported by 12 analysts, who are given smaller sleeves to manage once they've proved their mettle over time. The assets that Milias manages will be distributed among the funds' other listed managers, primarily Mohsin Ansari, as well as two senior analysts, Greg Molinelli and James Marchetti, who have been running substantial sleeves already in the Vanguard funds but are not yet named portfolio managers. This is similar to what happened in April 2012 after the death of Howard Schow, another Primecap co-founder who was a portfolio manager on all six of the team's funds.
All of the Primecap managers use the same patient contrarian growth strategy of buying stocks with good growth potential but temporarily depressed valuations. They're willing to make significant sector bets where they see value and to hold on to promising stocks for years waiting for them to turn around. This strategy has been very successful over time; Vanguard Primecap and Vanguard Capital Opportunity have 10-year returns that rank in the large-growth category's top decile, and the team's four other funds have been similarly successful since their inception, albeit with periods of short-term underperformance mixed in. All six funds have looked great so far in 2013, ranking in their categories' top 20% for the year to date as of Oct. 9.
Laudus Large-Cap Growth Fund's New Bosses Same as Old Bosses
Neutral-rated Laudus Growth Investors U.S. Large Cap Growth LGILX has found a solution for its recent spate of manager changes: It has hired its old manager.
Charles Schwab Investment Management, the advisor to the Laudus family of actively managed funds, has replaced the fund's long-time subadvisor UBS Global Asset Management with a team from BlackRock Investment Management. It's less of a replacement than a reunion, though, because the new manager is Lawrence Kemp, who ably ran this fund for more than 10 years before leaving UBS for BlackRock in November 2012. Kemp's BlackRock squad, which runs BlackRock Capital Appreciation MDFGX, also includes other former UBS investors who had worked with Kemp during his first go-round at Laudus, including Phil Ruvinsky, Kathryn Mongelli, and Wendy Nickerson.
Kemp and his current team officially took over on Oct. 4, less than a year after Kemp left and triggered a rash of departures and changes. Not only did Nickerson leave UBS to join Kemp at BlackRock (Ruvinsky and Mongelli had left UBS for other firms before Kemp did), but one of the comanagers who succeeded Kemp, Sam Console, left in April 2013. More recently, Paul Graham, who had overseen UBS' growth strategies since 2003, stepped down in anticipation of his 2014 retirement. And in September 2013, the team added a new comanager, Dan Neuger, from outside the firm.
The fund's approach won't change. Kemp's brief successors here tried to keep doing what he had been doing for a decade, and Kemp hasn't changed his stripes during his hiatus. The fund will still attempt to craft a relatively compact portfolio of 40 to 60 stocks that fall into three broad buckets: superior, durable, and periodic growth companies. It will keep most of its assets in the elite and classic growers, while maintaining a smaller, more fluid, and more opportunistic stake in the cyclical companies.
The fund will, however, change its name and get a tad cheaper. It will drop "Growth Investors," shortening its moniker to Laudus U.S. Large Cap Growth. Its expense ratio also will slip to 0.77% from 0.78%, which is below average for no-load large-cap funds. There could be a tax impact, though. Less than half the funds' holdings overlap, and this fund could realize some capital gains as Kemp reasserts control over the portfolio.