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.
Artisan Value Team Founder and Portfolio Manager to Retire in 3 Years
Scott Satterwhite, comanager of Gold-rated Artisan Small Cap Value ARTVX, Gold-rated Artisan Mid Cap Value ARTQX, and Silver-rated Artisan Value ARTLX, announced that he will be retiring at the end of September 2016. (Artisan requires that its portfolio managers, who are given a significant degree of autonomy in building their teams, give three years' notice.) Daniel Kane, who joined the team as an analyst in 2008 and was named an associate portfolio manager on the funds in September 2012, has now been promoted to portfolio manager. He is also now assisting Satterwhite with the informal lead manager role on Small Cap Value.
Satterwhite joined Artisan in 1997 and was the sole manager of Small Cap Value when it launched that year. All three funds have generated top-quartile results under the team, which took over Mid Cap Value in 2001 and Value at its 2006 inception. Satterwhite previously spent more than a decade managing small-value strategies for Wachovia. James Kieffer, a comanager on all three of the Artisan funds, served as an analyst under Satterwhite at Wachovia starting in 1989.
Herro Closes Oakmark International to New Investors
Check out our special Fund Times column from late last week about manager David Herro's decision to close Gold-rated Oakmark International OAKIX to new investors. The move was effective at the close of trading on Oct. 4.
Targeting Expanded Alternatives Platform, TCW Buys L.A. Private Equity Shop
TCW announced on Sept. 30 that it had acquired Craton Equity Partners, a Los Angeles-based private equity firm. Craton specializes in socially responsible investing and has $241.5 million in assets under management. Terms of the deal were not disclosed.
TCW had indicated a desire to expand its alternative asset management platform in the past, and this is just the latest acquisition. The firm also acquired the Special Situations Fund group from Regiment Capital Advisors, a lending business that targets middle-market companies, in December 2012. As of June 30, alternative investments made up just $8.5 billion of TCW's $130 billion asset base, which skews heavily toward fixed income.
Vanguard Chairman and CEO Tapped to Be Chairman of ICI
On Oct. 3, the Investment Company Institute announced that its board of governors had elected Vanguard's chairman and CEO, F. William McNabb III, to serve as the ICI's chairman for a one-year term.
McNabb became Vanguard's CEO in 2008 and also has served on the ICI's board of governors since 2008. As the ICI's chairman, McNabb will preside over the board of governors, which is responsible for setting policy and overseeing the activities of the ICI, whose members include mutual funds, closed-end funds, exchange-traded funds, and unit investment trusts.
Fidelity Files for 2 Event-Driven Funds
Fidelity recently submitted paperwork with the SEC seeking permission to create two long-only, event-driven funds.
The proposed funds, Fidelity Event Driven Opportunities and Fidelity Advisor Event Driven Opportunities, would target the retail and advisor channels, respectively, and would invest in stocks in a special-situation event, such as firms undergoing a corporate reorganization, a change in beneficial ownership, changes to their capital structure, or a management change. Also likely to be considered are the stocks of companies that are being deleted from a market index. According to the filing, the proposed funds would not be constrained by any particular investment style and would not be bound by any caps on the sizes of investment positions.
The proposed funds would not be true alternative funds in that they would be long-only and would not use shorting.
Fidelity's Arvind Navaratnam, who does not manage any other mutual funds, would be the proposed funds' portfolio manager.
The funds are expected to launch around Dec. 11.
Associate director, active fund analysis Dan Culloton, senior fund analysts Greg Carlson and David Kathman, and fund analysts Michelle Canavan Ward, Robert Goldsborough, and Flynn Murphy contributed to this report.