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3 Important Manager Changes This Year

Our take on the changes at T. Rowe Price Blue Chip Growth and two other funds.

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Susan Dziubinski: Hi, I'm Susan Dziubinski with Morningstar. Several high-profile fund manager changes have been announced so far this year. Here with me today to talk about three of them is Russ Kinnel. Russ is Morningstar's director of manager research and editor of Morningstar FundInvestor.

Hi, Russ. Thanks for being here today.

Russ Kinnel: Hi, Susan. Good to be here.

Dziubinski: Let's start off with talking a little bit about the number of fund manager changes we've heard about so far this year. Is this about typical for a standard year? Is it a little more, a little less?

Kinnel: Yeah, it's typical. You often see a number of changes after the new year starts.

Dziubinski: And how in general do our fund analysts assess a fund manager change, and what impact could a fund manager change have on our fund Analyst Ratings of the fund?

Kinnel: Typically, when a manager change happens, our analysts will do a full review, especially if it's the lead manager. If it's someone who is only running 5%, they might not. But people are really important to our ratings, and therefore, a manager change really gets our attention and we want to really dig in and understand how good is the new manager, what's their track record, are there any indications that there might be strategy tweaks as the new manager indicates? So, a lot of things to sort through. And we, obviously, will talk to the manager but we'll look at the new manager's records elsewhere, see if they have a good record elsewhere, and how relevant those records are to the current fund. So, really, there's a lot to unpack.

Dziubinski: Now, one of the most notable changes we've heard about so far this year is out of T. Rowe Price, and it's Larry Puglia, who we've nominated before for our Fund Manager of the Year award. He will be stepping down at T. Rowe Price Blue Chip Growth (TRBCX). Can you talk a little bit about that one and what the implications are for the fund?

Kinnel: That's right. Larry Puglia has done a great job over a very long stretch at Blue Chip Growth. So, we're sad to see him go, but it's not a surprise. T. Rowe managers are actually very consistent. They almost all--when they retire, it's almost always between ages 60 and 64. And so, actually a year ago, T. Rowe Price named Paul Greene a comanager, and given Puglia's age, it was pretty clear where this was headed. T. Rowe tends to do these nice long transitions. And so, actually, when that happened, we lowered our People rating one notch and we lowered the overall rating from Gold to Silver. And then, when T. Rowe Price announced this in January 2021--that it actually was going to happen, that Puglia was going to retire--we didn't actually change the rating because we already anticipated that. So, the reason we still kept at a pretty high rating with Paul Greene is there's a very good record at their Communications & Tech Fund, which is obviously relevant for a large-growth fund. So, we liked the long transition. We liked his record elsewhere. But as a recognition, of course, you're moving up both in terms of how much AUM you're running and a wider strategy. So, that led us to take it down one notch. But obviously, as the ratings imply, we still have a lot of confidence in this fund.

Now, we've had another manager change at Artisan Mid Cap Value (ARTQX), and there, we did make a change recently to the fund Analyst Rating. Tell us a little bit about that one.

Kinnel: That's right. Jim Kieffer is stepping down, and that led us to lower the People rating from Above Average to Average, and that led the fund rating to go to mostly Neutrals. And the reason there is, in this case, the new managers don't have as long in the strategy as we'd like to see. So, they're a bit more of an unknown, and that leads us to--we still have Process rated Above Average because they have been maintaining that process, so we assume process will be fairly similar, but with People at Average that took the fund rating down a notch.

Dziubinski: And lastly, Neuberger Berman International ()(NIQVX) announced a fund manager change. A manager who has been there as the lead manager for 20 years is going to be stepping down. So, what are the implications for that fund and its rating?

Kinnel: Yeah, it's really an unusual story you don't see very often. Benjamin Segal, as you mentioned, longtime manager, he's, I think, 51 years old, and he's actually stepping down to become a high school math teacher. He said his high school math teacher really affected him and changed his life and he wanted to return the favor to the next generation, which I think is really great. In this case, he's handing the fund over to Elias Cohen, who's steeped in the strategy, been there for a while. But we did lower our People score one notch. And so, the fund with different share classes had been rated a mix of Silver and Bronze. Now, it's Bronze and Neutral because the new manager has been part of the strategy for a while, but we don't have that track record with buy, sell control to really give us enough confidence to keep the People score. So, it's an interesting story, both from an investment side and just a human side as well.

Dziubinski: Well, Russ, thank you for your time today and for helping put some of these changes into perspective for us. And we'll probably be talking to you before the end of the year to talk about some other manager changes that are likely to be announced. Thanks for your time.

Kinnel: You're welcome. Sounds good.

Dziubinski: I'm Susan Dziubinski with Morningstar. Thank you for tuning in.

Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.