Fund Times: News on Dreyfus, Janus, MFS, and More

Dreyfus announced this week that it plans to replace the managers on its entire taxable-bond lineup (with the exception of taxable money market funds), pending approval by the funds' board of directors.

If the board approves the appointment, Standish Mellon Asset Management (an affiliate of Dreyfus) will take over from the funds' current managers. (The current managers will continue to manage the funds until the replacements are approved.)

The management change should be welcome news for shareholders, who have endured inconsistent results at best under Dreyfus management, said Morningstar fund analyst Dieter Bardy. Standish has a more robust, institutional-quality investment process in place, and it has more than $200 billion in dedicated fixed-income assets, so the managers are much more in tune with those markets.

Dreyfus also announced this week that lead health-care analyst Matthew Jenkin (who contributed to many of Dreyfus' diversified funds and was the manager of Dreyfus Premier Health Care , a tiny sector fund) left with two other more-junior health-care analysts to run a hedge fund for Lehman Brothers. Director of research Elizabeth Slover will take over the Health Care fund for the time being with research backup from other respective investment research resources within the Mellon/Dreyfus framework. Dreyfus' consumer analyst will pinch-hit on the diversified portfolios.

Strong Name to Disappear
In the wake of the recently completed acquisition of $29 billion in Strong fund assets by  Wells Fargo (WFC), Wells said it is getting rid of the Strong brand name. When the merger is completed in the second quarter of 2005, Wells said, it will replace both the Strong Funds and Wells Fargo Funds brand names with "Wells Fargo Advantage." The combined fund family recently had approximately $100 billion in assets.

Janus Shapes Up Managers' Bonus Plan
As part of its turnaround plan to win back investors' trust,  Janus Capital Group  announced that it is rolling out a new bonus plan for investment personnel. The Denver-based firm has been struggling against shareholder redemptions in recent years. In addition to its scandal-related woes, the majority of the firm's funds put up disappointing returns during the bear market.

The new bonus plan is based on one- and three-year performance, but it's heavily weighted to three-year figures. Importantly, the maximum one-year target is top quartile whereas the three-year bonus tops out at the top 15%. Janus also addressed the one-way pendulum problem by cutting off the bonus for below-average performance. Moreover, it cuts the bonus in years when a fund loses money.

Morningstar director of fund research Russel Kinnel likes the consistency component of the plan. "It rewards managers who have produced annual returns that are above average for three, four, and five years in a row," Kinnel says in an upcoming Fund Spy article. Another step that aligns management with long-term investors is that the long-term bonus is paid out equally in fund shares and shares of Janus Capital." (Read Kinnel's full article on Morningstar.com on Monday, Jan. 31.)

MFS Streamlines Its Lineup
MFS said this week that it plans to merge away  MFS Managed Sectors , one of MFS' many multi-sleeve large-growth offerings. Managed Sectors will be folded into  MFS Strategic Growth , which is run by Irfan Ali. (Ali has been one of three managers assigned to Managed Sectors since the summer of 2002.)

In addition,  MFS Large Cap Growth   will merge into  MFS Core Growth .

The mergers are good news--Morningstar has long been critical of MFS' large-growth lineup, as the funds are not terribly distinguishable from one another in terms of strategy and record, said Morningstar fund analyst Laura Pavlenko Lutton.

Etc.
Barclays Global Investors' new U.S. gold exchange-traded fund, iShares COMEX Gold Trust (IAU), began trading Friday, Jan. 28, on the American Stock Exchange.

In an apparent effort to stem inflows to the funds,  Third Avenue Real Estate Value (TAREX)  and  Third Avenue International Value  became unavailable for purchase without a transaction fee at Schwab's fund supermarket as of Jan. 15.