Fund Times: Harvard Hires Dreyfus Manager

Harvard Management Company, which runs Harvard University's $26-billion endowment, has hired Marc Seidner of Standish Mellon Asset Management to head its domestic fixed-income division. This move is part of an effort to reconstitute the fixed-income division, which lost many key players when they left to work for former HMC president Jack Meyer at Convexity Capital, his newly formed hedge fund.

Seidner has worked for Standish Mellon's fixed-income segment since January 1995, most recently as its director of active core strategies. In this capacity, he led a team of eight portfolio managers and 51 analysts and traders. He was also manager of a number of offerings issued under the Dreyfus name, such as  Dreyfus Premier Core Bond  and  Dreyfus GNMA (DRGMX). Senior portfolio managers Kent Wosepka and Cathy Powers, who will together lead the active core team, will replace Seidner at Standish.

ICAP Managers Display Confidence in Their Own Process
Thanks to a recent regulatory filing, we finally have complete manager ownership information from ICAP, and the picture is quite positive. Within the ICAP international team, winners of Morningstar's 2005 International-Stock Manager of the Year award, lead manager Rob Lyon held more than $1 million in  ICAP International (ICEUX) and more than $1 million in ICAP Select Equity . Jerrold Senser, comanager with Lyon, also had more than $1 million in both funds, as well as at least $500,000 in their third fund,  ICAP Equity . We like to see managers hold significant levels of investment in the funds they run, and in funds across the fund family, since it signals high levels of confidence in their process and abilities.

Third Avenue's Whitman Banks on GM Debt
One of our favorite value managers,  Third Avenue Value's (TAVFX) Marty Whitman, has initiated an interesting position in long-term  General Motors (GM) senior unsecured debt. Whitman, an expert in bankruptcies and distressed securities, is proceeding cautiously and has so far committed only $2 million to the position. In his latest shareholder letter, however, Whitman outlines his thought process. He believes that Chapter 11 bankruptcy "would be the easiest way for General Motors to solve its legacy cost and labor cost problems," and is banking on two things if they were to file. First, he believes that "General Motors is readily reorganizable given that it has so many profitable businesses worldwide." Second, the firm "is so large and important to the U.S. economy, that heaven and high earth would be moved to preserve some equity for the existing General Motors Common Stock." The key point being that if the stock is to retain value, his unsecured debt positions "would have to be given 100% of [its] claim." Since he has been purchasing the debt at "a dollar price of about 50% of claim and a yield to maturity of around 15%," this heavily discounted debt could ultimately provide a very generous total return.

While investing in distressed companies is obviously risky, we're anxious to see how Whitman's GM bet turns out in the coming years. We'd also like to emphasize that shareholder letters can provide invaluable information not only about specific funds, but also about particular companies and market conditions, too.

Federated Launches New Funds of ETFs
Federated Investors, the Pittsburgh-based investment management firm, is the latest entrant in the quickly growing target-retirement fund marketplace. The firm recently introduced three funds that invest in ETFs: Federated Target ETF 2015, Federated Target ETF 2025, and Federated Target ETF 2035, intended for investors who plan to retire close to those years. These funds will invest in a range of exchange-traded fund offerings to achieve asset allocations that annually update as the investor draws closer to retirement.

The fund will track a blended benchmark that utilizes three indexes: the Standard & Poor's Composite 1500 Index, the Lehman Brothers Aggregate Bond Index, and the MSCI EAFE Index. Manager John W. Harris will be responsible for asset allocation decisions here.

AMF to Help the Community by Launching New Fund
Shay Assets Management, advisor to the AMF fund family, has recently filed a preliminary prospectus for AMF Community Development Fund. According to the filing, the fund will "invest at least 90% of its net assets in debt securities whose proceeds will be used primarily for community development purposes" and that the advisor thinks qualify to receive credit under the Community Reinvestment Act of 1977. The CRA qualification is intended to encourage FDIC-covered banks and thrifts to meet the needs of wider segments of their community, including low-income neighborhoods. Thus, the fund will invest in a variety of securities, including single and multifamily mortgage-backed securities, including those issued by FNMA, FHLMC, and GNMA, as well as municipal bonds whose proceeds will be used for community development purposes.

IMS Capital Announces New Manager
Portland, Ore.-based IMS Capital Management has announced the addition of Donald A. Shute to their fixed-income management department. He will comanage IMS Strategic Income (IMSIX), a small fund in the conservative-allocation category with $70 million in assets. Shute will also assist with the firm's other fixed-income offerings. Prior to joining IMS, Shute worked for Bear Stearns Asset Management and before that at Wells Fargo Asset Management.