Fund Times: Barclays Launches Commodity ETF

Barclays Global Investors has launched its iShares GSCI Commodity-Indexed Trust (GSG) on the New York Stock Exchange. The exchange-traded fund will attempt to track the performance of the GSCI Excess Return Index, which is a diversified basket of 24 commodities, though it has a significant focus on the energy sector. The fund will charge a 0.75% management fee, which is comparable with similar funds, such as Deutsche Bank's DB Commodity Index Tracking Fund (DBC), which launched earlier this year.

One interesting aspect of the fund's indexing strategy is that it will involve the use of "long positions in CERFs, which are contracts listed on the CME that have a term of approximately five years listing and whose settlement at expiration is based on the value of the GSCI Excess Return Index," according to the fund's prospectus. This is unusual because a more conventional way of attaining commodities exposure would be through the purchase of month-long futures contracts for the commodities in the benchmark. We'll be interested to see how the strategy works out over time, particularly since the longer-term nature of the CERF futures contract could have advantageous tax consequences for shareholders.

Lazard Joins Vanguard Fund
Lazard Asset Management, a subsidiary of Lazard Ltd. (LAZ), has joined the advisory team at Vanguard International Value (VTRIX), Vanguard said in a statement. Lazard joins the fund's two existing subadvisors, AllianceBernstein and Hansberger Global Investors, which were added to the portfolio in 2004 and 2000, respectively. Vanguard will invest a portion of the fund's current cash position and a segment of new money that comes into the fund to Lazard. While we've been pleased with this fund's performance, we do think it's strange to add yet another subadvisor here now, particularly since AllianceBernstein was recently added to run a quarter of the fund's assets.

Fidelity Appoints New Manager to Income-Oriented Fund
Fidelity Investments has made Scott Offen a comanager at Fidelity Strategic Divided & Income (FSDIX) and Fidelity Advisor Strategic Dividend & Income (FASDX), where he'll focus on the equity portion of the funds, working alongside lead portfolio managers Christopher Sharpe and Derek Young. Offen succeeds Brian Hogan, who, in addition to his other portfolio management duties, will assume a new role in managing the firm's equity research group. Offen, who joined Fidelity as an equity research analyst in 1985, will continue to run Fidelity Value Discovery (FVDFX), which has performed quite admirably since he took over in late 2002. In addition to Value Discovery, Offen has experience running several Fidelity Select funds, which should give him a range of industry experience that will be valuable in his new charge.

WaMu Announces Fund Advisory Unit Sale to Principal
 Washington Mutual (WM) recently announced that the Principal Management Corporation, a division of Principal Financial Group (PFG), will buy its mutual fund management arm, WM Advisors, along with its distributor and shareholder-services business. WM Advisors runs 21 distinct equity and fixed-income retail funds, totaling about $29 billion in assets under management as of June 30. Should shareholders and trustees approve the sale, they could see the WM funds merged into various funds managed by Principal.

Pax World Folds on Two Social Screens
Pax World Funds, advisor to the pioneering Pax World Balanced (PAXWX), has decided to update its social screens to allow for investments in alcohol and gambling stocks. These changes are part of a broader effort to update social screens that were established in 1971 for the Balanced fund and have not been changed since. If both the fund's shareholders and its board of directors approve the changes, the prohibition on alcohol and gambling stocks will be removed and formal corporate governance, community, and product integrity screens will be added. These changes are a response to the evolution of the SRI industry and may also have been spurred in part by Pax's March 2005 divestment of 375,000 shares of Starbucks (SBUX) stock, which their screens required because Starbucks licensed its name and coffee for an alcoholic beverage. The updated screens will also impact Pax's two smaller funds: Pax World Growth (PXWGX), and Pax World High Yield (PAXHX).

Another "Worst" 529 Bites the Dust
The state of Arizona has decided not to renew its contract with Pacific Funds to manage of the Pacific Funds 529 College Savings Plan once the current contract expires in November. Instead, assets in this plan can be transferred to other Arizona 529 options. The Pacific Funds plan has been a fixture on the "worst" side of Morningstar's "The Best and Worst 529 Plans" annual report, due to its high costs, lack of an age-based option, and poor investment choices. The June 2005 introduction of a Fidelity-run plan in Arizona represents a better option for college savers in that state.

Disclosure: Morningstar licenses its indexes to certain ETF providers, including Barclays Global Investors (BGI) and First Trust, for use in exchange-traded funds. These ETFs are not sponsored, issued, or sold by Morningstar. Morningstar does not make any representation regarding the advisability of investing in ETFs that are based on Morningstar indexes.