Fund Times: Vanguard Opens the Spigots for Three Funds

 Vanguard Strategic Equity (VSEQX) has reopened to new investors, and  Vanguard Windsor II (VWNFX) and  Vanguard Wellington (VWELX) have lifted their maximum annual investment limits. All three funds still will have higher, $10,000 minimum investments, though.

Vanguard closed Strategic Equity and imposed the investment restrictions on Windsor II and Wellington in April 2006 because the funds had attracted a lot of assets due to strong performance. Too much asset growth too fast can hamper a fund manager's efforts to execute his or her strategy.

Net cash flows into the fund have cooled since Vanguard took the action, so the family decided to ease the restrictions. At $7 billion for Strategic Equity, $46 billion for Windsor II, and $44 billion for Wellington, asset levels are still extremely large for their respective categories, though. Vanguard said it would continue monitoring the funds' assets and investors should, too.

Hartford Settles with SEC
On Nov. 8, 2006, the SEC announced that it had settled with three subsidiaries of Hartford Financial Services Group for using brokerage commissions from 61 broker/dealers to pay for the marketing and distribution of Hartford mutual funds and annuities. The arrangements that drove the charges are commonly referred to as "directed brokerage." The arrangements took place between 2000 and 2003 and caused shareowners to pay costs that Hartford had specifically told them it would pay; the SEC further says that Hartford misled the funds' boards concerning this practice. A payment of $55 million ($40 million of it in "ill-gotten gains" and a $15 million penalty) will be returned to the funds. The fine, while the heaviest yet assessed for such practices, is in the same range as the $30 to $50 million fines levied against Ameriprise, Putnam, and MFS. Click here to read the SEC's press release about the settlement.

HighMark Funds' Parent Under Investigation
The parent of HighMark funds has disclosed in a regulatory filing that the fund family is being investigated based on its relationship with a third-party administrator. Media reports speculate that regulators are focusing on HighMark's relationship with  SEI Investments (SEIC), which provides marketing and distribution services for mutual funds. The SEC recently fined one of SEI's competitors,  Bisys Group  , for making undisclosed payments to fund companies so that they eventually would support renewing the firm's contract with Bisys. Those kickback payments should have gone to fundholders in the form of lower expense ratios. HighMark, which is owned by  UnionBanCal , runs 13 domestic-stock and bond funds, including  HighMark Value Momentum  and  HighMark Small Cap Value .

Vanguard Cuts 529 Plan Fees
Vanguard also cut fees, added active managers, and closed an option in its Nevada-sponsored 529 plan.

The Vanguard 529 College Savings Plan sponsored by Nevada will reduce expenses by 10 to 12 hundredths of a percent across its lineup of investment options, starting Dec. 1, 2006. The cuts will bring the total costs of half of the plan's 22 options to 0.50%.

Vanguard has twice before cut the fees on this plan. The family cited strong asset growth, productivity improvements in technology and client services, and Vanguard's mutual ownership structure (the funds own the management company, which provides services at cost) as the reasons for the cuts.

Vanguard added to the plan three actively managed funds-- Vanguard Windsor (VWNDX),  Vanguard Morgan Growth , and Vanguard STAR (VGSTX)--and closed the Vanguard Balanced Index option in the plan. Its assets will be transferred to the Vanguard Moderate Growth Portfolio option in the plan.

FundX to Chase ETF Performance, Too
The DAL Investment Company, advisor to the small FundX fund family, plans to launch two new funds that apply its momentum fund-picking strategy to exchange-traded funds.

DAL, which runs Morningstar Fund Analyst Pan  FundX Upgrader , has filed with the SEC to launch two funds of ETFs: FundX ETF Upgrader and FundX ETF Aggressive Upgrader. Both funds will invest in various ETFs with strong short-term returns that rank highly in the DAL's momentum-oriented fund-selection system. An investment committee headed by Janet Brown, who also manages the original FundX Upgrader (which invests primarily in conventional open end funds), will run the new offerings.

Both funds will charge a 1% management fee. That's about four times the average management fee for no-load funds of funds, and it does not include the expense ratios of the underlying ETFs.

The funds' momentum strategy provides yet another reason to stay away. Using a proprietary ranking system, Brown sorts ETFs into five categories according to their risk score, with Class 1 being "most speculative" and Class 5 being fixed-income offerings. She then assigns the funds in each group a score based on their trailing one-, three-, six-, and 12-month returns and ranks them. ETF Upgrader will focus generally on Class 3, or "high-quality" funds, and ETF Aggressive Upgrader will hold more speculative Class 1 and 2 funds.

AIM Slams the Door on Opportunities Funds
AIM Advisors is merging four poorly performing funds (some of which are Morningstar Fund Analyst Pans) into slightly better performing offerings, should shareholders approve.

 AIM Opportunities I  will merge into  AIM Small Cap Equity (SMEAX), and  AIM Opportunities II  and  AIM Opportunities III  will merge into  AIM Select Equity  .  AIM Advantage Health Sciences  also will merge into  AIM Global Health Care (GGHCX).

Management will not change for three of the funds. The managers of the Opportunities funds, Derek Izuel and Duy Nguyen, also run AIM Select Equity. AIM Advantage Health Sciences manager Derek Taner also runs the Global Health Care fund. AIM Small Cap Equity, however, is run by Juliet S. Ellis and Michael Chapman, who have seen improving performance lately. Still, none of the new funds are terribly compelling for former Opportunities shareholders, so we suggest they find better options among our  Fund Analysts Picks.

Janus Changes CIO Management Structure
Janus Capital Group recently announced that it has replaced its current four-person "investment-discipline" CIO team, consisting of David Decker, Jason Yee, Jonathan Coleman, and Gibson Smith, with a co-CIO structure led by Coleman and Smith.

Decker will focus on running  Janus Adviser Long/Short , the firm's first hedge-fund-like investment vehicle, as well as  Janus Contrarian (JSVAX). Yee will continue in his duties managing  Janus Worldwide . Coleman will continue running  Janus Enterprise (JAENX), and Smith will maintain his role as manager of  Janus High-Yield (JAHYX) and  Janus Short-Term Bond (JASBX), as well as comanager on  Janus Balanced (JABAX).

In a statement released by the fund company, the firm explains that these changes are intended to free Janus CEO, and former CIO, Gary Black to "focus his efforts on growing Janus' assets." This mission could be seen as particularly important to the firm now, after years of hemorrhaging assets, due in part to the firm's poor showing during the 2000-02 bear market and involvement in the 2003 mutual fund trading scandal.

2006 Elections Usher Fund-Related Figures to High Office
In a recent, yet anticipated, political development Eliot Spitzer, the Democratic New York State Attorney General whose investigations of regulatory misdeeds precipitated the mutual fund scandals of late 2003 and beyond, has won the New York State Governorship in a landslide.

A surprising political change of recent days, however, was the announced resignation of U.S. Secretary of Defense Donald Rumsfeld and the appointment of former CIA chief, and Fidelity Investments board member, Robert Gates, to succeed him.

Calvert Offers New Income Fund
Calvert Asset Management Company has recently filed a prospectus with the SEC to offer the Calvert Ultra-Short Floating Income Fund.

The fund's mandate, if approved, will be to invest the majority of its assets in floating-rate securities, as the name suggests, and securities with durations of one year or less. While at least 65% of net assets will be invested in U.S. dollar denominated investment-grade securities, management can hold up to 35% in junk-rated bonds, and 25% in foreign debt issues, which may be unhedged.

Calvert bond veteran Greg Habeeb, who runs  Calvert Income (CFICX) and  Calvert Social Investment Bond (CSIBX), will manage the portfolio here. Habeeb has a strong record with high-yield sector investing, so we are interested to see how he will position this portfolio. The fund's cost, after fee waiver, will be 0.89%, which seems steep. We'll watch to see if it trends downward as assets flow in.

Rydex to Offer Nine New ETFs
Rydex Investments recently expanded its lineup of ETFs to include nine funds based on the S&P Equal Weight Sector Indexes, which will trade on the American Stock Exchange.

The funds will seek to provide exposure to the consumer-discretionary, consumer-staples, energy, financial-services, health-care, industrial, basic materials, technology, and utilities sectors. Equal weighting, unlike market-capitalization weighting, does not emphasize larger-cap companies. Instead all stocks in the portfolio start off with the same weighting. To maintain the equal weight, the portfolios will be rebalanced quarterly.