Fund Times: American Century Loses Another Top Executive

Bill Lyons will retire from his post as president and CEO of American Century Investments on March 1, 2007. Lyons has been CEO for more than six years, as part of his nearly 20-year career at the Kansas City, Mo.-based asset manager. Jonathan Thomas will replace Lyons in both roles. Thomas is much newer to American Century, but he brings plenty of industry knowledge to the job. He arrived in 2005 after serving as a managing director and global COO for Morgan Stanley's investments division.

This is the latest in a string of high-profiled departures from American Century. Enrique Chang, formerly of Munder Capital Management, took over the chief investment officer role after Mark Mallon announced his upcoming retirement in October 2006. And CIO for small/mid-cap growth and sector funds Harold Bradley will leave the firm at the end of January after serving as comanager of  American Century Select ,  American Century New Opportunities , and  American Century New Opportunities II . Finally, one of the firm's largest funds, large-growth offering  American Century Ultra (TWCUX), lost longtime manager Bruce Wimberly in 2006.

DWS Changes Two Large-Cap Funds' Managers
DWS will replace Thomas Sassi and Steven Scrudato, managers of the $1.9 billion  DWS Large Cap Value , with Germany-based manager Thomas Schuessler. Schuessler is entering his sixth year at Deutsche Asset Management and his 11th at Deutsche Bank. He'll take over the fund on Feb. 5, and he'll try to turn around performance after three straight years of bottom-quintile returns in the large-value category.

The company also announced changes at large-blend fund  DWS Growth & Income (SUWAX). DWS replaced Theresa Gusman and two comanagers on Jan. 23 after less than two years at the helm. Gusman and company failed to post top-half returns in the large-blend category during their tenure, finishing behind 68% of peers in 2006. A three-person team will take over. Robert Wang, managing director of Deutsche Asset Management, Jin Chen, and Julie Abbett (both also directors) will manage the fund using the quantitative tools employed at several other DWS offerings. All three have been with the company for several years.

IShares Proposes High-Yield Bond ETF
Barclays Global Investors plans a new fixed-income ETF tracking about 50 high-yield corporate issuers found in the iBoxx Liquid High Yield Index. The iShares iBoxx High Yield Corporate Bond Fund will come to market amid increased demand that's caused several fund families to propose bond ETFs. Among them are a few other offerings proposed by Barclays, as well as four investment-grade funds planned by Vanguard. So far, Vanguard is the cost leader in fixed-income ETFs, as its offerings will charge only 0.11%.

Current market conditions don't favor lots of high-yield exposure through either a traditional mutual fund or an ETF. Junk debt has performed strongly in recent years, narrowing income spreads between high-yield and investment-grade bonds to near-record lows. That trend is causing an increasing number of fixed-income managers to assert that, on average, junk bonds' lowered income levels no longer compensate investors for their credit risk. So, we urge investors to approach this sector with extreme caution.

John Hancock to Merge Two Struggling Equity Funds
Boston-based John Hancock plans to merge John Hancock Focused Equity  into John Hancock Mid Cap Equity . Both funds compete in the mid-growth category and have the same comanagers: Alan North and Henry Mehlman. Focused Equity shareholders will benefit from a lower expense ratio--1.38% versus 1.50%--though better performance isn't guaranteed. Both funds posted streaky returns, at best, in recent years.

Kelmoore Settles With SEC After Misleading Investors
Boutique asset manager Kelmoore Investment Company agreed to a $100,000 settlement with the SEC after an investigation into misleading expense disclosures. Had the company accurately disclosed brokerage and other fees, expenses on its funds may have exceeded 3% instead its purported 1% levy. Investors considering any of Kelmoore's three funds should explore other options. All three Kelmoore funds charge 2.0% or more for A shares; such high expenses likely contributed to each fund's bottom-quintile five-year record in its respective category.

Two RS Funds Name New Comanagers
 RS Smaller Company Growth  and  RS Emerging Growth (RSEGX) are getting some help. Advisor RS Investment Management named Stephen Bishop, Melissa Chadwick-Dunn, Scott Tracy, and Allison Thacker to comanager roles alongside James Callinan at Emerging Growth. Tracy also becomes comanager at Smaller Company Growth alongside William Wolfenden. All four new managers have been at RS for at least six years.

MassMutual Offerings Switch Subadvisors
MassMutual Premier Strategic Income , MassMutual Premier Main Street (MSSAX), and MassMutual Premier International Equity (MMIAX) will all say good-bye to subadvisor OppenheimerFunds, Inc. and hello to another Oppenheimer team, OFI Institutional Asset Management, in early February. OFI focuses primarily on institutional asset management, but this isn't its first role as subadvisor to a public mutual fund. The company currently runs a portion of assets at  USAA Income Stock (USISX). MassMutual and OFI have not yet named individual managers for any of the funds.

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.