The Six Biggest Manager Changes of the First Half of 2007

One of the trickiest things for investors to do is figure out what to do when a fund they own changes managers. There are obvious questions about whether the strategy will change and whether the new manager is as good as the old one, and it isn't always easy to find the answers.

That's why I provide capsules of the most important manager changes each month in Morningstar FundInvestor. I tell readers what happened and whether that's a good thing. (I also send out e-mail alerts on the changes to FundInvestor subscribers.) Today, I'll share some of those capsules on the most important changes so far in the first half of 2007.

 First Eagle Global (SGENX) and  First Eagle Overseas (SGOVX)
March 28, 2007
Impact: Positive
Charles de Vaulx is out after two years and Jean-Marie Eveillard is back in. Eveillard is 67, and he handed the reins to de Vaulx in 2004. Eveillard said he will run the fund for one year, run it for a second year with a comanager, and then be available for consultation for three more. First Eagle gave no reason for De Vaulx's departure. | Our Take: If you own one of these closed funds, you should be pleased that Eveillard was available to step in, though the abrupt nature of De Vaulx's departure is a bit disconcerting. Eveillard had a much longer track record than De Vaulx and he had remained involved in the funds. It's vital that Eveillard groom successors to take over as he steps back. I don't expect a big taxable event due to this change as Eveillard and de Vaulx had similar investing styles.

 Oppenheimer Developing Markets (ODMAX)
May 1, 2007
Impact: Negative
Mark Madden left Oppenheimer and was replaced by Justin Leverenz, who served as a senior analyst on  Oppenheimer Global (OPPAX) for the past few years. | Our Take: Madden is an experienced manager with a long and strong track record, but his replacement has no prior portfolio-manager experience other than running a couple of offshore single-country funds for a short time. For a $10 billion emerging-markets fund, that feels like a big challenge. With 41% potential capital gains exposure, a big tax bill may await shareholders this year.

 T. Rowe Price Growth & Income 
March 1, 2007
Impact: Neutral
Tom Huber, manager of  T. Rowe Price Dividend Growth (PRDGX), has taken the helm at  T. Rowe Price Growth & Income . He replaces Anna Dopkin, who was promoted to an oversight position. Huber's fund has produced strong performance since he took over in 2000. | Our Take: One good manager has been replaced by another. We don't expect a change in strategy.

 T. Rowe Price Growth Stock (PRGFX)
May 1, 2007
Impact: Negative
Bob Smith left the fund to head up T. Rowe Price International Stock (see below). Rob Bartolo, who was comanager at  T. Rowe Media & Telecommunications (PRMTX), took the helm. | Our Take: Bartolo is a rising star at T. Rowe, and he showed strong stock-picking abilities as an analyst. However, he has only a couple of years of portfolio management experience (and at a sector fund no less) and is diving into the deep end with a $21 billion fund.

 T. Rowe Price International Stock (PRITX)
May 1, 2007
Impact: Positive
Growth Stock's Bob Smith is moving to serve as lead manager of this fund alongside Mark Bickford-Smith who was already a comanager. | Our Take: This is a big lift for a fund that has long been middling. T. Rowe has been working to raise up the quality of work done by its foreign funds to the level of its domestic funds, and this move is a big part of that. With Smith's strong track record, this is a fund to watch. On the downside, this fund has a 37% capital gains overhang, so I wouldn't rush to buy in this year.

 Vanguard U.S. Value 
June, 1, 2007
Impact: Negative
Vanguard handed 50% of this portfolio to AXA Rosenberg. It had been run exclusively by GMO. Our take: AXA Rosenberg's large-value record in mutual funds is too short to have much meaning. It's disappointing to see GMO's strategy watered down.