Fund Times: Fund Reopenings Ring in the New Year
Plus, PIMCO's retirement funds, 130/30 launches, and more.
It looks like Third Avenue International Value (TAVIX) won't be the only foreign small/mid-value stalwart to welcome new investors in coming weeks. Following suit, Tweedy, Browne Global Value (TBGVX) will reopen on Jan. 2. The fund has remained closed since mid-2005, when the dearth of attractively priced investment ideas worldwide, coupled with management's unwillingness to compromise on its value-oriented strategy, caused its cash stake to climb as high as 20%. The fund's cash level has since come down, and according to management, continued fallout from this summer's credit crunch has opened up more opportunities to purchase stocks trading at appealing discounts to intrinsic value estimates. Given the team's vigilance, we'd expect the fund to close promptly once opportunities dry up.
First Eagle Overseas (SGOVX) will also reopen to investors Jan. 14, as will its world-allocation sibling First Eagle Global (SGENX). First Eagle Overseas initially shuttered its doors in February 2004 for similar reasons--a deluge of inflows outpaced the availability of compelling investment opportunities, especially among small and midsize companies--and First Eagle Global closed a year later. First Eagle Gold had already reopened in October, so as of Jan. 14 all five First Eagle funds will be available to new investors.
And we're not done yet. On Jan. 2, investors will have the opportunity to purchase shares of two more fine foreign value offerings: Oakmark International Small Cap (OAKEX) and its large-cap counterpart Oakmark International (OAKIX). Both funds are run by David Herro, who was named Morningstar's International-Stock Manager of the Year in 2006. Of the funds mentioned above, these two have been unavailable the longest, since mid-2002 and the end of 2003, respectively. The reopenings come after Herro's strict value style caused both funds to struggle mightily relative to peers in 2007.
Janus Bucks the Trend
Janus announced Dec. 20 that it is closing Janus Overseas (JAOSX), Janus Adviser International Growth (JDIAX), and Janus Aspen International Growth (JAIGX) to new investors effective immediately. All three funds are managed identically by Brent Lynn and have seen spectacular performance and heavy inflows in recent years. Lynn's all-cap tendencies and go-anywhere nature, along with the funds' heavy stakes in emerging-markets stocks, have all been important components to the success, so remaining flexible is key. Lynn is managing roughly $16 billion in total.
Target Retirement Funds, PIMCO-Style
As asset managers have caught on to the appeal of target-date retirement funds--those one-stop-shopping options for investors wanting a simple, hassle-free way to invest for retirement--the sector has taken off. Enter PIMCO. In a recent filing, the bond management firm outlined plans to join the target-retirement fray in 2008 by launching a series of so-called RealRetirement Funds with target dates ranging from 2010 to 2050.
So far, much of the target-retirement debate has centered on achieving the right mix of stocks versus bonds and the degree to which that mix becomes more conservative over time. The proposed PIMCO funds, though, appear to offer a new twist on this formula. Instead of stashing close to 90% of assets in equities from the get-go, as is common for target funds with longer investment horizons, the PIMCO funds will take a more diversified approach, supplementing traditional stock and bond holdings with a helping of "real" assets, such as commodities and real estate. PIMCO also appears to be placing more emphasis than rivals on hedging against inflation: As investors near retirement, for instance, a growing stake in Treasury Inflation-Protected Securities will enter the mix.
The funds will be managed by Jamil Baz, who joined PIMCO in April 2007 after prior stints at Goldman Sachs and Deutsche Bank. Fee estimates were not disclosed in the filing.
When it Rains 130/30 Funds, It Really Pours
Once reserved for institutional and high-net worth investors, 130/30 products have begun entering the retail space in earnest. As BlackRock's 130/30 product, BlackRock Large Cap Core Plus, hits the market this week, three more fund companies announced plans to launch similar offerings in 2008. First up, Fidelity will throw its hat into the long-short ring with Fidelity 130/30 Large Cap. Skipper Keith Quinton, who blends quantitative and fundamental analysis in running Fidelity Disciplined Equity (FDEQX) and Fidelity Tax-Managed Stock (FTXMX), will use a similar approach here. Starting out, the fund's price tag will be capped at 1.30%.
Bear Stearns may not be as ubiquitous as Fidelity when it comes to retail mutual funds, but it, too, will launch a 130/30 fund (Bear Stearns Multifactor 130/30 Core Equity). The offering will focus on domestic stocks in the Russell 3000 Index. Michael Rosen, who heads the quantitative equity team at Bear Stearns Asset Management, will manage the fund, and fees will be capped at 1.25%.
ETFs won't be left out in the cold, either. ProShares has filed with the SEC to roll out a 130/30 ETF in early 2008. The filing is light on a few key details, including fees and the makeup of the index that the fund plans to track, but the proposed fund could push the increasingly tested boundaries between active and passive ETFs.
While the hubbub over 130/30 funds may be difficult to ignore, we'd encourage investors to approach these new offerings with a healthy dose of informed skepticism. For a useful primer on 130/30 funds, check out this article.
Further Streamlining for Wells Fargo Advantage Funds
Another round of menu cleanup is in store for Wells Fargo Advantage Funds in 2008. The firm recently announced plans to merge 15 of its offerings into funds with similar objectives. Wells Fargo Advantage Asset Allocation (SFAAX) will absorb Wells Fargo Advantage Balanced (STAAX), for instance, and Wells Fargo Advantage Corporate Bond (STCBX) will merge into Wells Fargo Advantage Income Plus (STYAX). The teams and processes already in place at the acquiring funds will remain intact after the reorganization, and shareholders in the funds being absorbed will see their fund's expense ratios either drop or stay the same. Most of the planned mergers, slated for the third quarter of 2008, are subject to shareholder approval.
The firm will also be closing the Class B shares of all Wells Fargo Advantage Funds, with the goal of eventually converting existing B shares to Class A shares. Although Wells Fargo had already made significant strides in streamlining the firm's offerings following its Strong funds purchase, both moves are positive steps toward an even more simplified, navigable lineup.
More Beatles Than Dylan
A portfolio manager shuffle at Managers Fremont Micro-Cap (MMCFX) leaves this fund with a whole lot more cooks in the kitchen. David and Robert Kern of Kern Capital Management, who had managed this fund since its 1994 launch, have been replaced by teams at four separate subadvisors. Dan Goldfarb and team at OFI Institutional Asset Management now run 37.5% of the fund's assets in a core strategy. Meanwhile, Tom O'Halloran and crew at Lord, Abbett & Co. and New Century Growth Investors' team led by Tom Press and Don Longlet are splitting the fund's 40% growth stake (Lord, Abbett gets a larger share). The remaining piece of the pie--at 22.5% of assets--will be run by Michael Gardner and his cohorts at WEDGE Capital Management as the fund's value sleeve.
This change may seem a bit odd, because the Kerns had produced a fine long-term record during their tenure here. But their approach, which stacked bets in technology, health-care, and consumer firms, led to bouts of underperformance that tripped up the typical investor, whose moves into and out of the fund were largely ill-timed. Under new management, the fund's more diversified approach could, if nothing else, smooth out some of the kinks.
Leaving and Liquidating
On Dec. 19, 2007, UBS announced that Brian Singer, longtime lead manager of UBS Global Allocation (BPGLX) and CIO of UBS' Global Investment Solutions unit, has stepped down and will be leaving the firm. Replacing Singer will be Curt Custard, who most recently headed up the Multi-Asset Solutions group at Schroders. UBS has not yet determined who will assume Singer's CIO duties.
Charles Mayer is retiring from his post as the director of U.S. portfolio management at Pioneer Investments, a role somewhat akin to CIO. Mayer wasn't responsible for the day-to-day management of any mutual funds, but he did advise the portfolio managers. Pioneer has not yet announced a replacement.
The board of Janus Federal Tax-Exempt (JATEX) approved plans to close and liquidate this ailing long-term municipal-bond fund. In what proved to be a tough year for long-term muni funds thanks to this summer's subprime debacle, this fund had the distinction of posting the worst results in the category for the year through Dec. 19 with a 5.35% loss.
Miriam Sjoblom does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.