Fund Times: PIMCO Raises Fees on Prominent Funds, Lowers Levies on Others

Big-gun bond house PIMCO is hiking fees for the institutional share classes of the venerable (and hulking)  PIMCO Total Return (PTTRX), as well as  PIMCO Low Duration (PTLDX), PIMCO Moderate Duration (PMDRX), and Analyst Pick  PIMCO High Yield Instl  (PHIYX) on Oct. 1, 2008. The administration and supervisory fee for two of the Bill Gross-run offerings, Total Return and Low Duration, will rise by 3 basis points (0.03%) apiece, while the levy on the third, Moderate Duration, will get inched up by 1 basis point (0.01%). The same charge on High Yield will climb by 5 basis points (0.05%). These alterations affect the funds' Institutional, Administrative, and P shares.

Cost increases are never fun, and they're particularly irksome in this case given that PIMCO has had wild success in attracting assets lately. If there's a silver lining for shareholders of the aforementioned funds, it's that their total expense ratios remain quite low relative to the median-level expenses for institutional funds in their respective categories.

The explicitly good news in this announcement is that PIMCO is cutting expenses elsewhere. The same line-item fees on the no-load D share classes of several funds will be dropping, substantially in some cases, on the same date. The deepest cuts of the lot send the costs of the shop's  All Asset D  and All Asset All Authority D  down by 20 basis points (0.20%) each. The administrative and supervisory fees for four funds, Analyst Picks  PIMCO Foreign Bond (Unhedged) D  and  PIMCO Foreign Bond (USD-Hedged) D , and inflation-beating offerings  Real Return D  and  RealEstateRealReturn Strategy D , will shrink by 5 basis points (0.05%). Lastly, the advisory fee on Real Return Asset's institutional shares (PRAIX) will drop by 5 basis points (0.05%).

We like to see fee reductions and wish more funds had been included in this round of chopping. Also, as the overwhelming majority of PIMCO's mutual fund assets reside in institutional shares, the revenue hit it is taking with these reductions is dwarfed by the increases mentioned above.

Bill Miller Gets Help
An extra pair of hands has joined Bill Miller on the struggling  Legg Mason Opportunity (LMOPX). Samantha McLemore has been appointed assistant portfolio manager at this mid-cap growth offering, and she'll support Miller with research and other investment duties. She first joined Legg Mason as a research analyst in 2002 but has worked closely with Miller on this fund for much of this time. McLemore's position is similar to Mary Chris Gay's role at  Legg Mason Value (LMVTX), which she's held since March 2006. Although both help with the process, Miller sets the investment policy.

Ariel Cuts Back
For the first time in its 25-year history, Chicago-based asset manager Ariel Investments has made significant staff cuts. The firm laid off nearly 20 employees, reducing its workforce by 20%. All of the firm's senior investment staff remain on board, though, so we don't expect any changes to the firm's investment process.

This recent belt-tightening follows a tough stretch of performance for a number of its funds. The $2 billion in assets  Ariel (ARGFX) has lost 23% in the 12 months ended Aug. 19, and its $1.6 billion sibling  Ariel Appreciation (CAAPX) has lost 14% over this stretch. Both of those showings rank near the bottom of the mid-blend category, and the funds' average annual returns over the past three and five years also look poor on a relative basis. Overall, the firm managed a total of $21 billion in assets in 2004, but that amount has dropped to $9 billion today.

Although the funds have struggled, we think that investors who leave now are making a mistake. We like the consistent, low-turnover style employed by manager John Rogers and crew, and we think it will pay off in the long run.

Calamos Enters Evolving Markets
The Naperville, Ill.-based Calamos Investments recently launched its version of an emerging-markets stock fund. Similar to the approach taken at  American Funds New World (NEWFX), Calamos Evolving World Growth (CNWGX) will invest both directly in companies based in the developing world and in developed-markets companies with direct ties to emerging markets. Calamos hopes that this approach will offer investors dedicated exposure to growth in emerging markets with lower volatility. The fund will invest at least 35% in emerging-markets stocks and 40% in non-U.S. stocks.

Although the fund will primarily invest in equities, it will have the flexibility to own convertibles and bonds, which fits with the team's expertise evaluating all the securities in a company's capital structure. Initially, Calamos has capped annual fees on the fund's A shares to 1.75%, which is just below the median cost of emerging-markets funds with similar fee structures.

DWS International Team Jumps Ship
Deutsche Asset Management, advisor to the DWS fund family, announced key manager departures at its two foreign large-blend offerings,  DWS International (SCINX) and the more concentrated  DWS International Select (MGINX). Matthias Knerr, who has managed the funds since 2004 (alongside Alex Tedder, who left in 2005) after heading up Deutsche's London-based stock analyst team, left the firm along with Chris LaJaunie, his comanager since March 2008, who had worked on the funds since 2006.

Knerr and LaJaunie have been replaced by Joseph Axtell, who has run the small- and mid-cap-focused  DWS Global Opportunities (KGDAX) since late 2002 and took over  DWS Europe Equity  in mid-2007, and Michael Sieghart, from Deutsche's Frankfurt offices. Sieghart currently manages several European and global equity funds for European investors.

Open and Shut Cases
As of Aug. 18, the $4.5 billion in assets  Van Kampen High-Yield Municipal (ACTHX) is once again accepting new money. Wayne Godlin, head of Van Kampen's muni department, has steered this fund since 1990 and its smaller sibling  Van Kampen Strategic Municipal Income  since 2002. At both offerings, he and his comanagers emphasize longer-maturity, nonrated municipal bonds. In the past, Van Kampen has closed this fund when Godlin thought that bonds with sound underlying traits and appealing yields were in short supply. Although the fund had remained closed between September 2004 and August 2007, this is the third time that the fund has reopened in the past 12 months, a reflection of just how volatile the muni market has been over this stretch. Strategic Municipal, on the other hand, has remained open the entire year.

Similarly, the $661 million in assets AIM High Income Municipal , which opened March 3, was scheduled to close Aug. 29. Instead, the advisor announced this week that it will remain open for an indefinite period, citing an ample supply of the types of bonds that meet the fund's investment criteria. During a tough year for high-yield munis, both of these funds have held up better than their typical peers in this niche category.

Paul Herbert contributed to this article.