Fund Times: Labor Day Fund Manager Shuffling

Shareholders of a few funds have returned from a long Labor Day weekend to find new bosses in charge of their investments. For starters, the manager of  BlackRock Pacific (MDPCX), a front-load fund that sports the lowest price tag of any option in the diversified Pacific/Asia category, has been replaced by two new comanagers. Ben Moyer, who has run the fund for the last two years after joining it as a senior analyst in 1994, has handed off management duties to Nicholas Scott and Robert Weatherston. Scott first joined BlackRock in January 2007, and he helms the firm's Asian equities efforts located in Hong Kong. Prior to that, he held a similar position at London-based M&G Asset Management. Weatherston joined Merrill Lynch Investment Management (now BlackRock) in 1996, and is currently a member of BlackRock's value equity team. We don't yet know what impact this change will have on the fund, which Moyer, like his predecessors, had run in a conservative style emphasizing large, liquid blue-chips.

Lead manager Kevin McCloskey has been replaced by Walter Bean at large-value offerings  Federated American Leaders  and  Federated Stock (FSTKX). This is the second manager change for Federated American Leaders this year: McCloskey took over as lead manager Igor Golalic left in February. We wouldn't view McCloskey's departure as a loss--he delivered lackluster results at Federated Stock during his eight-year stint as lead manager--but whether the fund will improve under Bean's direction remains to be seen. Although Bean joined Federated in 2000 and has many years of investment experience at previous firms, his track record running a mutual fund goes back only as far as the launch of his other large-value charge Federated Strategic Value (SVAAX) in 2005, and the fund's record has been mixed so far.

Small-growth offering  Pioneer Growth Opportunities  also has a new manager. Brian Stack replaced comanagers Diego Franzin and Peter Wiley, who had run the fund since 2004 and 2006, respectively. The fund has failed to keep up with its typical small-growth rival since Franzin, who heads Pioneers quant research efforts, began implementing his quantitative screens in last 2004. It remains to be seen if the fund will improve under Stack, though, who joined Pioneer this year after stints at BlackRock, MFS, and more recently Long Trail Investment Management, a firm he cofounded in 2005. So far, Wiley continues to corun his small-blend charge  Pioneer Small Cap .

Aberdeen Adds Missing Link
Since UK-based Aberdeen Asset Management gained a foothold in the U.S. retail mutual fund market with the completion of its purchase (and rebranding) of the Nationwide funds earlier this summer, the firm appeared to be a few cards short of a full deck. Of the 26 funds the firm acquired, only one, intermediate-muni fund Aberdeen Tax-Free Income (NTFAX), has a fixed-income mandate. The firm plans to change that, though, with two new domestic taxable bond offerings: Aberdeen Core Income and Aberdeen Core Plus Income.

Given Aberdeen's cohesive, experienced stable of taxable fixed-income talent, we think this is a smart move. Aberdeen bought Deutsche Asset Management's core bond operations in 2005, and we've long admired the relative-value approach the team has applied at intermediate-bond funds  DWS Core Fixed Income  and  DWS Core Plus Income (SCSBX), which we'd expect the new Aberdeen offerings to replicate. In fact, we named David Baldt (former lead manager of Core Fixed Income) Fixed-Income Manager of the Year in 1997. Baldt has since left the firm, but many of his fellow team members remain onboard.

Because the Aberdeen funds will directly compete with the two DWS offerings, Aberdeen can gain the upper hand through more-competitive pricing. With expected annual fees of 0.85% on the A shares of both funds, it appears that Aberdeen Core Plus Income will offer a much better deal than its DWS rival, which costs a lofty 1.02%. On the other hand, Core Income will initially be at a slight disadvantage to its DWS counterpart, which costs 0.80%.

Fund Cosmetics
Heritage Asset Management plans to make minor alterations to the names and investment policies of two funds in their lineup, both of which are subadvised by Eagle Asset Management. Heritage Diversified Growth (HAGAX) will be called Heritage Mid Cap Growth and its stated investment policy will change to reflect management's goal of investing at least 80% of the fund's assets in companies that fall within the market-cap range of the Russell Midcap Growth Index. In addition, large-blend offering Heritage Core Equity  will change its name to Heritage Large Cap Core, adding the stipulation that at least 80% of the fund will be invested in large-cap companies. In both cases, these changes (which will go into effect on Oct. 31) shouldn't have much impact on the funds. Diversified Growth already lands in Morningstar's mid-cap growth category and Core Equity is entirely invested in large caps.

Three funds from the Legg Mason Partners lineup also have new names. Legg Mason Partners Investment Grade Bond is now called  Legg Mason Partners Corporate Bond  (SIGAX); Legg Mason Partners Short-Term Investment Grade Bond is now called Legg Mason Partners Short-Term Bond (SBSTX); and Legg Mason Partners Inflation Management has become Legg Mason Partners Global Inflation Management . The funds' managers and strategies remain the same.

On Dec. 1, the American Performance funds will take the name of their advisor, Cavanal Hill Asset Management. The Tulsa, Okla.-based firm changed its name (and little else) from AXIA Investment Management to Cavanal Hill earlier this year, and soon the funds will follow suit. The firm manages roughly $6 billion in assets, but its mutual fund presence is just a fraction of that at just over $400 million in assets. The largest fund in the lineup is the $200 million in assets  American Performance Short-Term Income (APSTX).

Liquidating and Merging
The directors of the Lazard funds have approved the liquidation of small-growth offering Lazard U.S. Small Cap Equity Growth . The $13 million in assets fund, which was launched just over two years ago, never gained much traction with investors, and its recent troubles probably haven't helped. The fund is down 19% for the 12 months through Sept. 3, which is worse than 95% of the small-growth pack. The fund has already closed to new investors and begun liquidating, a process the firm expects to complete by the end of September.

Robert W. Baird & Co. has also thrown in the towel on small-growth laggard Baird SmallCap . Since its launch in 2004, the fund has failed to break into the top half of its peer group in any calendar year, and after topping out at $70 million in assets in 2004, the combination of outflows and investment losses have whittled the fund's assets down to $19 million. The fund will close to new investments on Sept. 5, at which point shareholders have the option to exchange their shares for shares in another Baird fund or redeem them. The fund's liquidation is scheduled to be completed by Oct. 31.

Two tiny single-state municipal-bond funds are also merging into their national cousin. The $17 million in assets Hartford Tax-Free New York  and $34 million in assets Hartford Tax-Free Minnesota  are slated to merge into the $217 million Hartford Tax-Free National . If shareholders approve the reorganization, it will occur in early 2009. Muni bigwig Franklin Templeton announced a similar reorganization several weeks ago. The firm plans to merge Franklin California Limited-Term Tax-Free Income  and Franklin New York Limited-Term Tax-Free Income , both of which have under $30 million in assets, into the $81 million in assets Franklin Federal Limited-Term Tax-Free Income (FFTFX) by November.

Clearly, the funds in Franklin's lineup that focus on shorter maturity bonds (and their relatively lean yields) haven't been as popular as others. Sibling  Franklin Federal Tax-Free Income (FKTIX), a Morningstar Analyst Pick in the muni-national long category has more than $8 billion in assets. The firm's bulkiest offering, Franklin California Tax-Free Income (FKTFX) (an Analyst Pick in the muni California long category), has more than $14 billion in assets.