Fund Times: Morgan Stanley Star Manager's Team to Leave with Him
Plus, Vanguard expenses to increase, and more.
Morgan Stanley has confirmed our expectations and announced that star manager Hassan Elmasry will take his team with him when he leaves later this year to start his own firm. We announced Elmasry's departure, the funds impacted, and our reaction a few weeks ago in Fund Times. Elmasry, however, will delay his departure until June 15; the firm had previously said he would leave at the end of April. In the meantime, Morgan Stanley is searching for a team to take over the funds and expects to announce a new squad before May.
Elmasry and his team currently run multiple Morgan Stanley funds in the United States, U.K., Australia, and Luxembourg, including Van Kampen Global Franchise (VGFAX) (and its Morgan Stanley clone), Van Kampen American Franchise (VAFAX), and Van Kampen Global Value (MGEAX). We still think his departure is a significant blow to the funds he runs and to Morgan Stanley's efforts to build its credibility as an asset manager. That his team is also leaving with him further diminishes the appeal of the funds they run. Those leaving with Elmasry include Michael Allison, Paras Dodhia, Jayson Vowles, and John Kelly-Jones. In other words, Morgan Stanley will be starting from scratch on these offerings, though they say the funds will "continue to focus on high quality companies with dominant intangible assets that possess inherent sustainable competitive advantages."
For investors here, there would seem to be little reason to stay around once Elmasry and his team set up shop and offer their new funds, assuming that the new offerings carry reasonable fees and will be available to U.S. investors. If Elmasry's funds become available in the U.S., we will let readers know in Fund Times.
RiverSource Fixed-Income Manager Leaving Firm
Another prominent manager is also leaving his firm. Jamie Jackson, who comanaged four RiverSource fixed-income funds, has decided to pursue other options. He was responsible for Treasuries, agencies, and broad interest-rate strategies for RiverSource Diversified Bond (INBNX), a $3.2 billion fund. Jackson was the sole manager on RiverSource Inflation Protected (APSAX), and comanaged with Todd White on RiverSource Short Duration US Government (IFINX), among other funds. Todd White, a comanager with Jackson on many funds, will now take the lead on many of the funds.
Western Asset Management Lets Support Staff Go
Western Asset Management has laid off approximately 100 employees, or 10% of its staff, to help bring costs under control. According to the firm, no investment professionals were laid off. The company has seen its assets under management drop more than 15% to around $515 billion from the end of 2007 until the end of last year.
Higher Fees--at Vanguard?
As my colleague Dan Culloton noted earlier this week, the unthinkable has come to pass: Vanguard expense have increased due in part to falling asset levels at many of its funds.
DWS to Liquidate Three Funds
On or about June 5, 2009, DWS Core Plus Allocation (CORAX), DWS Micro Cap (SMFAX), and DWS Disciplined Long/Short Value (LSVLX) will be liquidated. None of the funds has been a stand-out. The Core Plus fund is relatively small with $18 million in assets and has been a poor performer since its inception. The Micro Cap fund is a bit larger but also has lagged since its 2002 inception. It has been in the top half of its Morningstar small-growth category in only one of the previous six calendar years. Finally, the Long/Short fund has been a disappointment, falling more than 40% in 2008.
Fidelity Small Cap Stock (FSLCX), a fund we are not particularly fond of, will reopen to investors on March 30, as will Fidelity Diversified International (FDIVX), a fund we like. In addition, Fidelity will launch a new fund, Fidelity Global Commodity Stock, which will invest in the energy, precious metals, and agriculture industries. Joseph Wickwire, Fidelity Select Gold's (FSAGX) manager since August 2007, will run the new fund.
Also, Fidelity named Christopher Sullivan as its new head of fixed income recently. Sullivan replaces Dwight Churchill, who retired. Churchill was in the process of restructuring the taxable-bond team, which had subprime mortgage issues, to say the least, in late 2007 at Fidelity Ultra-Short Bond (FUSFX). Sullivan headed up fixed income at Goldman and worked at PIMCO in account management.
Fund Manager Plumb Tired
Thompson Plumb Growth (THPGX) has had a rough several years, and now its manager, John C. Thompson has had enough. The fund's board, as well as Thompson's father, John W. Thompson, the advisor's founder, has granted the manager's request for a temporary leave of absence from the fund, whose trailing one-, three-, and five-year returns all rank at the bottom of the large-blend category.
The elder Thompson said J.C. "chafed" at new guidelines the board approved, which will require the fund's industry weightings not exceed the S&P 500's by 5 percentage points and that individual stock weightings not exceed 4%, except in cases in which an index component already occupies a heavier weighting in the S&P 500.
It was the younger Thompson's decision to take the leave of absence, but the board had been concerned about the returns of the fund, which included a heavy dose of financial stocks at year-end 2007. The fund was slow to sell the poster children of the credit crisis in 2008 like AIG (AIG), Citigroup (C), and Fannie Mae (FNM), and John W. Thompson, who will manage the fund in the interim, says the weighting guidelines will make selling individual holdings easier. John W. Thompson will be helped by Jason Stevens and James Evans, who also manage Thompson Plumb MidCap (THPMX).
Christopher Traulsen, Morningstar's director of fund research, Europe, and fund analyst Harry Milling contributed to this article.
Ryan Leggio does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.