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Fund Times

Fund Times: Fidelity Names New Head of Equities

Plus, better fee disclosure may be coming to your retirement account.

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Fidelity acted quickly to replace Walter Donovan, the former Fidelity head of equities who left for Putnam. His successor is Brian Hogan, who's been senior vice president and head of Equity Research since 2006. Hogan has held a number of investment management positions during his 15-year Fidelity career. In his new position Hogan will oversee more than $450 billion in equity and high-income mutual fund assets. Hogan is relinquishing his role as head of equity research to take his new post. His successor has not been named. For more details on the announcement, please click here

T. Rowe Makes Small Staff Cuts
 T. Rowe Price (TROW) announced this week it has laid off 288 workers, or roughly 5.5% of its workforce. No portfolio managers are among those laid off, though the cut does include six investment professionals. Of those six, one was a research analyst (out of the more than 140 the firm has worldwide) and the others included traders and other professionals.

We have reported in the past several months the deep and widespread layoffs in the industry because of large market declines in the equity and fixed-income markets over the past year, as well as investors pulling out of stocks and bonds and moving money into money market and Treasury securities, which has led to sharp reductions in assets under management. Among those that have not cut investment professionals are Vanguard, PIMCO, Barclays, and Dodge & Cox.

Better Fee Disclosure Coming to a 401(k) Near You?
Investors in 401(k) plans may soon see a clearer picture of what they're paying. House Education and Labor Committee chairman George Miller (D-Calif.), and one of its subcommittee chairmen, Rep. Robert Andrews, (D-N.J), introduced legislation this week regarding 401(k) and mutual fund fee disclosure reform. The 401(k) Fair Disclosure for Retirement Security Act would require mutual funds in 401(k) accounts to break down the fees they charge into four categories: administrative fees, investment-management fees, transaction fees, and other charges. It would also require plan providers to disclose any financial relationships or potential conflicts of interest to plan sponsors. Related legislation has already been introduced in the Senate. For more information on the Act (H.R. 1984), please click here.

Opponents of the legislation have raised concerns about how unbundling fees, or listing the fees individually, could lead to higher administrative costs.

According to the committee, current law does not require all fees that workers pay to be disclosed. The Government Accountability Office has stated that these hidden fees can greatly reduce workers' retirement account balances. In fact, just 1 percentage point in extra fees can reduce a worker's 401(k) account balance by as much as 20 percent or more over a career, the GAO says.

The full text of the legislation can be found here.

SEC Outlines Regulatory Agenda
In related news, SEC chairwoman Mary Schapiro outlined her agenda for the commission in a recent speech. In the speech, she discussed numerous initiatives applicable to mutual fund shareholders including:

-Enhancing the standards applicable to money market funds.
-Providing investors in municipal securities with the same type of disclosure and investor protections as are provided to investors in other securities.
-Enhancing disclosure around asset-backed securities.

While she mentioned the need for more disclosure from credit-rating agencies, including fees received from issuers, she did not mention mutual fund fee disclosure in her speech even though the issue is front and center before both Congress and the courts.

TIAA-CREF Index Funds Merging May Not Be Good News for Shareholders
TIAA-CREF is merging some of its index funds. The TIAA-CREF Small-Cap Growth (TISGX) and Value Index (TISVX) funds will be merging into the TIAA-CREF Small-Cap Blend Index Fund (TISBX). It's reasonable to question whether shareholders who signed up for a growth or value fund want a blend fund instead.

In explaining the rationale for the merger in a filing, TIAA-CREF lists "defray[ing] operating costs" as one of the reasons for the action. Merging the funds was not TIAA-CREF's only option, of course. It could have hired Barclays, Fidelity, or another low-cost provider that offers similar index funds to subadvise the funds. This would have kept fees down and investors in the types of funds they originally signed up for.

Besides the small-cap fund merger, TIAA-CREF also announced that TIAA-CREF Mid-Cap Growth (TIMGX), Value (TIMVX), and Blend (TRBDX) Index funds will be merged into  TIAA-CREF Equity Index (TIEIX). These moves are disappointing. They were clearly motivated by TIAA-CREF's business interests and not necessarily the interests of shareholders who bought those funds for specific index exposure.

Touchstone Fund Board Decides Not to Liquidate Fund After All
The Touchstone Clover Core Fixed Income (TCFIX) board announced that it has decided not to liquidate the fund as planned. Instead, JKMilne Asset Management will take over for Federated, and the fund will change its name to Touchstone Intermediate Fixed Income.

Janus Shareholders in a Bind
The tiny Janus Adviser Global Research (JRGAX) is liquidating in July. This is a deviation from Janus' more general plan to merge comparable advisor funds into their no-load counterparts. If investors want the surviving no-load version of this fund (Janus Global Research (JARFX)), they will have to sell their Adviser Global Research shares (or wait for them to liquidate) and then buy into the surviving fund, causing potential transaction fee and tax issues.

Oppenheimer News
Pending a shareholder vote, Oppenheimer is planning to fold its  Oppenheimer Convertible Securities (RCVGX) into  Oppenheimer Capital Income (OPPEX), which has a significant convertible stake.

Earlier this week, Morningstar analyst Katie Rushkewicz described an even bigger change taking place at the firm: Ron Fielding, head of Oppenheimer's Rochester municipal-bond team, is retiring May 20. To read more, please click here.

American Century Manager Leaves Firm
Fielding wasn't the only high-ranking mutual fund official to leave a firm this week. Senior Morningstar analyst Gregg Wolper reported that Steve Lurito, who had served as chief investment officer of American Century's U.S. growth-stock funds since joining the firm in mid-2007, has left American Century. For more details, please click here.  

529 Rankings Released
Morningstar analyst Greg Brown released Morningstar's annual report of The Best and Worst 529 College-Savings Plans. To see the report, please click here.

 

 

Ryan Leggio does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.