Oppenheimer Lures Top Value Manager and Others from RS
Plus, Putnam launches leveraged funds, and more.
Govil, who had steered the previously poor-performing RS Large Cap Alpha to the top 1% of the large-blend category during his tenure from August 2005 through March 29, 2009, will manage two funds: The $5 billion large-blend fund, Oppenheimer Main Street (MSIGX), and the $1.5 billion all-cap fund, Oppenheimer Main Street Opportunity (OMSOX). The funds will use both quantitative (or computer-aided) and fundamental, bottoms-up value strategies. Previously, the Main Street funds were quant offerings.
Govil will run the large-blend Oppenheimer Main Street similar to Large Cap Alpha. He's a low-turnover, bottom-up value investor who buys strong franchises at a discount to his estimate of their intrinsic values. The fees at the Oppenheimer fund will be slightly cheaper than the RS fund--0.91% versus 0.93%.
Another former RS manager, Matt Ziehl, who helped steer RS Small Cap Core Equity (GPSCX), will help run Oppenheimer Main Street Small Cap (OPMSX). In total, 12 investment personnel have moved from RS to Oppenheimer, including Govil.
The Oppenheimer portfolios won't change overnight. It will take at least a few months for the Main Street fund, for example, to trim its holdings to Govil's preferred size of fewer than 100 holdings. It currently has 848.
Columbia Manager Un-retires
Peter Larson, comanager of Columbia Small Cap Core (LSMAX), will not retire as expected on June 30, 2009. This will provide the fund some stability, as its other comanager, Allyn Seymour, stepped down in April after working on the fund since its 1992 inception. Larson's long-term record with Small Cap Core is solid--the fund is up more than 6.5% over the last 10 years through May 20, which tops 80% of the small-blend group as well as the Russell 2000 Index.
Putnam Launches Leveraged Funds
Putnam launched two new funds this week that will invest in the stocks, bonds, bank loans, and convertible securities of leveraged companies, or those with a lot of debt. David Glancy, who joined Putnam earlier this year after several years of investing like this at Andover Capital and Fidelity Investments, will run Putnam Capital Spectrum (PVSAX) and Putnam Equity Spectrum (PYSAX).
Glancy attracted attention when he managed Fidelity Leveraged Company Stock (FLVCX) from its December 2000 inception through July 2003 and posted double-digit gains as the rest of the market tanked by investing in the stock of companies that issue high-yield debt or have leveraged capital structures. Glancy also put up strong relative numbers as manager of high-yield bond fund Fidelity Capital & Income (FAGIX) from February 1996 to July 2003.
This is an interesting time for Putnam to launch such funds. Indebted companies got crushed in the recent bear market (Fidelity Leveraged Company Stock lost close to 55% in 2008). Such companies, however, have a huge upside in good times because they can earn big returns on borrowed capital. The stock market and Fidelity's leveraged stock fund have rebounded in recent months in anticipation of an eventual economic recovery. Still, Fidelity's offering and the new Putnam funds are fraught with risk. When highly levered companies fail to refinance or pay back their outstanding bonds, they can fall into bankruptcy where equity investors can be completely wiped out.
Putnam's move is not original, but it is gutsy.
T. Rowe Merges Two Funds
T. Rowe Price will merge away two of its tax-efficient funds, pending shareholder approval. The $33 million T. Rowe Price Tax-Efficient Growth (PTEGX) will merge into the $28 million T. Rowe Price Tax-Efficient Multi-Cap Growth (PREFX), which is run by the same manager, Don Peters. The $32 million T. Rowe Price Tax-Efficient Balanced (PRTEX) will merge into the $2.1 billion T. Rowe Price Balanced (RPBAX), which is run by Edmund Notzon but is not tax-managed. The two funds have done a good job avoiding taxes since their late-1990s' inceptions, but performance hasn't been good and they have struggled with gathering assets.
Greg Brown and David Kathman, fund analysts with Morningstar, contributed to this report.
Ryan Leggio does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.