Fund Times: Third Avenue Hires Managers for New Bond Fund
Plus, American Century's asset allocation chief retires.
Sometime this fall, Third Avenue Management will launch a new fund for both institutional and retail investors focused on credit opportunities and high-yield investments. While this will not be the first time that the firm has launched a bond fund, it will be the only bond fund available from Third Avenue once it becomes available. Third Avenue previously had a high-yield fixed-income fund. It was managed by Margaret Patel but was eventually acquired by Pioneer and renamed Pioneer High Yield (TAHYX).
Jeffrey Gary, who joined the firm earlier this week, will run the new fund. Gary has more than 20 years of experience managing high-yield, long/short credit and distressed-debt investment portfolios. Most recently, Gary had been at BlackRock and since 2003 was the lead portfolio manager and head of the high-yield/distressed investment team, which managed approximately $17 billion.
Thomas LaPointe, who has more than a decade of experience in the credit arena, will assist Gary. Previously, he was responsible for managing approximately $6 billion in high-yield assets as co-head of high-yield investments for Columbia Management.
JPMorgan Merges Funds
JPMorgan is planning to merge JPMorgan Capital Growth (VCAGX) into JPMorgan Diversified Mid Cap Growth (OSGIX). Pending shareholder approval, the proposed merger will take place June 26, 2009. Both funds are run by the same management team, who originally ran Capital Growth and took over Diversified Mid Cap Growth after the merger of JPMorgan Chase and Bank One in 2004; it runs the two portfolios as clones, and the funds' respective three-, five-, and 10-year returns are similar. The 1.24% expense ratio of Diversified Mid Cap Growth, the proposed survivor of the two funds, is higher than the 1.14% charged by Capital Growth, which is being merged away. However, if the proposed merger is approved, JPMorgan will keep the combined fund's net expenses at or below Capital Growth's pre-merger expenses until at least Oct. 31, 2010.
American Century Asset Allocation Chief Retires
Jeff Tyler, who ran American Century's Strategic Allocation funds ( (TWSAX), (TWSCX), (TWSMX)) is retiring after 21 years at the firm's Mountain View, Calif., office. His comanager since 2000, Irina Torelli, is staying on, and CIO Enrique Chang was named manager on all of the firm's asset-allocation and target-date funds in January 2009.
American Century also announced that it hired Scott Wittman to take the lead on the allocation and Livestrong funds. Wittman was managing director of quant and alternative strategies at Munder prior to his departure and at one time was lead manager on Munder Energy (MPFAX) and International Core Equity (MAICX) funds. Wittman had worked with Chang at Munder.
Since 1996, Tyler has done a good job managing the allocation funds. While it's reassuring to see that Torelli is staying on to comanage the funds, it's unclear how Wittman will steer the firm's asset-allocation strategies. It's hard not to view this as a blow to the firm as Tyler's retirement follows a year marked by manager departures on the firm's domestic-equity team based in Kansas City, Mo., as well as the international equity team located in New York.
Baron Funds Announces Institutional Share Class
The Baron funds launched an institutional share class this week with much lower fees. The share class will be available for all eight of the firm's mutual funds. For example, Baron Growth's (BGRFX) expense ratio for the retail share class is 1.32%, but it will be 1.07% under the institutional share class (BGRIX). However, investors will need a minimum of $1 million to invest in these shares.
Wasatch Promotes President
Sam Stewart is stepping down from his CEO role and promoting longtime business partner and current president Jeff Cardon. We are told that Stewart, who is 66, has no intention of leaving anytime soon and will remain chairman of the advisor to the Wasatch funds, president of the funds, and an active portfolio manager on Wasatch Strategic Income (WASIX) and the Wasatch Global Science & Technology (WAGTX). Cardon will continue to manage Wasatch Small Cap Growth (WAAEX).
Van Kampen Merges Funds
Van Kampen Strategic Municipal Income (VKMHX) will merge into Van Kampen High-Yield Municipal (ACTHX) if shareholders approve the board's recommendation. The funds have a similar investment objective and similar investment policies and are managed by the same investment-management team.
Further Developments in SEC's BISYS Settlement
We have previously reported on BISYS Fund Services' settlement with the SEC following certain improper side deals with mutual fund advisors, including AmSouth Bank (now Regions Financial (RF)).
BISYS Fund Services had reached a settlement with the SEC regarding certain side agreements with fund advisors. The mutual fund advisors involved in the settlement include AmSouth Bank (now part of Regions) and its two advisor subsidiaries, AmSouth Investment Management Company and AmSouth Asset Management. BISYS performed administrative functions for the mutual fund advisors.
According to the SEC, BISYS entered into side agreements obligating BISYS to rebate a portion of its administration fee to the fund advisors in exchange for their promise to continue recommending BISYS as an administrator to the funds' boards of trustees. Following execution of the side agreements, BISYS paid for marketing expenses incurred by the advisors to promote the funds. Occasionally, the fund advisor also used the money dedicated by BISYS to pay expenses unrelated to marketing. This agreement should have been disclosed to the fund trustees and/or shareholders, but it was not, according to the SEC.
BISYS entered into an agreement with the SEC to reimburse more than $20 million dollars to fund shareholders at 28 firms, most of which weren't identified. The $20 million is composed of more than $9 million in disgorgement funds and a $10 million penalty. From 1999 to 2004, BISYS provided more than $230 million from its administration fees for the benefit of the funds' advisors or third parties pursuant to these side agreements, according to SEC filings.
Also implicated in these proceedings was BISYS' former general counsel, Melissa (Lisa) Hurley, and the former chairman of AmSouth Funds' board of trustees, J. David Huber, who helped facilitate the side agreement, according to the SEC, and who was actually president of BISYS prior to assuming his chairmanship.
New Round of Layoffs at American Funds' Parent
The bad news is that the advisor to American Funds announced its third round of layoffs. The silver lining for investors is that no investment professionals were laid off, which means that these layoffs should not impact the quality of research or portfolio management at the firm. For more details, see this report.
Fund analysts Karin Anderson and Jonathan Rahbar contributed to this report.
Ryan Leggio does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.