Veteran Growth Managers Leave AllianceBernstein, Vanguard
Plus, what a difference a decade makes, and more.
Fund Times
Jim Reilly and his brother Mike Reilly are leaving AllianceBernstein at the end of June. Both are part of the team managing AllianceBernstein Large Cap Growth (APGAX), which owns a mixed long-term record but has been a solid performer in recent years. Current comanager Scott Wallace will take over Jim Reilly's duties as team leader, while the other five team members will remain. Jim Reilly and the team had taken over the fund following the February 2006 departure of Thomas Kamp.
The change also affects Vanguard U.S. Growth (VWUSX). The team shares subadvisory duties on the fund with John Jostrand of William Blair. Jim Reilly and the Large Cap Growth team replaced AllianceBernstein's Alan Levi on the fund less than two years ago. In that time, the fund has trailed both the large-growth category and the Russell 1000 index.
It has been a decade of manager changes and poor performance for U.S. Growth. Over the last 10 years it has been among the poorest-performing funds in the Vanguard stable. Through March 10, 2010, it had lost 6.5% annualized in the past decade and trailed more than 90% of its peers. The fund's woes date back to when former subadvisor Lincoln Capital Management misplayed the tech-stock boom and bust. Vanguard ultimately fired Lincoln and hired Alliance in 2001. Jostrand joined three years later.
What a Difference a Decade Makes
Wednesday marked the 10th anniversary of the Internet bubble's peak. As my colleague Gregg Wolper has noted, many large-value funds' 10-year returns look quite different now that the late-1990s tech boom has dropped off of their records. To mark the event we took a quick look at our large-value Analyst Picks through two different lenses: over 10- and 13-year time periods, the latter because it incorporates several bull and bear markets.
There are a few quirks with our list. WHG Large Cap Value (WHGLX), managed by Susan Byrne, only opened its doors in 2006. In its place, we used the older and more expensive GAMCO Westwood Equity (WEECX), which Byrne runs the same way. Both funds recently shifted into the large-blend category.
Over the past decade, the S&P 500 is slightly in the red with a 0.2% annualized loss. All of our eligible Analyst Picks are in the black over this period and all but GAMCO Westwood Equity topped the large-value category's 3.8% return. T. Rowe Price Equity Income (PRFDX), led by seasoned manager Brian Rogers, is at the front of the pack with an annualized gain of 5.9%--topping 82% of its peers--followed by Sound Shore (SSHFX) at 5.7%, outpacing three fourths of its peers. The T. Rowe fund achieved this record thanks to a proven relative-value strategy, modest fees, and low volatility. Sound Shore's longtime managers focus on beaten down but fundamentally strong large- and mid-cap stocks.
For the 13-year period, the S&P 500's return improves to 4.5% while the large-value category's average is 4.4%. All of the eligible Analyst Picks topped both measures. The best record came from Columbia Value & Restructuring , which posted an annualized return of 8.8%. Value & Restructuring was also the top performer for the entire category over 13 years, while its 10-year return only topped 58% of peers'. Manager David Williams seeks out cheaply priced firms with viable restructuring plans. Weitz Partners Value (WPVLX), which spent the first half of the 2000s in the mid-value category, isn't far behind, with an 8.4% 13-year record and a decade-long return that slightly tops Value & Restructuring's. Veteran value investor Wally Weitz is a contrarian, willing to buy controversial names and load up on areas where he sees significant value.
DWS Fixed-Income Manager Exits
DWS fixed-income manager Matthew MacDonald has left the firm. Ohn Choe will replace MacDonald at DWS GNMA (GIGGX), DWS Inflation Protected Plus , and DWS Strategic Government Securities .
MacDonald's departure also affects DWS Short Duration , DWS Short Duration Plus (PPIAX), DWS Strategic Income , and DWS Target 2010 , Target 2011 , Target 2012 , Target 2013 and Target 2014 . DWS has not named a replacement for MacDonald on these funds.
Janus Expands Use of Performance Fees
Janus has proposed adding performance fees to five funds: Janus , Janus Twenty , Janus Forty (JDCAX), Janus Overseas (JAOSX), and Janus Global Opportunities . Corresponding Janus Aspen funds would also get performance fees. Shareholders will vote on the measure at an upcoming meeting. This isn't new for Janus; the fund family already uses performance fees on some other funds, viewing it as a way to better align managers' interests with those of shareholders.
Janus also seeks to move Global Opportunities under the umbrella of its subsidiary, Perkins Investment Management. Pending shareholder approval, the fund will be subadvised by Perkins, with current manager Gregory Kolb becoming a Perkins employee.
Etc.
This week, J.P. Morgan (JPM) filed for exemptive relief to launch new ETFs.
Two BlackRocker mergers are pending shareholder approval: BlackRock Capital Appreciation merging into BlackRock Fundamental Growth , and BlackRock Aurora merging into BlackRock Mid-Cap Value Equity (BMCAX).
Pending shareholder approval, Northern Mid Cap Growth will merge into Northern Multi-Manager Mid Cap .
The board of Franklin Templeton Perspective Allocation approved a merger of the fund into Franklin Templeton Corefolio Allocation (FTCOX).
Pending shareholder approval, four Pacific Capital funds and four Aberdeen funds will merge. Pacific Capital New Asia Growth will merge into Aberdeen Asia-Pacific (ex-Japan) Equity Institutional ; Pacific Capital International Stock will merge into Aberdeen International Equity Institutional ; Pacific Capital Small Cap will merge into Aberdeen Small Cap (GSXAX); and Pacific Capital High Grade Core Fixed Income will merge into the newly created Aberdeen Core Income.
Julio Bonilla is off the management teams of Wells Fargo Advantage Minnesota Tax-Free (NMTFX) and Wells Fargo Advantage Ultra Short-Term Municipal Income (SMAVX).
Oxford Global Total Return will be liquidating all assets by March 31, 2010.
Associate director of fund analysis Dan Culloton and fund analyst David Falkof contributed to this report.