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Fund Times

Target-Date Ads in SEC's Cross Hairs

Plus, Oppenheimer fund gets a facelift, and more.

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The SEC has proposed new target-date fund advertisement disclosure guidelines aimed at reducing potential investor confusion or deception.

The proposed rule, if adopted, would require target-date funds that include retirement dates in their names to disclose in marketing materials what the funds' asset allocations will be on those target dates. This would make it easier for investors to compare, for example, how much competing target-date funds will have in fixed-income securities and cash at the funds' target dates.

The SEC is also considering a proposal that would require marketing materials to include a table, chart, or graph depicting the target-date fund's asset allocation over time, along with a statement highlighting the fund's final asset allocation.

Regulators also may require target-date marketing materials to state target-date retirement funds shouldn't be selected based solely on age or retirement date and are not a guaranteed investment, and the stated asset allocations may be subject to change.

Target-date funds have experienced massive growth since their introduction in the mid-1990s. These funds currently have $270 billion in assets and have become prevalent as default options in 401(k) plans.

The SEC proposals are a response to dramatic losses suffered by some 2010 target-date funds in 2008. Many investors expected such funds, which were two years away from their target date, to better preserve capital in 2008's market downturn. The average 2010 target-date fund lost 24% in 2008, and all but one lost more than 10%. The range of losses varied greatly, too, from 9% to 41%.

The public has at least 60 days to comment on the proposals. The text is available here.

Oppenheimer Fund Gets a Total Face-Lift
 Oppenheimer Quest Balanced (QVGIX) will effectively become a different fund Aug. 16, 2010, according to a recent filing. The fund that has been managed since 1992 by Colin Glinsman of Oppenheimer Capital (which is owned by Allianz and unrelated to OppenheimerFunds) will become Oppenheimer Global Allocation, get a new manager, and employ a new strategy that will enable it to invest in stocks, bonds, and alternative asset classes from around the world. It will also be able to short securities and will establish a Cayman Islands subsidiary that will invest as much as 25% of assets in commodity-linked derivatives. Chris Leavy, OppenheimerFunds' CIO of equities, and Art Steinmetz, OppenheimerFunds' CIO of fixed-income, will run the fund. Quest Balanced looked great in Glinsman's first 12 years on the job but challenged in the past five.

Former Chicago Bear Departs American Century Fund Board
Former Chicago Bears NFL Hall of Fame running back Gale Sayers has resigned from the board of directors that oversees the American Century domestic and international equity funds. Sayers, who owns a Chicago-area information-technology firm and who joined the board in 2000, cited the time commitments of his business and philanthropic activities as the reason for his stepping down at this time, according to American Century. The independent directors of the board will meet to discuss filling the seat.

Diamond Hill Manager Gets New Title
Chris Welch, portfolio manager of  Diamond Hill Small-Mid Cap (DHMAX), is taking on an additional role at the firm. As of June 30, 2010, Welch will serve as Diamond Hill's co-chief investment officer alongside Ric Dillon, who is also Diamond Hill's chief executive officer and co-portfolio manager of the firm's long/short strategies. Welch will remain manager of Diamond Hill Small-Mid Cap.

Putnam Tweaks Lineup and Launches New Fund
Putnam announced earlier this week that, pending shareholder approval,  Putnam New Opportunities (PNOPX), an all-cap growth fund, will merge with  Putnam Vista (PVISX), a mid-cap growth offering. Rob Brookby, who currently manages both funds along with large-cap growth  Putnam Growth Opportunities (POGAX), will manage the fund after the merger.

Also,  Putnam Mid Cap Value (PMVAX) will be converted from a mid-value offering into an all-cap value fund. James Polk will continue running the fund.

Lastly, the firm registered a new fund with the SEC. It will be called Putnam Multi-Cap Core and will be run by Jerry Sullivan, who also manages  Putnam Investors (PINVX). The expense ratio for the fund's A shares is expected to be 1.36%.

These changes reflect Putnam's efforts to create a new multi-cap suite of funds.

Northern Cross Adds First New Analyst in Years
A few months ago, Northern Cross, the subadvisor for  Harbor International (HAINX), hired its first new analyst in years. The team added Scott Babka, who had previously covered European equities for Morgan Stanley. He will likely work as an analyst for the next five years, but then he will be groomed to eventually join the management team. He has expertise in industrials, but, as with all Northern Cross managers, the team would eventually like him to become a generalist. This is an important hire for Northern Cross. With lead manager Hakan Castegren in his mid-70s, succession issues loom large, and the team needed to strengthen its bench and add some new talent.

Effective June 10, 2010, the name of  Pin Oak Aggressive Stock (POGSX) was changed to Pin Oak Equity.

Pending shareholder approval, Cambiar Investors and Artio Global Management will replace Hoover Investment Management as subadvisors to Frost Small Cap Equity (FAHMX), pending shareholder approval.

Pending shareholder approval, Aquila Rocky Mountain Equity (ROCAX) will change its subadvisor to Three Peaks Capital Management from Aquila Investment Management. Under the new contract, Sandy Rufenacht and Brent Olson would replace Barbara Walchli as comanagers of the fund. A new investment strategy will allow it to invest across all market caps throughout the world and hold a combination of stocks and bonds. The fund's current strategy limits investments to equity shares of companies with a strong presence in the Rocky Mountain region. This strategy had limited investor appeal, evidenced by its tiny asset base of $9.1 million.

Chris Baggini joined the portfolio-management team of Turner Spectrum (TSPCX). As reported in last week's Fund Times, Baggini recently left the portfolio-management team of Aberdeen Equity Long-Short (MLSAX).

Gunther Stein replaced David Wang and Rick Brandt as portfolio manager of  Nuveen Multi-Manager Large-Cap Value (NNGAX), Nuveen Symphony Large-Cap Growth (NCGAX), Nuveen Symphony Large-Cap Value (NSLAX), Nuveen Symphony Mid-Cap Core (NCCAX), Nuveen Symphony Small-Mid Cap Core (NSSAX), and Nuveen Symphony Optimized Alpha (NOPAX).

Jeffrey Scott is off the portfolio-management team of  Invesco Van Kampen Senior Loan (VSLAX).

Several mergers at Eaton Vance are pending shareholder approval. If approved, Eaton Vance California Limited Maturity Municipal Income (EXCAX) will merge into Eaton Vance National Limited Maturity Municipal Income (EXNAX). Eaton Vance has also asked shareholders to approve the mergers of Eaton Vance Colorado Municipal Income (ETCOX), Eaton Vance Louisiana Municipal Income (ETLAX), Eaton Vance Insured Municipal Income (EAFIX), and Eaton Vance Kansas Municipal Income (ETKSX) into  Eaton Vance National Municipal Income (EANAX).

LKCM Aquinas Fixed Income (AQFIX) will liquidate all assets by July 30, 2010.

Mutual fund analysts Ryan Leggio, Jonathan Rahbar, David Kathman, Kevin McDevitt, and David Falkof contributed to this report.


Courtney Goethals Dobrow does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.