DFA to Launch a Commodity Fund
Plus, Columbia consolidates lineup, SEC investment chief announces departure, and more.
Investors will have a new, cheaper option for commodities exposure by the end of this year.
DFA has registered with the Securities and Exchange Commission to launch DFA Commodity Strategy. The fund, which should be launched before the end of the year, will charge a 0.41% expense ratio, according to an Aug. 16, 2010, filing. Currently, the cheapest diversified commodities fund is the institutional share class of PIMCO Commodity Real Return Strategy (PCRIX), which is 0.74%. The cheapest broad-based ETF is UBS E-TRACS DJ-UBS Commodity Index (DJCI), which is 0.50%. The DFA filing also mentions a fee waiver that would limit the expenses to no more than 0.55%. Like all DFA funds, investors can only access this fund through a DFA-approved financial advisor.
DFA's launch comes amid heightened demand for commodities. From the beginning of 2008 through July 2010, investors have put roughly $61 billion into commodity mutual funds and ETFs. During that same time period, U.S.-based stock mutual funds and ETFs have suffered outflows of nearly $53 billion. In 2010 alone, commodity funds have attracted more than $12 billion.
While proponents of commodities investing have touted their diversification benefits and inflation protection, DFA remains agnostic on the usefulness of commodities in a long-term investor's portfolio. DFA bases most of its funds on academic research indicating that small-cap value stocks tend to outperform over the long term. Judging from conversations with firm principals, however, DFA is launching the commodity fund due to demand from large clients rather than the weight of the research supporting commodity exposure.
Veteran managers David Plecha and Stephen Clark will run the fund, investing in a variety of commodity-linked derivative instruments, such as structured notes, swaps, and futures contracts on commodities or commodity indexes. The fund will also hold a portfolio of short-term investment-grade (rated BBB and higher) corporate and government bonds, hedging away all foreign currency exposure.
Columbia and RiverSource to Consolidate Lineups
Columbia Management announced the merger of 62 funds and the liquidation of eight others. The consolidation follows RiverSource funds parent Ameriprise Financial's (AMP) April purchase of Columbia from Bank of America (BAC).
The mergers involve a broad mix of Columbia and RiverSource funds and will require approval by the funds' boards of directors and the shareholders. One of the mergers will combine RiverSource Disciplined International Equity (RDIAX), Threadneedle International Opportunity (INIFX), Columbia International Stock (CISAX), Columbia International Growth (CGWAX), and Columbia Masters International Equity (CMTAX) into Columbia Multi-Advisor International Equity (NIIAX). Columbia liquidated the eight funds in its Columbia Retirement target-date series.
"Our goal is to provide a compelling and diversified lineup of strong-performing retail and institutional products that provide investment solutions for our clients," said Chris Thompson, Columbia's head of product management and marketing. "We expect these moves will help us to achieve that goal."
Investment Chief at SEC Will Leave in November
Andrew J. "Buddy" Donohue plans to leave the SEC in November after serving more than four years as its Director of the Division of Investment Management, the SEC said.
The SEC did not disclose why Donohue was leaving or whom his replacement would be.
He is departing as the SEC considers numerous rule changes that could greatly impact how the mutual fund industry does business. The commission is currently considering changes to 12b-1 fees and target-date-fund advertising disclosure, among other things.
American Century Founder to Give Away Majority of Wealth
American Century founder Jim Stowers and his wife Virginia have pledged to give 99% of their wealth to charity.
The move follows the campaign of Warren Buffett and Bill Gates to encourage fellow billionaires to publicly pledge to give at least half of their wealth to charity.
This is not the first time the couple has made a large charitable gift. In 1994, the Stowers created and endowed the Stowers Institute for Medical Research in Kansas City.
The Stowers are the only couple on the list who derived a majority of their wealth from the mutual fund industry. Jim Stowers left day-to-day activities at American Century in 2007 after working for nearly 50 years at the firm he founded in 1958 .
FPA Crescent (FPACX) sent out proxy materials requesting shareholders to approve a measure that would allow the fund to invest directly in commodities. The fund already has significant exposure to commodity-related companies, with 27% of its equity sleeve invested in the energy sector as of June 30, 2010.
Harbor will liquidate its Short Duration (HASDX) fund on Oct. 29, 2010, after it struggled to attract sufficient assets. Ken O'Donnell of Fischer Francis Trees & Watts has managed the fund since Jan. 1, 2003.
Electric City Value (ECVFX) will liquidate all assets by Aug. 31, 2010.
Dominic Vignola replaced Andrew Sheridan as the portfolio manager of SunAmerica Focused Technology (STNAX).
Eric Stein joined the portfolio-management team of Eaton Vance Global Macro Absolute Return (EAGMX).
Mutual fund analyst Ryan Leggio contributed to this report.
David Falkof does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.