Labor Dept Proposes Rules for Target-Date Disclosure
Plus, TCW sues DoubleLine Trust, and more.
Fiduciaries for the nearly 500,000 participant-directed plans, such as 401(k)s, will have to begin providing participants with more-detailed disclosure--including how target-date funds' asset allocations change over time--under new regulations proposed this week by the Department of Labor. These proposed rules follow the Securities and Exchange Commission's June 2010 recommendations for target-date fund advertising (read Morningstar's response to those proposals here). Target-date funds have been playing an increasingly big role in the investment lineups of 401(k) plans and other similar vehicles, which have approximately 72 million participants and about $3 trillion in assets, according to the Labor Department's Employee Benefits Security Administration.
The proposed amendments include a requirement that plan participants and beneficiaries receive both narrative explanations and graphical illustrations of how the target-date fund's asset allocation will change over time. Also, a target-date fund whose name refers to a particular date or that mentions a retirement or related target date in its stated objective will have to be accompanied by an explanation of the date's relevance. More detailed descriptions including investment strategies and objectives, performance history (with a notice that past performance doesn't indicate future performance), risk and return characteristics, fees, and expenses are also part of the proposal. The amendment would also require notification that the investments might lose money, including around the time of retirement.
Comments from the public are due by Jan. 14, 2011.
TCW Sues DoubleLine Trust
There's a new wrinkle in the ongoing legal battle between fixed-income portfolio manager Jeffrey Gundlach and his former employer, TCW Group Inc. TCW has filed a lawsuit against the DoubleLine Funds Trust (which oversees DoubleLine's mutual funds) and individual trustees.
The suit alleges that the trust and trustees either knowingly or unknowingly aided in misappropriation of confidential TCW data and trade secrets. TCW seeks unspecified damages and asks that the Trust be prevented from operating for a period of not less than six months because of its "illegal head start." If TCW's suit is ultimately successful on all fronts, it could mean that DoubleLine will be permanently prevented from managing the funds.
In response to this lawsuit, a DoubleLine spokesperson said, "TCW has been making false allegations against DoubleLine for 11 months now, and their case isn't going at all well. This latest legal maneuver is redundant and meaningless."
The accusations in the most recent suit are similar to those found in TCW's January 2010 lawsuit following its dismissal of Gundlach. He filed a cross-complaint in February 2010, alleging that he and his team were terminated in order to prevent them from collecting management and performance fees totaling at least $600 million and possibly as much as $1.25 billion.
TCW fired Gundlach in December 2009 because of concerns that he might leave the firm. The manager launched DoubleLine within weeks, accompanied by a number of his former TCW fixed-income team members. Since April 2010 the firm has brought out DoubleLine Total Return Bond (DBLTX), DoubleLine Core Fixed Income (DBLFX), DoubleLine Emerging Markets Income (DBLEX), and the upcoming DoubleLine Multi-Asset Growth.
Legg Mason Proposes Fund Merger
The board of directors for Legg Mason Capital Management American Leading Companies (LMALX) has proposed merging the fund into Legg Mason Capital Management Value Trust (LMVTX), managed by Bill Miller. The former fund has been managed since March 1998 by David Nelson (who plans to retire in early 2011) and in that time the fund has struggled, falling near the large-blend category's bottom over three- and five-year trailing periods. From Nelson's 1998 arrival through Nov. 30, 2010, the fund eked out a 0.6% annualized return, trailing the average peer's 1.7% gain and the S&P 500 Index's 2.3% return. Its asset base has also shrunk in recent years.
Investors won't likely see a big difference if the merger is approved. The two portfolios have a number of overlapping holdings, and they have been comparably volatile. However, expenses will come down by about 20 basis points as a function of Value Trust's significantly larger size (about $4 billion in assets versus American Leading Companies' $200 million).
Shareholders will vote on the proposal in mid-April 2011.
Some Changes Afoot at Several Artisan Funds
There are some upcoming changes at several Artisan funds. Effective Jan. 28, 2011, Artisan Opportunistic Growth (ARTRX) will change its name to Artisan Growth Opportunities. Also on that date, the team will be free to invest as much as it would like in non-U.S. companies (the previous limit on non-U.S. companies was 25%). Accordingly, the benchmark will change from the Russell 1000 Index to the MSCI ACWI Index. The overall investment process will remain unchanged. The fund will add a redemption fee on April 29, 2011.
James MacMillan is moving to a non-portfolio-management role at BlackRock. Effective Dec. 24, 2010, Nigel Bolton will take over portfolio-management responsibilities at BlackRock EuroFund (MDEFX), joined by Zehrid Osmani. At BlackRock International Value (MDIVX), comanager Robert Weatherston will remain on board and will be joined by new manager Brian Hall, who arrived at BlackRock in 2007 as an analyst. Alex McDougall will no longer be on the team running International Value.
Following Scout Investment Advisors' recent acquisition of Reams Asset Management, a team from Reams has taken over portfolio-management duties for Scout Bond (UMBBX). The new team consists of lead manager Mark Egan along with Thomas Fink, Todd Thompson, and Steven Vincent. They replace Michael Heimlich and Bruce Fernandez. In addition to the management changes, the fund will change its average maturity to two-six years from two-four years and will change its benchmark from the Barclays Capital 1-5 Government/Credit Index to the Barclays Capital U.S. Aggregate Bond Index.
Charles Schwab Corporation (SCHW) announced the naming of Marie A. Chandoha as president and CEO of Charles Schwab Investment Management Inc., the investment advisor to Schwab and Laudus Funds. Chandoha, who joined the firm in September 2010 from Barclays Global Investors, will report to Schwab CEO Walt Bettinger.
DWS has hired Fischer Francis Trees & Watts to subadvise DWS Core Fixed Income (SFXAX). The new team, led by David Marmon, also runs American Independence Intermediate Bond (IBFSX). They're slated to take over on or about Jan. 3, 2011. The fund is currently run in-house by managers who also run DWS Core Plus Income (SZIAX), DWS Emerging Markets Fixed Income (SZEAX), and some institutional funds for DWS. The DWS team will continue managing these funds.
The fund board overseeing Columbia Masters International Equity (CMTZX) announced that it wouldn't merge the fund into Columbia Multi-Advisor International Equity (NIEQX). The merger was proposed in August 2010.
The board of trustees of ING Mutual Funds approved a proposal to liquidate ING Asia-Pacific Real Estate (IAPAX) and ING European Real Estate (IAERX). The funds closed to new investors Nov. 26 and will liquidate on or around Feb. 1, 2011.
Effective Feb. 1, 2011, BB&T Short U.S. Government Bond (BSGAX) will be renamed the Sterling Capital Short-Term Bond Fund. It is expected that the fund's principal investment strategies, risks, and management team will be modified Feb. 1, 2011.
James Thompson is no longer a portfolio manager for Ivy Cundill Global Value (ICDAX). The fund is now managed by Andrew Massie and new manager David Tiley.
Jeremy Tigue, Terry Coles, and Giles Money no longer serve as portfolio managers for Calvert International Opportunities (CIOAX).
Kelli Hill no longer serves as a portfolio manager for Old Mutual Large Cap Growth (OLGBX). The fund is subadvised by Ashfield Capital Partners. The remaining managers are Bradley Fretz, Peter Johnson, J. Stephen Lauck, Marc Lieberman, and J. Stephen Thornborrow.
The board of trustees of PEAK6 Plus (PKPLX) approved a plan of liquidation of the fund. The fund will be liquidated on or about Dec. 10, 2010.
The board of trustees of Virtus Mid-Cap Growth (PHSKX) has voted not to proceed with the proposed merger of the fund into another Virtus fund. Additionally, the previous plan to convert B shares of the fund into A shares will not be implemented.
Effective Oct. 1, 2010, Russell Real Estate Securities (RREAX) is renamed Russell Global Real Estate Securities. Also, Tereasa Gandhi and Dennis Jensen are no longer portfolio managers of the fund.
The board of trustees of Oppenheimer Principal Protected Main Street (OAPMX) approved a plan of reorganization of the fund into Oppenheimer Main Street (MSIGX). If approved by shareholders, the reorganization is expected to take place March 25, 2011.
Mutual fund analyst Kailin Liu 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.