Managers Say Japanese Sell-Off Is Overdone

A large group of successful fund managers says the sharp decline in Japanese equities over the past week is overdone.

In short, these managers say investors are confusing the tragic human cost of the disaster with the true long-term economic cost to Japanese companies. While short-term volatility is likely, the tragedy and global stock market sell-off off in recent days won't affect the long-term value of global equities, the managers say.

The MSCI Japan Index has declined 11.7% this month through March 16. Meanwhile the S&P 500 is down 5.2% and the MSCI EAFE is down 8.5% over the same period.

Ben Inker, of GMO-run  Wells Fargo Advantage Asset Allocation (EAAFX), wrote in a note to clients this morning that corporate Japan can bounce back.

"Given the long duration nature of equities, where the bulk of value comes from the present value of dividends that will be paid 10 or more years in the future, we believe this event is unlikely to have material impact on the long-term fair value of corporate Japan," Inker wrote.

He thinks Japanese equities are one of the cheaper markets in the developed world, a view GMO colleague James Montier also made in a recent research report before the earthquake.

IVA managers Charles de Vaulx and Chuck de Lardemelle share this view.  IVA Worldwide  had 13.8% of assets in Japanese companies as of Feb. 28 while  International  had 28% of assets there. (Both funds are closed to new investors.)

"We do [think these are short-term losses], as we think indiscriminate selling is taking place to raise liquidity, thus unfairly punishing even the best businesses," DeVaulx wrote.

DeVaulx told Morningstar that the firm has been buying more shares of some of their holdings as their prices have declined in recent days.  First Eagle Global's (SGENX) Matthew McLennan made similar comments to Morningstar's Jason Stipp and in a letter to clients.

All of the funds referenced above have declined less than the MSCI Japan and the MSCI EAFE over the past two weeks.

Managers of funds that have lost more than the MSCI EAFE have made similar comments though.  Matthews Japan (MJFOX) manager Kenichi Amaki and  Oakmark International's (OAKIX)  David Herro both think the situation is creating opportunities for investors.

For more manager commentary on the situation, please visit Morningstar's collection Manager Perspectives.

BlackRock Launches Index-Based Target-Date Fund, Fidelity Tweaks Its Lineup
 BlackRock (BLK) will launch a new target-date fund series that will invest in index funds. This new lineup will differ from BlackRock's current LifePath funds that invest in a combination of actively managed and index funds.

Like Fidelity and TIAA-Cref, BlackRock will now have both an actively managed and index target-date fund lineup.

BlackRock currently has about $4 billion in its target-date funds and also manages the State Farm target-date fund series, making it one of the 10 largest target-date fund providers.

Fees for the new group of funds have not been disclosed.

Meanwhile, Fidelity announced some changes to its target-date lineup. Many of its funds will soon invest in emerging-markets debt through a new fund Fidelity is creating exclusively for its target-date funds.

The funds also eliminated their exposure to  Fidelity Equity-Income (FEQIX) and  Fidelity Total Bond (FTBFX). Management eliminated their stake in these funds in favor of Series funds focused on large value stocks and core bonds. The Series funds tend to be more benchmark-conscious.

The target-date funds will also invest in more funds designed exclusively for Fidelity's target-date fund lineup. This means Fidelity's retail funds won't be as affected by the fund flows of Fidelity's target-date funds going forward.

PIMCO Launching More Benchmark-Conscious Version of Total Return
PIMCO will launch a version of the firm's flagship  PIMCO Total Return  fund that will adhere more closely to its benchmark index, the Barclays Capital U.S. Aggregate Bond Index, and rely less on derivatives and leverage.

The new PIMCO Total Return Fund IV will not be levered or invest in high-yield debt or invest heavily in derivatives. This differs from Total Return, which regularly employs derivatives to execute its strategy.

The new fund will normally invest at least 80% of total assets in bonds and other debt securities, whereas the existing fund's target is 65%. The new fund will also have different interest-rate risk limitations. It aims to maintain an average portfolio duration, a measure of interest-rate sensitivity, within one and a half years of its benchmark's, which is a half a year less than Total Return's current duration target.

The new fund is geared toward investors, consultants, and advisors who want a fund that more closely tracks its benchmark index and is more transparent in its portfolio construction. The simpler portfolio could be easier for advisors and analysts to understand.

Gundlach Discloses Go-Anywhere Fund Investments
DoubleLine's Jeffrey Gundlach recently hosted his first conference call devoted to his firm's new fund, DoubleLine Multi-Asset Growth . The fund can invest in bonds, equities, commodities, and currencies, among other asset classes.

He disclosed that, as of Feb. 28, the fund had no investments in emerging equities and only 13% of the fund's assets are invested in U.S. equities. The fund gets its domestic-equity exposure though indexes of U.S. blue-chip firms, Gundlach said.

Gundlach also said the fund has 0% of assets in high-yield bonds due to overvaluation of the sector and poor quality of issuance in 2009 and 2010. This helps explain why almost 30% of the fund's assets are in cash.

The fund's three largest exposures are in residential mortgage backed securities (31.5% of assets), followed by the domestic equity stake and commodities (8.5%).

Investors can e-mail fundinfo@doubleline.com for a copy of the webcast presentation.

Fidelity Announces Manager Changes
Fidelity announced management changes to struggling  Fidelity Large Cap Value (FLUAX). Stephen Barwikowski, Justin Bennett, Laurie Bertner, Katherine Buck, Matthew Friedman, and John Mirshekari joined the team and will be overseen by existing manager Bruce Dirks. Large Cap Value is the latest Fidelity fund to adopt a multimanager approach, which divvies up portfolio to sector specialists who pick stocks for their respective sleeves. Each new team member has stock-picking responsibilities in one or two different sectors. (The same group recently took over half of  Fidelity Value's (FDVLX) assets.)

The newest member of this group is Buck, a former manager of  Fidelity Small Cap Value (FCPVX) who rejoined Fidelity in 2010 after working at Magnetar Capital from 2006 to 2008 and Wintrust from 2008 to 2010. That she spent four years away from Fidelity wasn't clear in the firm's prospectus filing with the SEC announcing the change, however. "Since joining Fidelity Investments in 1996, Ms. Buck has worked as a research analyst and portfolio manager," the filing said, suggesting her tenure at Fidelity had been uninterrupted.

Etc.
William Blair International Small Cap Growth (WISIX) will close to new investors on March 31, 2011.

Westcore Small-Cap Value  will close to most new investors on March 31, 2011.

T. Rowe Price has introduced its first F Class funds for advisors and financial intermediaries. The Institutional Floating Rate and Institutional Core Plus funds, previously available to institutional investors with a $1 million minimum investment, are now available to advisors with a minimum of $1,000.

AllianceBernstein launched AllianceBernstein International Focus 40 on March 11, 2011. The fund invests in 30 to 50 stocks of non-U.S. companies and can invest in any market cap, industry sector, or country.

Eaton Vance filed to launch Parametric Structured Commodity Strategy in May 2011. The fund will invest in commodity-linked derivative instruments backed by a portfolio of fixed-income securities. These include commodity-index-linked swap agreements, options and futures, and commodity-index-lined notes.

Matthews Asia Funds filed to launch Matthews China Small Companies in May 2011. The fund will invest at least 80% of assets in stocks of small companies in China and Taiwan.

MFS filed to launch MFS New Discovery Value on May 24, 2011.

Frontegra Columbus Core  will merge into Scout Bond , and  Frontegra Columbus Core Plus  will merge into Scout Core Plus Bond.

Virtus filed to launch Virtus Global Commodities Stock on March 15, 2011. The fund will invest globally, with at least 80% of assets in stocks of companies mainly engaged in metals, energy, and agriculture.

Sherry Zhang joined the management team of  Allianz AGIC International . The fund is now managed by Zhang, Steven Tael, and Kunal Ghosh.

Class M and Investor shares of BNY Mellon Municipal Opportunities (MOTIX) closed to new investors on March 11, 2011.

Hugh Simon is the sole manager of Dreyfus Emerging Asia  and  Dreyfus Greater China  as of March 11, 2011.

Forward Mortgage Securities  will liquidate on April 29, 2011.

Forward International Real Estate (KIRAX) will terminate Class B shares of the fund and convert existing B share to A shares, on March 16, 2011.

Blaine Rollins joined the management team of 361 Absolute Alpha . The fund is now managed by Rollins, Brian Cunningham, and Tom Florence (who used to work for Morningstar).

Sanchez Balcazar is no longer on the management team of  Legg Mason Western Asset Global High Yield , Legg Mason Western Asset Global Information Management , Western Asset Non-U.S. Opportunity Bond , or Western Asset Global High Yield Bond .

BlackRock will no longer be a subadvisor for  Natixis US Diversified (NEFSX) on May 31, 2011. Loomis Sayles will manage BlackRock's portion of the portfolio.

Dirk Laschanzky and Scott Smith no longer manage Principal International Equity Index (PIDIX). The fund is now managed by Thomas Kruchten.

Russell US Quantitative Equity (REQAX) added PanAgora Asset Management as a subadvisor to the fund.

Russell Emerging Markets (REMAX) removed T. Rowe Price as a subadvisor to the fund and added Delaware Management Company and Victoria 1522 Investments as subadvisors.

Brian Singer, Edwin Denson, Thomas Clarke, Renato Staub, and Edouard Senechal joined the management team of PMC Core Fixed Income (PMFIX) and PMC Diversified Equity (PMDEX).

Hartford filed to launch three new funds: Emerging Local Debt run by Ricardo Adrogue and James Valone of Wellington; Emerging Markets Research run by Cheryl Duckworth of Wellington; and World Bond run by Robert Evans and Mark Sullivan of Wellington.

RiverSource Partners International Select Growth  and RiverSource Partners International Small Cap  merged into  Columbia Acorn International (LAIAX).

Senior fund analyst Christopher Davis and fund analyst Kailin Liu contributed to this report.