Fund Times: More Change for Wells Fargo Funds
The dust has yet to settle on this fund family thanks to manager departures and acquisitions.
The dust has yet to settle on this fund family thanks to manager departures and acquisitions.
Wells Fargo Funds Management plans eight fund mergers across several categories for its Advantage funds, as manager departures and acquisitions continue to force the fund family to remake itself. Some of the mergers, which are slated for the third quarter of 2011, hold the promise of lower costs through economies of scale as well as a better strategy through the surviving fund. Generally, however, the mergers seem to be a checkerboard of pros and cons depending on the fund.
Glass Half Full?
For example, Wells Fargo Advantage Core Equity , after having suffered the December, 2010 departure of talented managers Walter McCormick and Emory Sanders, is slated to merge with Wells Fargo Advantage Opportunity . Given Core Equity's $844.7 million in assets and Opportunity's assets of $1.5 billion, the resulting economies of scale could drive down the cost of the surviving and pricey Opportunity fund. However, investors could see a change in the investment profile of the mid-cap Opportunity fund, as Core Equity is solidly large cap. Meanwhile, Opportunity is managed by a Wells team led by veteran Ann Miletti, who has had considerable success with small- and mid-cap stocks but less so with large caps. Either way, investors in Core Equity would have dealt with Miletti's team, which took over the fund when McCormick and Sanders left.
The proposed merger of McCormick and Sanders' other previous charge, Wells Fargo Advantage Classic Value , into Wells Fargo Advantage Equity Value is also a mixed bag for these two large-cap funds. Classic Value temporarily had fallen into the hands of James Tringas, who mostly specializes in small caps, so Classic Value may have proved to be out of his bailiwick longer term. However, Systematic Financial Management, Equity Value's subadvisor, has barely kept pace with the Russell 1000 Value since the fund's 2003 inception.
A Merger and a Closure
Meanwhile, the proposed merger of Wells Fargo Advantage Small Cap Growth into Wells Fargo Advantage Emerging Growth (WEMAX) is also triggering a proposed closure of the surviving fund, which will have about $1.3 billion in assets. We applaud the move, as a small-cap fund of more than $1 billion can limit investment opportunity and potentially affect returns. That said, Wells is allowing investors who "confirm indications of interest" in the fund before the proposed June 20 closure to invest in it through Dec. 31, 2011. This could work against the benefits of the closure if a large amount of assets flow into the fund between now and then.
That said, veteran manager Tom Ognar and his small-cap team has been able to stitch together solid performance at Emerging Growth with much lower volatility than Small-Cap Growth had under James Philpott, who left Wells this past March. But, given Emerging Growth's mere $27.9 million in assets, the merger likely will not drive down the cost of the surviving fund. Philpott's departure also spurred proposed mergers for his other previous charges, Wells Fargo Advantage Mid Cap Growth and Wells Fargo Advantage Growth Opportunities , which are slated to merge into Wells Fargo Advantage Enterprise (SENAX) and Wells Fargo Advantage Discovery , respectively.
Quant Gets Bigger
Several big changes are occurring with Wells' quantitative-driven strategies in tandem with Wells increasing its stake in Golden Capital Management to 65% from 45%. While plans for the majority ownership of GCM were announced in February, Wells said today that as part of the deal, GCM, which already subadvises a couple of Wells funds, will also become subadvisor for Wells Fargo Advantage Disciplined US Core (EVSAX) and for Wells Fargo Advantage Index Portfolio.
While these funds already had strategies being run by Wells' own quant group, the strategy for US Core will change in that it will incorporate fundamental analysis as well. With Amit Chandra of Wells' quant group becoming chief investment officer of GCM and Wells having the option to take full ownership of GCM, we see these moves as Wells wanting to expand their quant footprint.
To read Wells' press release on the mergers, click here.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.