Brown Brothers Harriman launches a concentrated large-blend fund investing in U.S. and foreign stocks; Vanguard reopens its Capital Opportunity fund to individual investors; Franklin Templeton rolls out an emerging-markets bond fund; USAA seeks permission to create actively managed ETFs; and manager changes at Perkins and Calvert.
New fund launches provide a peek into the corporate culture and stewardship practices of the firm behind the fund. Rolling out trendy new funds--tech vehicles in the late 1990s, say, or real estate funds in the mid-2000s--can generate torrential inflows and increased revenues for a fund firm. Investors in those funds, though, aren't likely to be well-served.
Brown Brothers Harriman is the opposite of trendy: Prior to the March 28 launch of BBH Global Core Select, the New York-based bank hadn't put a new fund on the shelves in more than a decade.
The new offering will invest domestically and abroad using the same bottom-up, relatively concentrated strategy in place at sibling BBH Core Select . That large-blend fund, which closed to new investors in November 2012 with assets of just $3.5 billion, ranks among its category's best options, earning a Morningstar Analyst Rating of Silver.
In addition to strategy, the funds share a manager: BBH Core Select's Tim Hartch is on the management team of the new fund as well.
Vanguard Reopens Capital Opportunity to Individuals
Check out our special Fund Times breaking-news report from April 3 on Vanguard's announcement that it is reopening Vanguard Capital Opportunity (VHCOX) to individual investors and removing the $25,000 annual limit on additional purchases.
Panoply of Perkins Portfolio Manager Changes
Perkins Investment Management announced a raft of portfolio manager changes and the launch of a new fund. The manager changes are, in part, a domino effect spurred by the departure of 15-year veteran Todd Perkins, comanager of Perkins Small Cap Value (JSCVX) since 2004, as well as Perkins US Strategic Value, an offshore fund. He will stay on as a part-time consultant.
Taking Todd Perkins' place on Small Cap Value is Tom Reynolds, an analyst with the company since 2009. Reynolds, who has covered financials for the firm, will be phased in as a portfolio manager--standard procedure at the firm--so comanagers Bob Perkins (the firm's founder) and Justin Tugman will continue to make the bulk of the decisions. Tugman will take Todd Perkins' place as a comanager on Perkins US Strategic Value.
Meanwhile, Kevin Preloger, a comanager on Perkins Large Cap Value since December 2008, will now also comanage Perkins Mid Cap Value (JMCVX). CIO Jeff Kautz and Tom Perkins remain managers on that fund. Preloger was added, according to the firm, in part because it is Perkins' largest offering and recent performance has been weak. Preloger will give up his comanager role at the all-cap Perkins Select Value (JSVTX), launched in December 2011.
Replacing Preloger on Perkins Select Value is Alec Perkins, an 11-year veteran of the firm who also comanages Perkins US Strategic Value.
Finally, the firm launched Perkins International Value on April 1. The fund is comanaged by Greg Kolb, the skipper of Perkins Global Value since 2005. His comanagers, Tadd Chessen and Chris Kirtley, have worked with Kolb as analysts since May 2011 and July 2010, respectively. Perkins International Value will be run in the same all-cap style as Perkins Global Value.
Franklin Templeton Launches Emerging-Markets Bond Fund
On April 1, 2013, Franklin Templeton launched Templeton Emerging Markets Bond. Michael Hasenstab, co-director of Franklin Templeton Fixed Income Group, leads the fund. Hasenstab's Gold-rated Templeton Global Bond (TPINX) has been focused on emerging-markets bonds and currencies for much of his tenure on the fund, and he has also successfully run a dedicated emerging-markets strategy for overseas investors for more than 10 years, so he has proven his expertise in investing in those markets. However, part of the Global Bond fund's appeal relative to an emerging-markets focused offering is that it has the flexibility to participate in a much wider opportunity set, which allows Hasenstab to shift the portfolio away from emerging-markets debt when it begins to look overvalued relative to other opportunities, or when macroeconomic risks swamp global debt markets. The 1.26% expense ratio of the A shares of the new emerging-markets bond fund is close to the 1.24% charged by its typical front-load emerging-markets bond peer.
USAA Is the Latest Firm to File for Active ETFs
USAA has submitted paperwork with the SEC seeking permission to create 14 actively managed exchange-traded funds. The proposed fund lineup includes equity, bond, allocation, and precious metals offerings. Most of the proposed ETFs match an existing USAA mutual fund strategy, such as USAA Short-Term Bond (USSBX) and USAA Cornerstone Moderately Aggressive (USCRX).
Active ETFs continue to draw interest in the investment industry. Indeed, USAA is the latest in a list of nearly 30 fund firms to file for permission to create active ETFs, including Fidelity, T. Rowe Price, J.P. Morgan, and Franklin Templeton. USAA is unlikely to roll out active ETFs in the immediate future, however. The approval process has taken more than one year for some firms, and many firms that have received permission still have not launched active ETFs.
USAA manages $50 billion in mutual fund assets for a client base composed predominantly of United States armed services members and their descendants. The firm manages its fixed-income offerings with an in-house team and has split equity management responsibilities between in-house managers and a lineup of more than 10 subadvisors. Of the strategies initially proposed for active ETFs, USAA Cornerstone Moderately Aggressive combines USAA managers and subadvisors Batterymarch Financial and Quantitative Management Associates. USAA charges average mutual fund fees, but the firm could potentially provide shareholders with lower-cost investment options through ETFs. The firm has not issued details on the proposed ETFs' fee structures, however.
Oppenheimer Commodity Fund Gets a Facelift
Effective March 28, 2013, Oppenheimer Commodity Strategy Total Return has undergone a strategy shift. Instead of tying its sector weightings to the S&P GSCI Index, the fund has changed its benchmark to the less energy-heavy Dow Jones-UBS Commodity Index. As of Dec. 31, 2012, the S&P GSCI was made up of 69% energy, 16% agriculture, 7% industrial metals, 5% livestock, and 4% precious metals, while the more diversified DJ-UBS Commodity Index comprised 32% energy, 31% agriculture, 19% industrial metals, 13% precious metals, and 6% livestock. Lead manager Robert Baker attempts to replicate exposure to the index and then makes moderate bets against it. As such, the fund's commodity sector positioning is expected to change significantly upon the completion of the transition to more closely reflect that of the DJ-UBS Commodity Index. The fund continues to use derivatives to gain its commodity exposure, which require only a small portion of fund assets. The team invests the remaining assets in cashlike securities, as it has done since 2009.
Given the historically low-yield environment, Baker and his team must add value solely through its commodity exposure to recoup the fund's 1.26% fee. Unfortunately, the team's strategies have failed to add value thus far, and since the start of 2009 when the fund transitioned its bond sleeve to hold primarily cashlike securities, it has lagged the S&P GSCI Index by roughly 2 percentage points annually through Feb. 28, 2013. The fund's unimpressive track record doesn't instill much optimism in the team's ability to add value versus its new benchmark.
Another Large-Cap Growth Manager Departs Laudus Growth Investors
Laudus Growth Investors US Large Cap Growth (LGILX) has suffered another loss to its investment team: Sam Console has left UBS (UBS), the fund's subadvisor. Console had been made a comanager of the fund, along with Peter Bye and Paul Graham, after the departure of longtime manager Lawrence Kemp in November 2012. (Kemp now runs BlackRock Capital Appreciation (MDFGX).)
Kemp's record as sole manager was excellent, and his departure prompted a downgrade of the fund's Morningstar Analyst Rating to Neutral from Bronze. That said, there was reason for optimism: Console and Bye were promoted from the fund's analyst team, and Graham had provided oversight as head of growth investing strategies at UBS since 2003.
The fact that Bye and Graham remain on board is reassuring, but Console's departure is significant: He had been part of the analyst team since 2005. (Bye came on in 2010.) It is also adds to broader concerns about attrition at UBS.
Comanager Removed From Calvert Bond Funds
According to a March 20, 2013, filing, Michael Abramo is no longer listed as a comanager on Calvert's suite of fixed-income funds. Abramo was listed as a comanager on six of the socially responsible-focused firm's bond funds, including the $1.9 billion Calvert Short Duration Income (CSDAX). The six funds' other comanagers remain on board.
Nationwide to Acquire 17 Mutual Funds From HighMark
Nationwide announced it will acquire 17 equity and bond mutual funds from HighMark Capital, approximately $3.6 billion in assets. Nine funds will be relaunched under the Nationwide umbrella, and HighMark Capital will continue to run the funds as their subadvisor. Nationwide plans to retain the current subadvisors--Bailard, Inc., Geneva Capital Management Ltd, and Ziegler Lotsoff Capital Management, LLC--for the remaining eight funds.
Associate directors of fund analysis Miriam Sjoblom and Shannon Zimmerman, senior fund analysts Greg Carlson and Laura Lallos, and fund analysts Michelle Canavan, Robert Goldsborough, Flynn Murphy, and Kathryn Spica contributed to this report.
