(PUB) Investing 2015

14

Fund News

Fund Manager Changes

AMG GW&K Core Bond MBDFX Date: 02-28-15 AMG fired PIMCO and replaced it with GW&K. It also renamed the fund from its former name AMG Managers Total Return Bond Fund. The fund had been a near clone of PIMCO Total Return PTTRX but will now be run by institutional money manager GW&K. Mary Kane will serve as manager. Kane has a brief two-year tenure at AMG GW&K Enhanced Core Bond Investor MFDAX, which has performed well during her tenure. | Our Take: The fallout from Bill Gross’ departure keeps coming. GW&K has a good reputation, but we don’t cover any of its funds yet. Impact: Negative Date: 01-05-15 Kent Gasaway is leaving the fund to focus on Buffalo Small Cap BUFSX, and Dave Carlsen is replacing him as comanager. Bob Male will remain as comanager. | Our Take: This is the second round of manager changes at Buffalo in recent years, and it comes amid slumping performance. In addition, Carlsen doesn’t have a long and meaningful track record. Thus, we have downgraded the fund to Neutral from Bronze. Date: 12-01-14 Jim Goff stepped down as head of research and nominal manager of this fund. Carmel Wellso succeeds him. | Our Take: This is a research fund that delegates stock selection to the analysts. In this case, the named manager doesn’t have the same impact as at a typical actively managed fund. Date: 11-10-14 Whitney George has left Royce after being mired in a severe slump. At Royce Low Priced Stock, Jim Stoeffel is now the lead manager. He had been an assistant manager since 2013 and worked for Royce since 2009. At Royce Premier, Chuck Royce shifts from comanager to sole lead manager. | Our Take: Stoeffel produced decent results during a previous stint at CRM Small Cap Value CRISX, so there are some positives here, but he doesn’t have George’s track record. The firm says that Royce Low Priced Stock will return to its roots with lower-priced stocks and will shed the materials stocks that have killed performance. We lowered that fund to Neutral. Premier’s change is less dramatic. George’s half of the portfolio will go to Royce, who was already running the other half. We rate Royce Premier Silver. Impact: Negative Date: 04-01-15 Bob Smith is set to step down this year; Richard Clattenburg will take his place. Clattenburg has been with T. Rowe Price since 2005, serving as an analyst and associate portfolio manager. | Our Take: Clattenburg lacks a record, so it’s a big drop from the seasoned Smith. We’ve lowered our rating to Neutral. Impact: Negative Date: 06-01-15 Veteran manager Larry Keele is stepping down and being replaced by Stuart Spangler. | Our Take: Oaktree is an excellent firm so we remain confident in the fund, but it’s still a blow to lose Keele, who has built a great record here. We lowered our rating to Bronze. Impact: Neutral Buffalo Mid Cap BUFMX Janus Global Research JAWWX Impact: Neutral Royce Low Priced Stock RYLPX and Royce Premier RYPRX Impact: Neutral T. Rowe Price International Stock PRITX Vanguard Convertible Securities VCVSX

Vanguard Cuts Target-Date Fees Vanguard announced it will roll out a new institutional fund for its Target Retirement lineup. With an esti- mated expense ratio of just 0 . 10% , the new funds will be the lowest-priced target-date mutual funds avail- able. The move undercuts Fidelity, which currently offers the industry’s lowest-priced series, Fidelity Freedom Index. Fidelity has room to fight back, as it is using a waiver to keep fees for that series at 0 . 16% and its underlying funds cost just 0 . 09% – 0 . 11% . Vanguard’s new series will also be competitive with, and some- times cheaper than, other index-based target-date funds offered via collective investment trusts, such as BlackRock’s LifePath Index CIT series. Vanguard also offers less-expensive target-date CIT s. Vanguard’s new funds, directed at retirement-plan providers, will require a $100 million minimum initial investment for investment-only clients, though record- keeping clients will have no minimum requirement. Vanguard’s current retail-focused funds charge between 0 . 16% and 0 . 18% and require an individual contribution minimum of $1 , 000 . The firm’s retail series passes along just the cost of its underlying index funds, but by using Investor share classes rather than the less expensive Admiral or Institutional share classes, there was room for the series to shave expenses. The new series will invest in a mix of those three share classes, which suggests that Vanguard should still have room to lower costs in the future. The announcement of the new institutional series is welcome news for plan sponsors. In addition to creating a new, lower-cost series, Vanguard will be making a change to the strategic allocation of its multiasset lineup. By the end of 2015 , the funds will boost their international-stock stake to 40% of stocks from 30% , and they will increase their international-bond exposure to 30% of the bond sleeve from 20% . The firm doesn’t tweak its expo- sures often, although since the 2003 launch of its Target Retirement funds, Vanguard has steadily

Vanguard Intermediate-Term Treasury VFITX, Vanguard Long-Term Treasury VUSTX, Vanguard Short-Term Treasury VFISX

Impact: Neutral

Date: 01-02-15

Gemma Wright-Casparius has replaced David Glocke as manager of the three funds. Wright-Casparius is head of Vanguard’s TIPS and Treasuries group and manager of Vanguard Inflation-Protected Securities VIPSX fund. | Our Take: The fund remains in good hands. We have affirmed our Silver rating on the funds.

Vanguard Short-Term Federal VSGBX Date: 01-02-15 Brian Quigley has replaced Ron Reardon as portfolio manager of this fund. Quigley has worked on the fund since 2007. | Our Take: Quigley is experienced, and the fund doesn’t have much flexibility to begin with, so we don’t expect any big changes. We are maintaining our Silver rating. Impact: Neutral