(PUB) Investing 2015

March 2015

Morningstar FundInvestor

15

moved to increase the series’ international exposure. In 2010 , the series increased its international- stock exposure to 30% from 20% , and in 2013 , the series added international bonds to the mix. Many industry peers have also increased their inter- national exposure over time, although Vanguard’s recently announced changes give the firm’s offering a decidedly more international tilt than the norm, with the typical target-date fund having one third of its stock sleeve and roughly 16% of its bond sleeve invested abroad. Artisan Plans Emerging-Markets Fund Artisan Partners has hired away Lewis Kaufman from Thornburg funds. The firm plans to launch an emerging-markets fund run by Kaufman in the middle of 2015 . Kaufman produced a strong record at Thornburg Developing World THDAX over a five-year span. We had given the fund a Morningstar Analyst Rating of Bronze but lowered it to Neutral with Kaufman’s departure. Paul McCulley Leaves PIMCO On Feb. 20 , PIMCO announced that its chief econo- mist, Paul McCulley, would be leaving the firm at the end of February. McCulley had returned to PIMCO in May 2014 ; he’d previously spent more than a decade at the firm before departing in 2010 . In his role as chief economist, McCulley was not a named portfolio manager on any funds, but he did sit on PIMCO ’s influential investment committee. While Morningstar continues to keep a close eye on manager turnover at PIMCO , McCulley’s departure did not come as a surprise and does not appear to be an indication of flagging morale at the firm. Indeed, senior PIMCO leadership had indicated in recent months that his future at the firm was uncertain given that McCulley had reportedly returned at the personal request of then- CIO Bill Gross. The other issue posed by McCulley’s departure is its impact on the effectiveness of the firm’s invest- ment committee. Indeed, together with former co- CIO Mohamed El-Erian and Gross, McCulley

was considered one of the firm’s top macroeconomic thinkers. Although it will take some time for the investment committee to prove itself, there are some reasons for optimism. For starters, the 2014 ex- pansion of the committee to include then-deputy CIO s Mark Kiesel, Dan Ivascyn, Andrew Balls, and Mihir Worah promised to better integrate the perspectives of portfolio managers plugged into the firm’s bottom-up fundamental research. Mean- while, PIMCO has been on an active hiring campaign. Several recent hires, including Joachim Fels as global economic advisor and former presidential economic advisor Gene Sperling as a consultant, together with the return of Nobel laureate Michael Spence, also as a consultant, add macroeconomic heft. Finally, the returns of veteran manager Chris Dialynas and Marc Seidner, CIO for nontraditional strategies, to the firm and the investment committee are also positive signs. Morningstar has not made any changes to its ratings on the PIMCO lineup of mutual funds as a result of McCulley’s departure. In particular, PIMCO Total Return PTTRX retains its Bronze rating. This rating reflects the significant and impressive resources that PIMCO dedicates to this strategy and the strength and experience of the three PIMCO veterans who have taken over management of the fund. However, the Bronze rating also reflects uncertain- ty regarding continued outflows, the reshuffling of management responsibilities, and ongoing changes to the investment committee. œ