11
Morningstar FundInvestor
April 2
014
New skippers who lack previous portfolio-manage-
ment experience don’t necessarily flop their first time
around. But the lack of a prior track record often
makes for murky prospects. Let’s take a closer look at
several current examples.
T. Rowe Price Growth Stock
PRGFX
Joe Fath took the helm of this large-growth fund in
mid-January
2014
. Unlike most new T. Rowe man-
agers, Fath didn’t have the luxury of a lengthy transi-
tion period: Former skipper Rob Bartolo resigned
unexpectedly. And although Fath had served as an
associate portfolio manager at
T. Rowe Price
Institutional Large Cap Growth
TRLGX
since
2008
,
and thus is familiar with many of this fund’s hold-
ings because of portfolio overlap, he hasn’t called the
shots at a fund before. (Associate managers at
T. Rowe don’t make buy/sell decisions and thus aren’t
listed in a fund’s prospectus.) Fath is also taking
on a big job here: He runs a total of $
58
billion in this
strategy, a pool that is
5
times larger than Large
Cap Growth’s asset base. That asset load would be
challenging for even a veteran manager, much less
one who hasn’t run a fund before.
T. Rowe Price New Era
PRNEX
In September
2013
, Shawn Driscoll replaced Tim
Parker, who had managed the fund since June
2010
.
Driscoll hasn’t run a fund before. He had worked
with Parker since April
2013
, though, to ensure a
smooth transition here. Also, Parker remains at
the firm, so Driscoll can use his knowledge. That said,
this rookie manager is putting his own stamp on
the fund, which is primarily a natural-resources port-
folio but has the latitude to define that term broadly.
Indeed, much like Parker’s predecessor, longtime
manager Charles Ober, Driscoll has added engineer-
ing and pipeline construction firms to the fund.
He’s also built bigger stakes in large integrated oil
firms than Parker did. It remains to be seen whether
Driscoll can succeed here in his first portfolio-
management assignment while striking out in a diff-
erent direction from Parker.
Fidelity International Small Cap
FISMX
Sam Chamovitz became the ninth manager of this
11
-year-old fund at the end of February
2014
,
replacing a three-person management team. Cham-
ovitz, a Fidelity analyst since
2007
, managed an
internal international small-cap strategy for
12
months before taking over here but hasn’t run a fund
before. His lack of a track record is particularly
unsettling given the fund’s focus on a wide swath of
volatile stocks buffeted by their exposure to local
economies across the globe. He’s also making signifi-
cant changes, slashing the number of holdings
to roughly
100
from
350
—and the fund may own
a bigger stake in emerging-markets stocks now
since its new benchmark, the
MSCI ACWI
ex-
USA
Small Cap Index, has substantial exposure to devel-
oping markets. Investing here right now would be a
sizable leap of faith.
RS Value
RSVAX
Most of this fund’s five managers have run money for
only short periods. When longtime manager Andy
Pilara stepped off the fund in May
2013
to become a
senior advisor for the firm, Joseph Manelli and Byron
Penstock joined three others as comanagers here.
The other three were replaced in January
2014
by Paul
Hamilon, Robert Harris, and Daniel Lang. Of this
current group of five, Manelli and Penstock had man-
aged
RS
funds for a total of two years and one year,
respectively, when they took over the fund. This is the
first portfolio-management assignment for the other
three. They run the fund in a collaborative fashion, but
their collective track record is far too short to inspire
any confidence.
œ
Contact Greg Carlson at
Green Managers at the Helm
Red Flags
|
Greg Carlson
What is Red Flags?
Red Flags is designed to alert
you to funds’ hidden risks. Such
risks can take many forms,
including asset bloat, the depar-
ture of a solid manager, or a
focus on an overhyped asset
class. Not every fund featured in
Red Flags is a sell, and in fact,
some are good long-term hold-
ings. But investors should be
prepared for a potentially bum-
pier ride in the near future.
