14
McCulley Returns to PIMCO
PIMCO
has rehired Paul McCulley to serve as chief
economist at the firm. He will occasionally head
PIMCO
’s investment committee—an important policy-
setting group at the firm. However, McCulley will
only be a part-time employee. According to our
PIMCO
analyst Eric Jacobson, McCulley’s main value may
come from the fact that he’s willing to voice differ-
ences of opinion with Bill Gross.
5 Lessons from Bill Bernstein
John Rekenthaler filed this report on a new pamphlet
from Bill Bernstein:
Financial writer Bill Bernstein has published a
pamphlet on the basics of successful long-term
investing entitled “If You Can: How Millennials
Can Get Rich Slowly.”
Lesson #1: Save, Save, Save
Even if you can invest like Warren Buffett, if you can’t
save, you’ll die poor.
Bernstein recommends that investors put away “at
least”
15%
of salary throughout their working lives.
That differs sharply from the advice of Gaobo Pang
and Sylvester J. Schieber, who advocate a lifecycle
savings approach that smooths consumption over
time. Under their model, workers invest minimally at
the beginning of their working years while repaying
student loans and other debt, moderately during the
child-rearing years, and then heavily in the final
10
–
15
years before retirement.
Bernstein, on the other hand, is old school. No
smoothing for him. People who believe that they can’t
save the requisite
15%
, he writes, are people who
“spend too much money.” Cut back today so that you
can have more tomorrow. Nobody needs the latest
smartphone,
900
television channels, or the daily latte.
“Life without these [luxury items] may seem spartan,
but it doesn’t compare to being old and poor, which is
Fund Manager Changes
Fund News
American Funds Europacific Growth AEPGX
Impact: Negative 05-30-14
Rob Lovelace has stepped down from the fund, though he will continue on his other two funds. His
replacement is Lawrence Kymisis, who has 19 years of investment experience and has been a comanager
since 2007 on American Funds SMALLCAP World SMCWX.
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Our Take: It’s a blow to lose one of the
most-seasoned and best-known managers at the fund. However, with 10 listed managers plus a sleeve run
directly by analysts, it’s likely that Lovelace was running less than 10% of the portfolio. Many seasoned
hands remain at the fund.
Appleseed APPLX
Impact: Negative 06-30-14
Ronald Strauss and Rick Singer are set to retire at the end of June.
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Our Take: We are maintaining our
Bronze rating because three comanagers remain who have been leading the way. Bill Pekin, Adam
Strauss, and Josh Strauss are the managers we’ve spoken to over recent years, and we feel comfortable
with them in the lead.
FPA Perennial FPPFX
Impact: Negative 06-03-14
Steve Geist is retiring from FPA. Comanagers Eric Ende and Greg Herr will divide his duties.
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Our Take:
Herr was named comanager in August 2013, so he’s quite new, but Ende has been on board since 1999.
That reassures us that the fund is still in good hands. We are placing the fund under review as we dig into
the change.
Ivy Asset Strategy
Impact: Negative 06-15-14
Comanager Ryan Caldwell left on June 15, though he will remain a consultant for two years.
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Our Take: We
are placing our rating under review as we look into Caldwell’s departure and how the fund will look under
lead manager Michael Avery as he considers additions to the team. It’s certainly a blow to lose someone
who has played a key role at the fund since 2005.
Scout International UMBWX
Impact: Negative 03-31-14
James Moffett is transitioning off the fund over the course of the year. In a letter to clients, he said current
comanager Michael Stack will be promoted to co-lead portfolio manager on March 31 and become sole lead on
Jan.1, 2015. Moffett plans to remain at the firm, though he won’t be a named manager on this fund. Stack has
been with Scout since 2006 and has 18 years of investment experience. Michael Fogarty remains a co-portfolio
manager.
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Our Take: Moffett’s departure isn’t a surprise given his age (72), but it’s still a loss. During the past
three years, we downgraded the fund’s rating first to Silver and then to Bronze because Moffett was several
years past conventional retirement age, and discussions with him indicated that he was preparing successors.
While Stack and Fogarty are steeped in the process, they don’t have the track records of lead managers that
would have led us to keep the fund at Silver. We have rated the fund Neutral.
Third Avenue International Value TAVIX
Impact: Negative 06-30-14
Amit Wadhwaney is leaving. Matthew Fine, who has comanaged the fund since 2012 and had been an
analyst on the fund since 2003, will take over as the lead manager. Wadhwaney’s exit comes in the wake
of other departures from the international team. In April 2013, Jakub Rehor, who had been a long-tenured
analyst and named to the fund’s portfolio-management team in January 2013, left the firm. Two other
analysts also left that month, though Third Avenue has since brought them back as consultants.
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Our Take:
Wadhwaney and the analysts’ departures are a big blow, and we’ve downgraded the fund to Neutral.
Vanguard Selected Value VASVX
Impact: Neutral 03-31-14
Vanguard is adding Pzena Investment Management to the roster of firms managing the fund. Pzena will
start small and gradually build up as Vanguard sends inflows the firm’s way. Barrow Hanley runs 74% of
assets, and Donald Smith & Co. runs 26%.
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Our Take: This will have little impact at first but may matter
down the road. Pzena is a deep-value firm with a strong long-term track record, but it was hit hard in 2008.
