14
FMI Fund to Close
Gold-rated
FMI Large Cap
FMIHX
will close to new
investors on June
30
,
2013
. The fund currently
holds $
7
.
2
billion in assets under management, com-
pared with $
5
.
3
billion at the end of
2012
’s first
quarter. The fund’s closure is in line with the firm’s
previous moves to preemptively close funds
when asset growth has threatened to compromise
the investment strategy. See Page
6
for more on
the fund.
Fees Hold Back 529 Returns
College savers are socking more money into
529
plans, even though the investments’ returns have not
been as strong as similar mutual funds’, according
to a Morningstar industry study.
Traditional
529
plan industry assets topped $
166
billion in
2012
, up about
25%
over the previous year.
To be sure, much of the increase in
529
assets
can be attributed to market gains. The S
&
P
500
Index
was up
16%
, while the Barclays U.S. Aggregate
Bond Index rose more than
4%
last year. But organic
growth remains significant—likely in the double-
digits. Despite these gains, however, Morningstar’s
study found that
529
investment options haven’t
kept pace with similar mutual funds when it comes
to performance.
For the five-year period through Feb.
28
,
2013
, eight
Morningstar
529
categories of non-age-based options
posted returns that were lower than the returns for
mutual funds in similar categories. For example, con-
servative-allocation
529
investment options gained
3
.
73%
per year on average for the period, while
similar mutual funds were up
4
.
34%
per year. Morn-
ingstar also analyzed returns for age-based
529
options. Because there are no analogous mutual fund
categories, the study compared the age-based
options’ returns with those posted by a combination
of indexes that reflect the typical age-based option’s
asset allocation in each category. For the five-year
Fund Manager Changes
Fund News
Fidelity Floating Rate High Income FFRHX
Impact: Negative 03-31-13
Christine McConnell retired and Eric Mollenhauer took her place at the helm. Mollenhauer is an 18-year
veteran of Fidelity’s high-income group who has served a stint as Fidelity’s director of high yield and is no
newcomer to managing bank-loan portfolios. He’s managed Fidelity’s internal and institutional bank-
loan accounts since 2007 and took the lead at Fidelity Series Floating Rate High Income FFHCX when it was
launched in 2011.
|
Our Take: McConnell’s loss is a blow, though Mollenhauer is a seasoned investor.
Gateway GATEX
Impact: Negative 02-29-13
Lead manager Patrick Rogers left in February and was replaced by Paul Stewart, who has been with
Gateway since 1995.
|
Our Take: Although it’s a negative to lose Rogers, it’s only a slight negative.
His replacement is experienced, and the strategy is a sytematic and repeatable one that is less depen-
dent upon one manager. Thus, we maintain our Silver rating.
Laudus Growth Investors LGILX
Impact: Negative 03-29-13
First, lead manager Lawrence Kemp left subadvisor UBS in November 2012. Now, one of three comanagers
who took over, Sam Console, has left the firm. Peter Bye and Paul Graham remain at the helm
|
Our Take:
Losing Kemp was a big blow as he built a great record and his team had been a model of stability. Console’s
departure adds to our concerns. We rate the fund Neutral.
Oakmark Equity and Income OAKBX
Impact: Neutral 04-17-13
Three comanagers were named to serve alongside longtime manager Clyde S. McGregor. Director of fixed
income Edward J. Wojciechowski and investment analysts Colin Hudson and Matthew A. Logan will run
the moderate-allocation fund along with McGregor.
|
Our Take: This is still McGregor’s fund, and we don’t
see this leading to any changes in strategy. However, it’s noteworthy because McGregor is 60 and the
younger comanagers may well succeed him when he retires.
Oakmark Select OAKLX
Impact: Neutral 01-28-13
Win Murray, Harris Associates’ director of U.S. equity research, and senior research analyst Tony Coniaris
joined Bill Nygren in running the fund.
|
Our Take: The announcement was not unexpected. On July 31, 2012,
longtime comanager Henry Berghoef, who had assisted Nygren in managing the fund since 2000, stepped
down. Harris stated at the time that it planned to appoint a successor by May 2013. It’s likely that the two
new comanagers will act primarily as assistant managers to Nygren for now. Still, Nygren emphasized
that the decision to add Murray and Coniaris was made with an eye toward the fund’s long-term steward-
ship. In a statement, he said, “While I expect to be at Oakmark for many more years, we need to think
about succession for the funds. ... Win and Tony are both younger than I am, and bringing them in as coman-
agers now will ensure investment continuity for Select far into the future.”
Third Avenue International Value TAVIX
Impact: Negative 04-24-13
Comanager Jacub Rehor resigned only four months after being named comanager at the fund. In addition,
two analysts serving the international fund have left.
|
Our Take: The good news is that this is Amit
Wadhwaney’s fund and he’s still there. The bad news is that three departures at the same time is a clear
signal of turmoil at Third Avenue.
T. Rowe Price Health Sciences PRHSX
Impact: Negative 02-15-13
Kris Jenner and two analysts serving this fund left T. Rowe Price to start their own firm. Analyst Taymour
Tamaddon was promoted to run the fund.
|
Our Take: This is a big blow, as Jenner built a great record and
Tamaddon is new to portfolio management. We dropped our rating to Neutral from Gold.
