15
Morningstar FundInvestor
May 2
013
period through Feb.
28
,
2013
, all of the Morningstar
age-based
529
categories posted average returns that
fell short of the combined benchmarks’ returns—
some by as much as
2
percentage points per year, on
average. To be sure, most
529
age-based options’
assets are more diversified than the three bench-
marks in this test, but the
529
returns are nonethe-
less disappointing.
One reason why
529
options have trouble keeping up
with mutual fund or index returns may be their
higher fees. Investors are paying less in annual fees
than in years past, thanks to program managers
negotiating for lower fees and substituting cheaper
investments for more-expensive ones. The average
annual expense ratio for each Morningstar
529
category declined between July
2011
and January
2013
. For example, the typical large-blend
529
investment cost
1
.
05%
in January
2013
, down from
1
.
13%
in July
2011
.
Lower fees certainly are a plus, but most
529
invest-
ment options’ expense ratios remain higher than
similar mutual funds. The typical
529
investment
options in the large-value, large-growth, conservative-
allocation, moderate-allocation, aggressive-allocation,
intermediate-term bond, and short-term bond catego-
ries are more expensive, on average, than in similar
mutual fund categories. The average price gap ranged
from
14
-
35
basis points. One of the widest average
price differentials was among short-term bond invest-
ments, with
529
investment options charging
34
basis
points more per year than mutual funds and further
diminishing returns on investments with small
absolute returns.
3 PIMCO Actively Managed ETFs Nearing Launch
PIMCO
announced on April
22
that three of its
proposed actively managed exchange-traded funds
that are based on popular mutual funds and that had
been in registration with the
SEC
are now effective.
The fixed-income giant has not yet scheduled launch
dates for any of the three proposed
ETF
s but could
move forward with rolling them out at any time.
The three proposed
ETF
s are based on large mutual
funds with long track records. The mutual funds on
which they are based are
PIMCO Diversified
Income
PDVDX
,
PIMCO Real Return
PRRDX
, and
PIMCO Low Duration
PLDDX
.
Longleaf Global Reopens
Longleaf Partners Global
LLGLX
launched Jan.
2
,
2013
, but then closed to new investors just three
weeks later because of a paucity of appealing
bargains after a big rally in global markets, according
to the managers. On April
16
, the fund reopened.
A statement sent to the fund’s shareholders noted
that the managers have been finding compelling
opportunities and investing some of the cash that had
built up, and thus they could comfortably begin
accepting more inflows. The fund has about $
28
mil-
lion in assets and charges an expense ratio of
1
.
65%
.
Oakmark Sells Stake in Dell
Oakmark Funds said it sold its stake in
Dell
DELL
after Blackstone Group pulled its bid for the company.
Oakmark Select
OAKLX
manager Bill Nygren wrote:
A ”potential acquirer with access to non-public infor-
mation decided to end its quest to acquire Dell at a
higher price. Since they had information we didn’t,
we believed it was prudent to assume they might be
right. So we sold our stock and will put the proceeds
into other stocks that we are more confident are
undervalued.”
Oakmark was one of Dell’s largest shareholders with
25
.
4
million shares spread across its funds. At
Oakmark Select, it accounted for
4
.
5%
of assets as of
March
31
. It had a
2
.
1%
weighting in
Oakmark
Fund
OAKMX
.
FPA’s Ekstrand to Retire
Just as we were going to press,
FPA
announced that
manager Rikard Ekstrand plans to retire at the end of
2013
because of “family health reasons.” Ekstrand is
comanager of the closed
FPA
Capital
FPPTX
. Dennis
Bryan, who was named comanager in
2007
, will be
the lead manager. Arik Ahitov was named associate
portfolio manager on the strategy.
We had viewed Ekstrand and Bryan as equals when
Bob Rodriguez stepped back from lead manager
duties at the fund.
FPA
said it plans to hire an analyst
to contribute to
FPA
Capital’s research efforts.
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