14
Sell-Off Spooks Fund Investors
The spike in interest rates has spurred big outflows in
June. Our weekly flow data for the third week in
June shows $
9
.
0
billion in taxable-bond fund redemp-
tions, $
5
.
0
billion in muni redemptions, $
4
.
1
billion
in U.S. equity redemptions, and $
2
.
3
billion in foreign-
equity outflows.
We haven’t seen this level of outflows since
2008
. It
indicates that some investors were caught off-guard,
despite years of warnings that interest rates would
back up. Weekly flow data is a rough estimate, how-
ever, and it may not signal a long-running sell-off.
A second caveat is that fund flows don’t usually drive
the markets. They are more of a lagging indicator.
For taxable bonds and equities, it’s just a drop in the
bucket. Sustained muni redemptions could have
a brief impact on the market as individual investors
play a big role there. We saw this in
2011
when
an incorrect prediction of a muni meltdown led to
outflows and a sell-off, but the muni market snapped
back to rally soon after.
Arrowpoint Buying Meridian Funds
Arrowpoint is buying the firm that runs the Meridian
funds. This is intriguing, as Arrowpoint recently hired
Chad Meade and Brian Schaub away from
Janus
Triton
JATTX
.
Meridian Growth
MERDX
manager
Rick Aster died last year, leaving a void on the
growth side. Arrowpoint is a manager of hedge funds
founded by ex-Janus managers.
So it’s a possible scenario that Meade and Schaub
take that fund over and the existing Meridian team is
kept to run the value fund.
Brandywine Manager Buyout
Friess Associates, the advisor for the Brandywine
funds, announced that its employees are buying back
a majority ownership stake in the firm from
Affili-
ated Managers Group
AMG
. The funds have had
Fund Manager Changes
Fund News
Aberdeen Select International Equity BJBIX and
Aberdeen Select International Equity II JETAX
Impact: Neutral 05-31-13
The former Artio funds joined the Aberdeen lineup and are now run by the team in charge of 4-star Aber-
deen International Equity GIGAX.
|
Our Take: These funds have new managers and a new strategy,
so their past records really have no meaning. Past management had been successful until 2008 but had
suffered a slump since then that led to huge outflows and staff cuts. Now the fund is in the hands
of the much more successful and stable Aberdeen team. So this isn’t the fund you bought, but the change
may prove to be for the best given the state of decline at Artio.
Buffalo Mid Cap BUFMX
Impact: Negative 05-31-13
Grant Sarris, one of three comanagers on the fund, has left. Veterans Kent Gasaway and Robert Male
remain as comanagers.
|
Our Take: While Sarris’ departure is a loss, he had the shortest tenure at the firm
of the three comanagers. Thus, we will maintain our Bronze rating on the fund. Still, we’ll watch closely
for additional departures.
Columbia Acorn Select ACTWX
Impact: Neutral 05-01-13
Comanager Ben Andrews is stepping back to work as an analyst serving this fund. Rob Chalupnik, who has
been a comanager since 2011, is now the lead manager. Andrews’ 25% share of the fund will go to the
analysts serving the fund. All told, the analysts now run 80% of the fund.
|
Our Take: The fund has been a
mediocre performer under Andrews, and it sounds like he felt he wasn’t serving the fund well as manager.
So on the one hand, it’s good news that he’s finding a better fit. On the other, we have a lead manager
with a short tenure, and the analysts responsible for the unimpressive record remain in charge of most of
the assets. We are maintaining our Neutral rating.
Harbor International Growth HIIGX
Impact: Neutral 05-21-13
Harbor has replaced manager James Gendelman and Marsico Capital with Gerard Callahan, Iain Campbell,
Joseph Faraday, and Paul Faulkner of Baillie Gifford, a firm that subadvises portions of two Vanguard
funds.
|
Our Take: Harbor rarely makes subadvisor changes, but it’s understandable as performance has
long lagged and Marsico has seen some managers and analysts leave. We don’t see Baillie Gifford
as a big upgrade, but it does at least seem to be more stable. We are dropping the fund from coverage.
T. Rowe Price Media & Telecommunications PRMTX
Impact: Negative 10-01-13
Dan Martino will transition off this fund at the end of September. Analyst Paul Greene has been promoted
to comanager until he takes over on Oct. 1.
|
Our Take: We hate to see Martino go but recognize that the
fund has weathered past departures well thanks to the depth of the analyst team. Greene has been an
analyst at T. Rowe since 2006. We’ve lowered our rating to Bronze from Silver. While we think the fund
is likely to continue to outperform, it is not a destination but a stepping stone for new portfolio managers
toward a diversified growth fund.
T. Rowe Price New America Growth PRWAX
Impact: Negative 05-10-13
Joe Milano has unexpectedly left T. Rowe Price, and it has promoted Dan Martino from T. Rowe Price
Media & Telecommunications PRMTX to take his place.
|
Our Take: What a blow. We’ve lowered the rating
to Neutral from Gold. You don’t often see surprise changes at T. Rowe; normally a new manager has a
transition period. What’s more, while past Media & Telecom managers have moved on to diversified funds,
results have been mixed. The good news is that Martino did a fine job at his previous fund, so there may
yet be hope for this one.
