14
Fairholme Reopens
Fairholme Fund
FAIRX
has reopened to new inves-
tors. The fund has had a steady trickle of outflows
this year, though I don’t know if that’s what prompted
Bruce Berkowitz to reopen the fund.
Here is what he did say in a press release:
“The decision to re-open the fund to new investors
was based on the expectation that, given the fund’s
current holdings, investment opportunities, and
liquidity, inflows from new investors can be invested
in a manner that is consistent with the fund’s invest-
ment objective and strategies.”
It’s up a solid
21%
for the year, landing it in the top
9%
of large-blend funds. We rate it Silver as
Berkowitz has a great track record and assets have
come back down to a more manageable level.
However, I would keep it to a single-digit position
as it remains very aggressively positioned. The fund
has
76%
of its equities in financials. With
44%
in
American International Group
AIG
,
14%
in
Bank
of America
BAC
, plus sizable weightings in
FNMA
and Freddie Mac preferreds, you have a high-
risk portfolio.
FPA Paramount Makes Changes
FPA
has announced big changes at
FPA Paramount
FPRAX
. It is changing both managers and strategies.
The fund will adopt a more value-driven strategy.
In addition, longtime managers Eric Ende and Steve
Geist will step aside and recently named comanagers
Greg Herr and Pierre Py will take over.
Jack Laporte Dies
Jack Laporte, former manager of
T. Rowe Price New
Horizons
PRNHX
, died at age
68
. Laporte ran the
fund from
1987
to
2010
. A $
10
,
000
investment at the
start of his tenure would have grown to $
77
,
000
by
the end. That’s well ahead of the $
51
,
000
produced by
Russell
2000
.
Fund Manager Changes
Fund News
FPA Paramount FPARX
Impact: Negative 09-01-13
FPA Paramount is changing both managers and strategies. The fund will adopt a more value-driven strat-
egy. In addition, longtime managers Eric Ende and Steve Geist will step aside, and recently named
comanagers Greg Herr and Pierre Py will take over.
|
Our Take: It’s an odd move considering that just two
years ago FPA announced the fund would switch from a domestic mandate to a global one even
though Ende and Geist had long been domestic-stock investors. Given the limited track records on the
new managers, we have lowered our rating to Neutral from Silver.
Leuthold Asset Allocation LAALX
Impact: Negative 08-30-13
Lead manager Eric Weigel is no longer managing the fund, and Leuthold has announced it plans to merge
this fund into Leuthold Core Investment
LCORX
.
|
Our Take: This is a big setback as Weigel had only been
brought in last December. We rated Asset Allocation Neutral and Core Bronze, so there is a positive side
to the merger if not the manager departure. Both funds have suffered from performance slumps and seen
sizable redemptions.
Matthews Asia Dividend MAPIX
Impact: Negative 10-31-13
Jesper Madsen stepped back from being lead manager and will leave the firm in October. Yu Zhang and
Robert Horrocks have taken over.
|
Our Take: Madsen’s departure is a loss. However, Horrocks is a seasoned
investor with a strong record. We are maintaining our Silver rating on this fund, whereas we’ve lowered
the rating on Matthews China Dividend because Zhang is the only manager scheduled to be on the fund
after Madsen retires.
Matthews China Dividend MCDFX
Impact: Negative 10-31-13
Jesper Madsen moved from lead manager to comanager in April, and he will retire in October. Yu Zhang
was comanager for a year before becoming lead manager in April. Matthews said it will decide in
the coming months whether it will add a comanager to the fund when Madsen departs.
|
Our Take: Zhang
served as an analyst at Matthews starting in 2007 until he became a manager. In addition, he has
served as comanager for two years at Matthews Asia Dividend
MAPIX
. We lowered the fund’s rating to
Neutral from Bronze because of Zhang’s limited experience as a lead manager, the key role Madsen
has played, and the uncertainty surrounding the comanager position. Because it’s a collaborative effort
at Matthews, we expect that the strategy will not change significantly.
Vanguard Explorer VEXPX
Impact: Neutral 08-12-13
Vanguard added a seventh subadvisor in Stephens Investment Management. The Stephens team is led by
Ryan Crane, who worked as an analyst at AIM in the late 1990s and managed AIM (now Invesco) Small
Cap Growth
GTSAX
from 1999 to 2004. That fund struggled from asset bloat and posted middling results
under Crane. Since the mid-2000s, Crane and three ex-AIM comanagers have subadvised American
Beacon Stephens Small-Cap Growth
STSGX
and American Beacon Stephens Mid-Cap Growth
STMGX
,
which have outpaced their respective small- and mid-growth peer group averages with less volatility.
|
Our Take: We are keeping our Neutral rating on the fund as it has a stable of decent but not great man-
agers, making for a rather bland overall portfolio. Low costs remain a plus, but it’s not compelling when
you can buy a small-cap index fund from Vanguard with even lower fees.
Wasatch Large Value FMIEX
Impact: Negative 09-01-13
David Powers has been brought in from Eagle Asset Management to replace Ralph Shive and Michael
Shinnick. Shive and Shinnick will continue to run Wasatch Long/Short
FMLSX
. Powers was at Eagle for a
year. Before that he ran ING Large Cap Value
IEDAX
for four years where he outperformed his peers.
|
Our Take: This looks like a big change as Powers hadn’t worked with Shive. We’re encouraged by Powers’
track record, but it isn’t nearly as long as Shive’s.
