14
GMO Says U.S. Stocks Are Overvalued
Ben Inker of
GMO
says equities are overvalued.
“The U.S. stock market is trading at levels that do not
seem capable of supporting the type of returns that
investors have gotten used to receiving from equities.”
Specifically, he forecasts a negative
1
.
3%
annual-
ized return for U.S. equities after taking out inflation
over the next seven years.
T. Rowe Price Shutting Two Funds to
New Investors
Bronze-rated
T. Rowe Price New Horizons
PRNHX
will close to new investors after the market’s close
on Dec.
31
. The fund’s category-topping performance
over the trailing three- and five-year periods has
attracted $
1
.
5
billion of new money since January
2012
.
Inflows and market appreciation have pushed assets
up to $
14
.
3
billion as of October, making it the biggest
actively managed small-cap fund.
Silver-rated $
9
.
5
billion
T. Rowe Price Small-Cap
Stock
OTCFX
and its $
1
.
5
billion clone,
T. Rowe
Price Institutional Small-Cap Stock
TRSSX
, will
also close to new investors after the market’s close
on Dec.
31
, given inflows. Bronze-rated
T. Rowe Price
Small-Cap Value
PRSVX
, which has $
9
.
4
billion
in assets and has experienced net outflows in
2013
,
remains open. Although the fund is huge, I can’t
really quibble with the timing of the closing. The fund
hasn’t had meaningful inflows since
2004
, the last
time it closed. Here are its annual net flows starting
in
2005
: $
59
million, negative $
650
million, nega-
tive $
971
million, negative $
97
million, $
13
million,
negative $
110
million, and negative $
332
million.
This year it has taken in $
183
million.
Capital Gains Estimates From Vanguard
and Calamos
Vanguard and Calamos have come out with capital
gains estimates for year-end. At Vanguard, the
biggest estimate is about
10%
for
Vanguard
Explorer
VEXPX
.
Fund Manager Changes
Fund News
Artisan Mid Cap ARTMX
Impact: Negative 09-30-13
Andy Stephens is no longer the lead manager on this fund, but he remains team leader and is listed as a
comanager. Matt Kamm is now the lead manager. Stephens had been sole manager for the first four years
at this fund until another comanager, Jim Hamel, was promoted in 2001. Kamm, who joined the team
as an analyst in 2003 and became an associate manager in 2010, has contributed to strong stock selection
in health care over the years.
|
Our Take: Having Stephens dial down his contribution here is a negative,
although his continued involvement and Kamm’s experience give us confidence. Plus, Hamel is still on board
as are two other experienced comanagers. We are maintaining our Silver rating on this closed fund.
Artisan Small Cap Value ARTVX, Mid Cap Value ARTQX, and Value ARTLX
Impact: Negative 09-30-16
Scott Satterwhite, who comanages three Artisan Value funds, is set to retire in three years. Dan Kane was
promoted to comanager, joining Jim Keiffer and George Sertl as the trio that will run things when Satter-
white retires.
|
Our Take: While the loss of Satterwhite is a negative, he has a good team around him, and
Artisan certainly has plenty of lead time to prepare for his departure. We’re maintaining our ratings on the
funds.
Laudus US Large Cap Growth LGILX
Impact: Positive 10-04-13
Laudus has hired back former manager Lawrence Kemp. I wrote in last month’s Fund Manager Changes
that the fund had gotten a new comanager, but I was disappointed Laudus hadn’t followed Kemp to
BlackRock. Lo and behold, Laudus announced in October that it is moving the fund from subadvisor UBS to
BlackRock, Kemp’s new home.
|
Our Take: This is very good news for shareholders. We’re maintaining
the rating at Neutral because Kemp is still in the process of building his team at BlackRock, but the ingredi-
ents are there for a good fund down the road.
PIMCO Global Multi Asset PGMDX
Impact: Neutral 11-17-13
PIMCO has replaced lead manager Saumil Parikh with Mohamed El-Erian. El-Erian will review the fund’s
allocation moves, which have not been timed well.
|
Our Take: The fund was designed to be cautious,
so its lagging returns recently are no shock, but the fund has been disappointing even in the context of
cautious allocation strategies. On one level, having El-Erian take over looks like an upgrade. However,
PIMCO is reviewing the fund’s allocation strategy, and we’re always wary of funds when the Under Con-
struction signs go up. We’re rating the fund Neutral.
Vanguard International Growth VWIGX
Impact: Negative 10-30-13
Comanager Virginie Maisonneuve was hired away by PIMCO. She had been a comanager of this fund’s
Schroders-run sleeve since 2005. Schroder runs about one third of the fund, and Simon Webber, who has
been listed since 2009, will be the sole manager of the Schroder sleeve.
|
Our Take: Maisonneuve was
the second-most senior manager on the fund, so it’s a blow. However, as she was a comanager of only one
third of the fund, it’s far from a disaster. The other slices are run by experienced managers at Baillie
Gifford and M&G Investment Management. We are reviewing our rating, and I will send out an email alert
when we have published the new report.
Vanguard Precious Metals and Mining VGPMX
Impact: Negative 11-17-13
Longtime manager Graham French is stepping down, and comanager Randeep Somel is replacing him.
|
Our
Take: The move appears to have more to do with a slump in a broad equity fund that the two managed for
M&G Investment. We are putting the rating under review while we look into the change. We don’t expect a
change in strategy, but French has done well at this fund even if the global strategies have suffered.
