(PUB) Investing 2015

PIMCO Bails on Some Stock Funds

PIMCO

is packing it in on its ambitious equity plans.

Equity chief investment officer Virginie Maisonneuve

is leaving the firm only a year after joining. In

addition,

PIMCO

is liquidating three funds, including

PIMCO EqS Pathfinder

PTHDX

, in light of poor

performance and low asset levels.

It was an odd effort from the start, as

PIMCO

chose to

build its equity effort in-house. With Neel Kashkari

at the helm, the firm didn’t even choose someone

with equity asset management experience.

PIMCO

claims it isn’t throwing in the towel on equities

entirely; in a statement,

PIMCO CEO

Douglas

Hodge affirmed a commitment to stocks. In addition,

for the past decade,

PIMCO

has worked with the

firm Research Affiliates on fundamentally indexed

strategies. In January,

PIMCO

announced plans

to develop seven more equity products that will be a

part of the

PIMCO

Fundamental Index

PLUS AR

group of strategies.

PIMCO Total Return Having a Good 2015

Although it is still suffering outflows,

PIMCO Total

Return

PTTRX

has performed well in the first

five months of

2015

. The fund is up

21%

for the

year to date, placing it in the top third of its

category and well ahead of the Barclays U.S.

Aggregate Bond Index.

The fund has a big bet on the dollar versus the

euro, and that has worked pretty well so far.

In addition, the fund has a sizable investment in

Treasury Inflation-Protected Securities, which

have also performed well. Both bets reflect

PIMCO

’s

view that the U.S. economy is relatively strong

while Japan and Europe need to keep interest rates

low to boost their economies.

Meanwhile, outflows slowed to a still hefty

billion

in April from a peak of more than

$30

billion in the

Fund Manager Changes

Fund News

AMG GW&K Core Bond MBDFX

Impact: Neutral

Date: 02-28-15

AMG fired PIMCO and replaced it with GW&K. It also renamed the fund from AMG Managers Total Return

Bond Fund. The fund had been a near-clone of PIMCO Total Return PTTRX but will now be run by institutional

money manager GW&K. Mary Kane will serve as manager. Kane has a brief two-year tenure at AMG GW&K

Enhanced Core Bond MFDAX, which has performed well during her tenure.

Our Take: The fallout from Bill

Gross’ departure keeps coming. GW&K has a good reputation, but we don’t cover any of its funds yet.

Buffalo Mid Cap BUFMX

Impact: Negative Date: 01-05-15

Kent Gasaway left the fund to focus on Buffalo Small Cap BUFSX, and Dave Carlsen replaced him as

comanager. Bob Male remains as comanager.

Our Take: This is the second round of manager changes

at Buffalo in recent years, and it comes amid slumping performance. In addition, Carlsen doesn’t have a long

and meaningful track record. Thus, we have downgraded the fund to

from Bronze.

Columbia Acorn ACRNX

Impact: Negative Date: 05-01-15

Columbia Acorn USA AUSAX

Lead manager Rob Mohn plans to retire in the fourth quarter of 2015. In addition to comanager David Frank,

Zach Egan and Fritz Kaegi were named comanagers of the fund to prepare for Mohn’s departure. No

managers were added to Columbia Acorn USA, where William Doyle serves as Mohn’s comanager. In addition,

Acorn is moving to a more traditional portfolio manager/analyst division of labor in which analysts will no

longer add stocks and choose their portfolio weighting.

Our Take: Poor performance has spurred wrenching

changes at the funds. We have put both funds Under Review. We lowered Columbia Acorn’s Morningstar

Analyst Rating to Neutral in 2014 because of concerns about redemptions and poor performance. Columbia

Acorn USA had been rated Bronze.

Perkins Mid Cap Value JMCVX

Impact: Negative

Date: 04-05-15

Comanager Jeff Kautz resigned. Kevin Preloger, who was named comanager in April 2013, remains and

will be joined by Justin Tugman of Perkins Small Cap Value JSCVX.

Our Take: The fund has been

trying to get back on track after several years of underwhelming performance. The fact that its five-

year results aren’t up to par isn’t surprising or disappointing given the fund’s relatively conservative process,

but weak stock-picking is more cause for concern. The loss of a long-tenured manager is disappointing

but not insurmountable. Risk-adjusted results since inception remain strong. However, the departure, coupled

with the fund’s stock-picking woes, is enough to move this fund’s Morningstar Analyst Rating to

from Silver.

Weitz Value WVALX

Impact: Negative Date: 12-31-15

Wally Weitz is stepping down from management responsibilities here. However, he will remain manager at

Weitz Partners Value WPVLX and Weitz Hickory WEHIX. Comanagers Brad Hinton and Dave Perkins will take

over his responsibilities.

Our Take: Weitz’s departure from the fund is a loss, but he’s been working on the

transition for years, and we feel good about Hinton and Perkins. We are maintaining our rating of

•

the fund.

Vanguard Convertible Securities VCVSX

Impact: Negative Date: 06-01-15

Veteran manager Larry Keele is stepping down and being replaced by Stuart Spangler.

Our Take: Oaktree is

an excellent firm, so we remain confident in the fund, but it’s still a blow to lose Keele, who has built a great

record here. We lowered our rating to