448 / 708
14
American Century Equity Income Closing
American Century Equity Income
TWEIX
will close
to new investors on Oct.
24
. The fund had been in
outflows the prior four years but has had
$1
.
4
billion in
inflows so far in
2016
. That’s not a big number, but
it does take the fund to an all-time high of
$11
.
4
billion
in total.
The likely reason for closing is that about one fourth
of the portfolio is invested in convertible bonds and
preferred stock, both relatively small markets. On the
equity side, it’s unlikely there are many liquidity
constraints: Top equity holdings
Johnson & Johnson
JNJ
and
Exxon Mobil
XOM
represent less than
one day’s trading volume. The decision to close under-
scores management’s prudent philosophy. We
give the fund a Morningstar Analyst Rating of Silver.
Bogle Says Prepare for Low Returns
Christine Benz chatted with Vanguard founder Jack
Bogle about the state of the investment world.
Here are a couple of important thoughts from Bogle.
Christine Benz:
What should investors expect from
the markets?
Jack Bogle:
We’re looking ahead to some challenges
compared to what we’ve had in the past. Today,
the dividend yield is
2%
. The growth in earnings over
the past
50
years has been about
6
.
5%
. I don’t think
it’s going to be that high. So, I use
5%
for earnings
growth and that gives me a
7%
, roughly, a
7%
invest-
ment return on stocks. The problem is in the valua-
tions, and today the stock market is selling at about
23
times earnings, and the long-term norm is
17
times
earnings. That would mean you lose
3%
of that return.
Benz:
So down to
4%
?
Bogle:
Down to
4%
and the bond returns, the
10
-year
Treasury, which is the basic benchmark, is at
1
.
6%
.
By going a little longer and a little less in governments
Fund Manager Changes
Fund News
Fidelity Leveraged Company Stock FLVCX
Impact: Neutral
Date: 12/31/2016
Tom Soviero will step down at the end of the year. Mark Notkin will take Soviero’s place. Notkin runs Fidelity
Capital & Income FAGIX, which has a Morningstar Analyst Rating of Silver.
Our Take:
Notkin has a strong record
in high-yield. Like Soviero, he has tended to be an aggressive manager. We have placed the fund
Ø
.
MFS Global Equity MWEFX
Impact: Negative Date: 2017
MFS announced that longtime lead manager David Mannheim will retire in one to two years. Ryan McAllister
will join the fund as a comanager in September 2016. Roger Morley, who has been a comanager since 2009,
will remain on board.
Our Take:
Mannheim has done a great job and will be missed. While Morley is a seasoned
MFS veteran who has a successful record running a fund on his own, McAllister doesn’t have as much
experience, though he has been at the firm since 2007. Also, Morley and McAllister will continue to draw on the
work of a strong group of analysts. We still have faith in the fund but have cut our rating one notch to
•
.
Oakmark Global OAKGX
Impact: Negative Date: 09/30/2016
Oakmark International OAKIX
Rob Taylor surprised us by announcing he will retire at age 44. At Oakmark Global, David Herro will take Taylor’s
spot alongside Clyde McGregor. At Oakmark International, lead manager Herro will be the sole manager,
though he still has the help of senior analysts at the firm.
Our Take:
We are maintaining our
Œ
ratings on the
funds as we have faith in Herro. However, the change does underline the importance of succession planning
at the firm, and we’ll be watching closely as McGregor and Herro draw closer to retirement age. McGregor is 63
and Herro is 55.
Perkins Global Value JGVAX
Impact: Negative Date: 07/10/2016
Tadd Chessen, who joined Perkins Investment Management in April 2013 as an international analyst and was
named comanager of Perkins Global Value later that year, has left the firm. His departure comes just a year
after comanager Christian Kirtley left to rejoin ICAP, his employer prior to Perkins. Firm CIO and lead manager
Greg Kolb remains in place. Kolb has overseen this fund since 2005 when it was run out of parent company
Janus; he and the fund moved to value subsidiary Perkins in 2010. Meanwhile, George Maglares, an analyst
who joined Perkins in 2013, has been promoted to comanager.
Our Take:
Given Kolb’s history with the fund,
it retains its Morningstar Analyst Rating of
´
and Positive People rating. However, we’ll be watching
turnover on the investment team.
T. Rowe Price Small-Cap Stock OTCFX
Impact: Negative Date: 10/01/2016
Greg McCrickard is set to retire in October. He will be replaced by Frank Alonso, who has been an associate
portfolio manager on the fund since 2013. Alonso has been with T. Rowe Price since 2000.
Our Take:
We don’t have much of a track record to go by for Alonso, so it’s a big drop from the proven McCrickard. We
lowered our rating to
ˇ
from Silver.
Vanguard Capital Value VCVLX
Impact: Neutral
Date: 07/10/2016
Vanguard removed Peter Higgins from this fund, leaving David Palmer of Wellington as sole manager.
Our Take:
Higgins was responsible for the higher-risk half of the fund, so this may moderate the fund’s profile
as Palmer has more of a classic value approach. We are maintaining our
ˇ
rating.
Vanguard International Growth VWIGX
Impact: Neutral Date: 07/10/2016
Vanguard fired subadvisor M&G Investment, which was running 12% of assets. Those assets were handed to
the other two subadvisors, Baillie Gifford Overseas and Schroder Investment Management. Baillie will
now manage 60% of assets and Schroder 40%.
Our Take:
M&G’s comanager Charles Anniss had only been on
the fund since October 2014, and his predecessor was only on the fund for two years, too. It may be that
turnover prompted the change, and in any case M&G wasn’t why we had a Silver rating on the fund. We are
maintaining our
•
rating.