(PUB) Investing 2016

14

Fund News

Fund Manager Changes

AMG Yacktman Focused YAFFX and AMG Yacktman YACKX Date: 05/01/2016 Founder Don Yacktman stepped down officially as manager on the fund. Stephen Yacktman and Jason Subotky remain as managers. Our Take: Don Yacktman has been dialing back his work on the fund for a number of years, so this was not a surprise and our ratings already reflected the fact that Stephen Yacktman and Subotky were the driving forces at the funds. The funds retain their respective • and Œ ratings. Date: 05/15/2016 Comanager Rayna Lesser was replaced by Morgan Peck. Peck will take over the tech sleeve dedicated to the comanagers on this fund. Our Take: The comanagers only run 6% total of assets and Joel Tillinghast oversees 94%. Thus, this fund remains a bet on Tillinghast and the fund retains its • rating. Date: 05/02/2016 Lead manager Jamie Pagliocco stepped down from the firm’s muni funds to take a position heading the firm’s fixed-income trading group. Comanagers Mark Sommer and Kevin Ramundo, who have managed muni funds at the firm since 2002 and 2010, respectively, were named managers on the firm’s entire suite of muni funds. Joining the duo as a new portfolio manager is Cormac Cullen, a senior member of the firm’s muni research team. Our Take: We have faith in the seasoned team that Pagliocco leaves behind and are encouraged that past transitions in Fidelity’s muni group have been quite smooth. We are maintaining our Œ rating on the fund. Impact: Negative Date: 03/23/2016 Bob Goldfarb stepped down as comanager in the wake of the implosion of top holding Valeant Pharmaceuticals VRX. Sequoia explained that decision-making was too centralized and didn’t give enough room for analyst input. Our Take: Goldfarb achieved a lot for investors even though he may be best remembered for the Valeant mess. Moreover, the latest bad news on Valeant makes it clear that Sequoia’s thesis was wrong—up until this point we didn’t know if Valeant’s problems were small or large. We have lowered our rating to ´ from Gold. Impact: Negative Date: 07/01/2016 Manager Taymour Tamaddon is moving to run T. Rowe Price Institutional Large Cap Growth TRLGX. Ziad Bakri will take his place on July 1, 2016. Bakri has been a healthcare analyst with the firm since 2011. He is an M.D. and had previously worked as a biotech analyst for Cowen and Co. Our Take: This is a challenge for T. Rowe because it follows the loss of a manager and two healthcare analysts in 2014. The firm says it plans to hire additional analysts. This is Bakri’s first time serving as a portfolio manager. 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. Virtus Foreign Opportunities JVIAX Former Morningstar Fund Manager of the Year winner Rajiv Jain is leaving subadvisor Vontobel to set up his own firm. Matthew Benkendorf, who has been at Vontobel for 17 years, is taking over. Benkendorf signed a 10-year contract when Jain resigned, so we can at least be sure that he won’t be following Jain. We don’t yet know if any of the team’s analysts will leave. Our Take: Losing Jain is a big blow, though Benkendorf is experienced and a fair amount of the team will most likely remain in place. We lowered ratings for both funds to ´ from Silver. Impact: Neutral Fidelity Low-Priced Stock FLPSX Impact: Neutral Fidelity Municipal Income FHIGX Impact: Neutral Sequoia SEQUX T. Rowe Price Health Sciences PRHSX T. Rowe Price Small-Cap Stock OTCFX Virtus Emerging Markets Opportunities HEMZX Impact: Negative Date: 05/31/2016

Valeant Debacle Spurs Improvements at Sequoia Analyst Kevin McDevitt reports that the Sequoia SEQUX shareholders’ meeting on May 20 reinforced how much has changed following the fund’s disaster with Valeant Pharmaceuticals VRX . The past nine months have been extremely painful for shareholders, but it also spurred Sequoia’s management to ensure that something similar never happens again. The changes address investment policy, risk manage- ment, and decision-making. Portfolio manager--and now CEO of advisor Ruane, Cuniff, and Goldfarb--David Poppe further clarified the changes to the team’s structure and risk-manage- ment policies that he first articulated in March. Going forward, the fund will cap position size at 20% of assets. Furthermore, the team will formally review pos- itions as they grow to 10% and 15% of assets. Next, the firm announced the makeup of the newly formed investment committee, including analysts Arman Gokgol-Kline, David (Chase) Sheridan, Trevor Magyar, John Harris, and Greg Alexander; Alexander will be a nonvoting member of the committee. Harris and Alexander will not be actively involved in managing Sequoia as they run their own respective separate private portfolios, Wishbone and Acacia. But they both bring extensive experience and expertise to the committee, adding a further layer of oversight. Although Poppe remains Sequoia’s sole portfolio manager, the investment committee will have veto power. happened with Valeant, based on past interviews and in the shareholders’ meeting, is that former comanager Bob Goldfarb had final say. Ultimately, despite concerns voiced regarding Valeant by members of the invest- ment team and the board, Goldfarb decided to maintain and even add to the position. Every recent change has been designed to prevent any one person from over- Despite these changes, the team took pains to empha- size that the firm’s process is not changing. What