(PUB) Investing 2016

15

August 2016

Morningstar FundInvestor

replacement rather than waiting around to see what happens with the shareholder vote.

PIMCO Brings in Outsider to Be CEO PIMCO announced on July 20 that it hired a new CEO , Emmanuel (Manny) Roman, most recently the chief executive of Man Group, a London-based asset man- ager focused on alternative investments. Roman will replace current CEO Doug Hodge in the role effective Nov. 1 , 2016 . The firm embarked on a process earlier in 2016 to find an executive with a strong strategic management focus, and PIMCO says the effort eventually evolved into the quest for a new CEO . A committee of PIMCO executives,including CIO Dan Ivascyn and president Jay Jacobs, reviewed candidates, and the decision was approved by PIMCO ’s managing directors, after which Allianz signed off on the selection. The firm claims Hodge is supportive of the decision, and he will remain at the firm indefinitely as a senior advisor to help transition his responsibilities. There’s been no indication that business management was a problem during Hodge’s tenure, but he presided over a difficult stretch for the firm, having taken over as CEO when Mohamed El-Erian, who had been both CEO and co- CIO , departed in January 2014 . The firm had already endured high-profile outflows—Morning- star estimates that outflows at PIMCO Total Return PTTRX from April 2013 through January 2014 were more than $47 billion—and Hodge had been in the CEO role for roughly nine months when Bill Gross left the firm in late September of that year. Between then and June 30 , 2016 , meanwhile, the firm’s overall assets under management sank to $1 . 5 trillion from $1 . 9 trillion. Notably, those figures include roughly $400 billion in presumably sticky assets the firm runs for parent Allianz. Although Hodge’s replacement was itself something of a surprise, Roman’s hiring squares with the business strategy on which PIMCO has focused of late. The firm has been adamant about its commitment to its large business in more-conventional fixed-income strategies, including its flagship PIMCO Total Return. It’s not surprising that alternatives have become an increasingly large part of its focus in recent years, though. K

Sequoia Dumps Valeant Sequoia SEQUX sold the rest of its shares of Valeant Pharmaceuticals VRX . “Valeant was our largest position to start the year and its 80% decline through June 30 badly penalized our results,” management wrote in a shareholder letter. “For the first half, Sequoia generated a negative 13 . 2% return vs. a positive 3 . 8% return for the S & P 500 Index. Absent Valeant, the rest of the Fund’s portfolio generated a positive return of 2 . 3% for the first half. At the end of this letter you will find holdings data for the Fund’s 10 largest holdings in Sequoia as of June 30 th. While we are all disappointed by these results, we have responded by changing our leadership and committing ourselves to restoring the legacy handed down to us from Bill Ruane and Rick Cunniff.” Vanguard Core Bond Shows Promise Morningstar Analyst Emory Zink shared these thoughts on a relatively new fund from Vanguard: “ Vanguard Core Bond VCORX —a member of the open-end inter- mediate-term bond category—has popped up on our radar. Launched earlier this year, the fund has a short track record, but there are ample reasons to follow its progress. “First, each of the three named portfolio managers have spent more than a decade at Vanguard and are supported by the firm’s deep credit analyst, risk anal- ysis, and economic research teams. “Second, for an actively managed core fixed-income product, its 25 basis point net expense ratio is one of the lowest in the category—a trademark of most Vanguard products. “And third, the economies of scale offered across Van- guard’s global operations have grown dramatically in the last decade. That’s why this actively managed fund is worth considering now.“