(PUB) Investing 2016

14

Fund News

Fund Manager Changes

Fidelity Leveraged Company Stock FLVCX 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 . 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 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. 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. 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. 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. 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. Impact: Neutral MFS Global Equity MWEFX Oakmark Global OAKGX Impact: Negative Date: 09/30/2016 Perkins Global Value JGVAX T. Rowe Price Small-Cap Stock OTCFX Vanguard Capital Value VCVLX Impact: Neutral Vanguard International Growth VWIGX

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. 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. Christine Benz: What should investors expect from the markets?

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