(PUB) Morningstar FundInvestor

14

Fund News

Fund Manager Changes

Aberdeen Select International Equity BJBIX and Aberdeen Select International Equity II JETAX

Impact: Neutral 05-31-13

Inker: Buy U.S. High Quality and European Value I had a chance to chat with GMO ’s Ben Inker about his outlook for the markets. Here are a few choice quotes: “All asset classes are to one degree or another trading higher than their historic averages. You can make a case that maybe European value and emerging- markets equities aren’t, but if you adjust for things it’s not even clear that they are cheap relative to historic averages.” “Today you’re getting paid for taking risk. But, we worry about what happens if cash rates go back to normal.” “We like high-quality stocks relative to the rest of the U.S. market for two basic reasons. One of them is for one of the very few times in history you can buy these guys at a discount to the overall market. So they are trading at a lower P/E than the broad market. Normally they trade at somewhere between a 10% and 20% premium. So, that’s pretty cool. You get to buy high-quality stocks at a discount. “The other reason we think they are particularly appealing versus the rest of the U.S. market right now is the biggest reason why we dislike the U.S. mar- ket: It is not its current P/E, but the fact that the earn- ings that make up that current P/E are at all-time highs and, from a profit margin perspective, we think are quite stretched. So we think profit margins are likely to be coming down over the next three to five to 10 years in the U.S., and under those circumstances, the quality stocks have this nice feature that their profitability is much less volatile than that of the rest of the market.” “Today, bonds are not particularly attractive. We have started to buy some TIPS , and it’s not because we think TIPS have a much higher expected return than traditional bonds, but because of the inflation pro-

The former Artio funds joined the Aberdeen lineup and are now run by the team in charge of 4-star Aber- deen International Equity GIGAX . | Our Take: These funds have new managers and a new strategy, so their past records really have no meaning. Past management had been successful until 2008 but had suffered a slump since then that led to huge outflows and staff cuts. Now the fund is in the hands of the much more successful and stable Aberdeen team. So this isn’t the fund you bought, but the change may prove to be for the best given the state of decline at Artio. Impact: Neutral 05-01-13 Comanager Ben Andrews is stepping back to work as an analyst serving this fund. Rob Chalupnik, who has been a comanager since 2011, is now the lead manager. Andrews’ 25% share of the fund will go to the analysts serving the fund. All told, the analysts now run 80% of the fund. | Our Take: The fund has been a mediocre performer under Andrews, and it sounds like he felt he wasn’t serving the fund well as manager. So on the one hand, it’s good news that he’s finding a better fit. On the other, we have a lead manager with a short tenure, and the analysts responsible for the unimpressive record remain in charge of most of the assets. We are maintaining our Neutral rating. Impact: Negative 12-31-14 Bill Frels will retire at the end of 2014. Mark Henneman, who will replace Frels, has been a comanager since 2006. Henneman became lead manager in July 2013. | Our Take: Henneman has long had a hand in the fund’s management. In addition, the firm has an experienced staff that is steeped in the strategy. Thus, we are maintaining our Silver rating (see Page 6 for more). Impact: Negative 10-31-13 Jesper Madsen stepped back from being lead manager and will leave the firm in October. Yu Zhang and Robert Horrocks have taken over. | Our Take: Madsen’s departure is a loss. However, Horrocks is a seasoned investor with a strong record. We are maintaining our Silver rating on this fund, whereas we’ve lowered the rating on Matthews China Dividend because Zhang is the only manager scheduled to be on the fund after Madsen retires. Impact: Negative 10-31-13 Jesper Madsen moved from lead manager to comanager in April, and he will retire in October. Yu Zhang was comanager for a year before becoming lead manager in April. Matthews said it will decide in the coming months whether it will add a comanager to the fund when Madsen departs. | Our Take: Zhang served as an analyst at Matthews starting in 2007 until he became a manager. In addition, he has served as comanager for two years at Matthews Asia Dividend MAPIX. We lowered the fund’s rating to Neutral from Bronze because of Zhang’s limited experience as a lead manager, the key role Madsen has played, and the uncertainty surrounding the comanager position. Because it’s a collaborative effort at Matthews, we expect that the strategy will not change significantly. Impact: Negative 10-01-13 Dan Martino will transition off this fund at the end of September. Analyst Paul Greene has been promoted to comanager until he takes over on Oct. 1. | Our Take: We hate to see Martino go but recognize that the fund has weathered past departures well thanks to the depth of the analyst team. Greene has been an analyst at T. Rowe since 2006. We’ve lowered our rating to Bronze from Silver. While we think the fund is likely to continue to outperform, it is not a destination but a stepping stone for new portfolio man- agers toward a diversified growth fund. Columbia Acorn Select ACTWX Mairs & Power Growth MPGFX Matthews Asia Dividend MAPIX Matthews China Dividend MCDFX T. Rowe Price Media & Telecommunications PRMTX