(PUB) Morningstar FundInvestor

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Fund News

Fund Manager Changes

FPA Paramount FPARX Impact: Negative 09-01-13 FPA Paramount is changing both managers and strategies. The fund will adopt a more value-driven strat- egy. In addition, longtime managers Eric Ende and Steve Geist will step aside, and recently named comanagers Greg Herr and Pierre Py will take over. | Our Take: It’s an odd move considering that just two years ago FPA announced the fund would switch from a domestic mandate to a global one even though Ende and Geist had long been domestic-stock investors. Given the limited track records on the new managers, we have lowered our rating to Neutral from Silver. Impact: Negative 08-30-13 Lead manager Eric Weigel is no longer managing the fund, and Leuthold has announced it plans to merge this fund into Leuthold Core Investment LCORX . | Our Take: This is a big setback as Weigel had only been brought in last December. We rated Asset Allocation Neutral and Core Bronze, so there is a positive side to the merger if not the manager departure. Both funds have suffered from performance slumps and seen sizable redemptions. 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: Neutral 08-12-13 Vanguard added a seventh subadvisor in Stephens Investment Management. The Stephens team is led by Ryan Crane, who worked as an analyst at AIM in the late 1990s and managed AIM (now Invesco) Small Cap Growth GTSAX from 1999 to 2004. That fund struggled from asset bloat and posted middling results under Crane. Since the mid-2000s, Crane and three ex-AIM comanagers have subadvised American Beacon Stephens Small-Cap Growth STSGX and American Beacon Stephens Mid-Cap Growth STMGX , which have outpaced their respective small- and mid-growth peer group averages with less volatility. | Our Take: We are keeping our Neutral rating on the fund as it has a stable of decent but not great man- agers, making for a rather bland overall portfolio. Low costs remain a plus, but it’s not compelling when you can buy a small-cap index fund from Vanguard with even lower fees. Impact: Negative 09-01-13 David Powers has been brought in from Eagle Asset Management to replace Ralph Shive and Michael Shinnick. Shive and Shinnick will continue to run Wasatch Long/Short FMLSX . Powers was at Eagle for a year. Before that he ran ING Large Cap Value IEDAX for four years where he outperformed his peers. | Our Take: This looks like a big change as Powers hadn’t worked with Shive. We’re encouraged by Powers’ track record, but it isn’t nearly as long as Shive’s. Leuthold Asset Allocation LAALX Matthews Asia Dividend MAPIX Matthews China Dividend MCDFX Vanguard Explorer VEXPX Wasatch Large Value FMIEX

Fairholme Reopens Fairholme Fund FAIRX has reopened to new inves- tors. The fund has had a steady trickle of outflows this year, though I don’t know if that’s what prompted Bruce Berkowitz to reopen the fund. Here is what he did say in a press release: “The decision to re-open the fund to new investors was based on the expectation that, given the fund’s current holdings, investment opportunities, and liquidity, inflows from new investors can be invested in a manner that is consistent with the fund’s invest- ment objective and strategies.” It’s up a solid 21% for the year, landing it in the top 9% of large-blend funds. We rate it Silver as Berkowitz has a great track record and assets have come back down to a more manageable level. However, I would keep it to a single-digit position as it remains very aggressively positioned. The fund has 76% of its equities in financials. With 44% in American International Group AIG , 14% in Bank of America BAC , plus sizable weightings in FNMA and Freddie Mac preferreds, you have a high- risk portfolio. FPA Paramount Makes Changes FPA has announced big changes at FPA Paramount FPRAX . It is changing both managers and strategies. The fund will adopt a more value-driven strategy. In addition, longtime managers Eric Ende and Steve Geist will step aside and recently named comanagers Greg Herr and Pierre Py will take over. Jack Laporte Dies Jack Laporte, former manager of T. Rowe Price New Horizons PRNHX , died at age 68 . Laporte ran the fund from 1987 to 2010 . A $ 10 , 000 investment at the start of his tenure would have grown to $ 77 , 000 by the end. That’s well ahead of the $ 51 , 000 produced by Russell 2000 .