Morningstar Advisor - August/September 2012 - (Page 23)

Investment Briefs How These Manager Changes Affect Investors Each month in the Morningstar FundInvestor newsletter, Russel Kinnel, Morningstar’s director of mutual fund research, reviews the latest manager changes and whether they were “positive,” “negative,” or “neutral” for the fund in question. Here is his take on some of the biggest manager changes of 2012 so far. He also lists each fund’s Morningstar Analyst Rating in light of the changes. Ariel Appreciation CAAPX Change: Comanager Matt Sauer left March 23 to join a former Oak Value colleague at Lateef. Comanagers John Rogers and Tim Fidler will remain, and there are no plans to add a third portfolio manager. Impact: Negative Analyst Rating: Bronze Russ’ Take: This is a blow but not a disaster. Still, Sauer seemed likely to become lead manager as Rogers had stepped in when the previous comanager left. Fidler was named a comanager in November 2009, so we don’t have much of a track record on him. BlackRock Energy & Resources SSGRX Change: Manager Dan Rice III left June 22 after The Wall Street Journal reported that his family had a large sum of money invested in a family-run energy partnership that had business deals with a company in the fund’s portfolio. BlackRock said it knew of the partnership and potential conflicts of interest and did not have a problem with it. Nevertheless, Rice resigned. Impact: Negative Analyst rating: Neutral Russ’ Take: We lowered our Analyst Rating to Neutral, as Rice’s departure is a blow. I’m also scratching my head over why BlackRock’s compliance department was OK with this. It’s certainly a blow to lose Rice, but comanager Denis Walsh III remains. Fidelity Overseas FOSFX Change: Vincent Montemaggiore replaced Ian Cerulli Says: Taking the Reins of Discretion The fee-based managed accounts segment is experiencing rapid growth in discretionary advisory programs. Discretionary programs grew by 53.6% during the past two years, compared with their nondiscretionary counterparts growing 32.6% over the period. Given the expectation of continued volatility in the markets, Cerulli expects to see further growth of the market share of discretionary programs. The fee-based managed-accounts segment is experiencing rapid growth in discretionary advisory programs, in both advisor-driven and home-office driven programs. Discretionary programs grew by 54% during the past two years, compared to their nondiscretionary counterparts growing by 28% over the period. While there are many factors driving advisors to use these programs, the main reason is the scalability of these programs compared with nondiscretionary programs, where the client needs to give their consent on any manager changes or asset-allocation shifts. Given the expectation of continued volatility in the markets, Cerulli expects to see further growth of the market share of discretionary programs. Managed-Account Assets and Growth Rates Assets ($ billions) Program Classification 1Q 2010 1Q 2011 4Q 2011 1Q 2012 Growth Rates 1Q 2012 YOY 2-Year Discretionary Advisory Programs $731.5 $960.6 $1,013.4 $1,123.8 10.9% 17.0% 53.6% Mutual Fund Advisory ETF Advisory Rep as Portfolio Manager Unified Managed Accounts $349.3 $7.0 $329.9 $45.2 $453.5 $10.8 $427.1 $69.1 $765.9 $463.7 $14.0 $454.7 $81.0 $761.3 $494.9 $15.4 $508.4 $105.0 $833.8 6.7% 9.1% 41.7% 10.1% 42.5% 119.6% 11.8% 19.0% 54.1% 29.7% 52.1% 132.4% 9.5% 8.9% 32.6% Nondiscretionary Advisory Programs $628.6 Mutual Fund Advisory Rep as Advisor Unified Managed Accounts $202.1 $392.1 $34.5 $212.3 $492.9 $60.7 $570.8 $196.6 $498.3 $66.4 $556.4 $2,331.1 $211.5 $547.3 $75.0 $596.6 $2,554.2 7.6% 9.8% –0.4% 11.0% 4.7% 39.6% 12.9% 23.5% 117.3% 7.2% 9.6% 4.5% 11.2% 10.7% 34.5% Separate Acct Consultant Programs $539.0 Total Managed-Accounts Industry $1,899.1 $2,297.3 Note: Numbers presented throughout represent most currently available industry data. Some historical figures may be revised due to newly identified programs, firm restatements, or other adjustments. Source: Cerulli Associates Hart Jan. 10. Hart struggled during his tenure here. Montemaggiore produced decent results at Fidelity Select Banking FSRBX and had run Fidelity Select Industrial Equipment FSCGX. Impact: Negative Analyst Rating: Negative Russ’ Take: Montemaggiore seems to be coming in cold on this assignment, as running a couple of U.S. sector funds doesn’t seem to provide sufficient experience to run a diversified foreign fund. We rate the fund Negative, but we’ll keep a close eye on the fund to see how Montemaggiore fares. Fidelity Value Discovery FVDFX Change: Scott Offen stepped down from this fund on Jan. 10 in order to focus on his new charge, Fidelity Equity Dividend Income FEQTX. 23

Table of Contents for the Digital Edition of Morningstar Advisor - August/September 2012

Morningstar Advisor - August/September 2012
Letter From the Editor
How Much of the Behavior Gap Is Your Fault?
What’s Your View of the Muni-Bond Market?
A Balanced Life
How to Get to Know EMMA
A Strong, Robust Fund Business
Dividend Investing Abroad
Four Picks for the Present
Investment Briefs
Fund Expenses Through the Decades
Autos on Comeback Track
Lessons From the Muni-Bond Rebound
Municipal-Bond Landscape Shifts
Municipal Bonds 101
A Tale of Two Cities
Unraveling the Mysteries of Money
Small Companies Mean the World to Him
The Chinese Art Market and the Origin of Bubbles
The Myth of the Dumb Investor
Stocks That Can Stand the Heat
Our Favorite Mutual Funds
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
The War on Savers

Morningstar Advisor - August/September 2012