BlackRock, Capital Group, Fidelity, and Putnam are the latest firms to cut jobs, and more.
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By Wenli Tan | 11-20-08 | 01:24 PM | Email Article

The global market turmoil is taking its toll on the U.S. mutual fund industry, forcing more firms to lay off employees.

BlackRock plans to cut jobs through the end of this year. Although the firm has yet to disclose the total number of expected layoffs, it has already let go roughly a dozen investment personnel. The list includes Linda Zhang, comanager of  BlackRock Asset Allocation ; Jordan Schreiber, longtime lead manager of  BlackRock Healthcare ; Jeff Gary, comanager of  BlackRock High Income  and  BlackRock High Yield Bond ; and Tom Burke of  BlackRock Fundamental Growth  and  BlackRock Global Growth , along with the team of six or so analysts that supported him. The remaining managers on the Asset Allocation, Healthcare, High Income, and High Yield Bond offerings will take over the departed managers' responsibilities. Jeff Lindsey of BlackRock Capital Appreciation  will take over Fundamental Growth, and Tom Callan and Michael Carey of BlackRock Global Opportunities  will run Global Growth.

Wenli Tan is a fund analyst at Morningstar.

American Funds' parent Capital Group Companies will continue to reduce its staff in the coming weeks. The firm has already eliminated 60 support staffers in its Global Institutional Group in Europe, divided between the London and Geneva offices. The GIG investment management team has not been affected. Capital Group spokesman Chuck Freadhoff says that "as assets under management have declined, the support structure that you build for a larger asset base is no longer needed." He said shareholders of the American Funds, which operate in a separate division of Capital Group, will not be affected.

Fidelity Investments recently announced its second round of layoffs. It is planning to cut roughly 1,400 jobs in the first three months of 2009, which will bring the total number to 3,000, or roughly 7% of its work force. The firm has suffered in the last year, as its equity offerings, including flagship  Fidelity Magellan , have shrunk in size due to steep losses and record-high shareholder redemptions. Fidelity's fixed-income side has struggled, too. A number of its short-term bond funds were caught owning subprime-backed bonds. Fidelity has yet to disclose if this latest round of layoffs will affect its investment staff.

Fidelity's Boston neighbor, Putnam Investments, announced on Monday that it is cutting 47 jobs, including 12 portfolio-management positions. These departures have less to do with cost-cutting than with revamping its struggling equity lineup, though. Previously, almost every equity fund at Putnam was team-managed with quantitative and fundamental managers aboard. New CEO Bob Reynolds says he wants to move to a single-manager format so that there's "individual accountability and responsibility of the funds." He also wants to shift the emphasis away from quantitative research and toward fundamental analysis, which is why almost all the fund managers let go had quant backgrounds.

Putnam departures include Jeanne Mockard and Geoffrey Kelley of  George Putnam Fund of Boston ; Michael Abata of  Putnam New Value  and  Putnam Classic Equity ; James Wiess of  Putnam Investors ,  Putnam Tax Smart Equity , and  Putnam Capital Appreciation ; Bradford Greenleaf of  Putnam Global Equity ; Michael Scafati of  Putnam International Equity ; John Ferry of  Putnam Capital Opportunities  and  Putnam International Capital Opportunities ; Kevin Divney and Brian DeChristopher of  Putnam Vista  and  Putnam New Opportunities ; Rick Weed of  Putnam Small Cap Growth ,  Putnam Discovery Growth , and  Putnam OTC & Emerging Growth ; David King of  Putnam Convertible Income-Growth  and  Putnam New Value .

Putnam also plans to roll the following six funds into larger, cheaper siblings with similar investment styles in the next 30 to 60 days (shareholder approval wasn't required): Putnam Classic Equity will merge into  Putnam Fund for Growth & Income ; Putnam Discovery Growth into Putnam New Opportunities; Putnam New Value into Putnam Equity Income; Putnam OTC & Emerging Growth into Putnam Vista; and Putnam Capital Appreciation and Putnam Tax Smart Equity into Putnam Investors. The acquiring funds' fundamental managers will stay put.

The changes remove some redundancies in Putnam's domestic-equity lineup. The family, however, has announced other, more troubling plans since Reynold came aboard in July 2008. It has filed plans with the SEC to launch a number of trendy offerings, including global sector funds, absolute return funds, and an emerging-markets stock fund. Given the high turnover in Putnam's manager and analyst ranks, these funds are unattractive. For example, David Hilder, who will lead the new Putnam Global Financial, has been with the firm for less than a year and has no previous experience running mutual fund assets.

Curtain to Close on Liberty Ridge Capital, Weiss Peck & Greer, and Goldman Sachs Funds
Liberty Ridge Capital's (the former PBHG Funds that was implicated in the mutual fund trading scandals earlier this decade) days may be numbered. Old Mutual is seeking shareholder approval to merge two of the four funds subadvised by Liberty Ridge Capital, Old Mutual Mid Cap  and Old Mutual Small Cap , into TS&W-subadvised offerings, Old Mutual TS&W Mid-Cap Value  and Old Mutual TS&W Small Cap Value . Old mutual also plans to merge Old Mutual Select Growth  into Old Mutual Large Cap Growth , which are run by the same subadvisors, and Old Mutual Developing Growth  into Old Mutual Strategic Small Company . A special shareholders meeting will be held on Feb. 27, 2009. If approved, the merges will take place on or around March 6, 2009.

Additionally, Old Mutual will terminate Liberty Ridge Capital's subadvisory contracts for Old Mutual Strategic Small Company and Old Mutual Focused  on Mar. 31, 2009. Ashfield Capital Partners will replace the Liberty Ridge on Strategic Small Company and join existing subadvisors Eagle Asset Management and Copper Rock Capital Partners. The firm is still looking for a replacement subadvisor for the Focused offering.

Pending shareholder approval, Robeco WPG 130/30 Large Cap Core  will merge into its more successful sibling  Robeco Boston Partners Long/Short Equity , which is run by managers Mark Donovan and Robert Jones and set to reopen on Nov. 24. The Robeco Weiss Peck & Greer investment team has run its 130/30 offering using quantitative models and the Robeco Boston Partners division has mixed quantitative screening and fundamental research. Robeco has yet to announce the fee impact on existing shareholders. The lackluster Robeco WPG offering charged 1.40%. While we like the Robeco Boston Partners fund's process and team, its 2.75% expense ratio is high. A special shareholders meeting will be held on Feb. 18, 2009. If approved, the merge will take place on or around Feb. 27, 2009.

Two more municipal-bond funds have bitten the dust. Goldman Sachs California AMT-Free Muni Bond and Goldman Sachs New York AMT-Free Muni Bond recently stopped accepting assets. Both funds will be liquidated on or about Dec. 29, 2008.

Capital Gains Distribution Announcements
A number of fund companies have posted capital gains distribution estimates for their offerings.

Vanguard is estimating big capital gain payouts for Fund Analyst Pick  Vanguard Precious Metals and Mining  ($1.95 or 19.4% of its Nov. 19 NAV), Analyst Pick  Vanguard Health Care  ($8.03 or 8.2% of NAV),  Vanguard International Growth  ($0.90 or 7.9% of NAV), and closed large-growth Analyst Picks  Vanguard Capital Opportunity  ($2.03 or 10.3% of NAV) and  Vanguard PRIMECAP  ($3.64 or 8.4% of NAV). Vanguard has estimates posted for its other offerings as well.

Shareholders of  Oppenheimer Developing Markets  and  Oppenheimer Global Opportunities  also will receive sizeable payouts. Developing Markets will make a distribution of $7.20 per share or 33.9% of its most recent NAV and Global Opportunities will pay out $2.74 or 17.2% of NAV. The bulk of the payouts will be long-term gains which are taxed at lower rates than short-term ones. Click here for Oppenheimer's estimated distributions for its fund lineup.

Tweedy, Browne expects to distribute $2.13 or 15.3% of NAV for  Tweedy, Browne Value ; $2.60 or 14.6% of NAV for  Tweedy, Browne Global Value ; and $0.04 or 0.6% of NAV for  Tweedy, Browne Worldwide High Yield Dividend Value .

Securities mentioned in this article



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Wenli Tan does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.
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