Plus, RiverSource's trendy new fund, and more.
By Katie Rushkewicz Reichart, CFA | 02-19-09 | 03:22 PM | Email Article

After record-setting outflows plagued mutual funds in 2008, the industry is starting to show signs of improvement. All asset classes experienced inflows in January except for balanced funds (a mix of stock and bonds), which shed $871 million, according to Morningstar Market Intelligence. U.S. stock funds were the biggest beneficiary, with $5.8 billion in net inflows. Among categories, intermediate-term bond funds led the way with $5.8 billion in new assets. Large-blend funds--the biggest category in terms of total assets--had $3.2 billion of inflows, and the high-yield bond category was not far behind, with nearly $2.8 billion in new money. Foreign large-blend funds came back strong after losing nearly $8 billion during the past year, taking in $1.6 billion in January. Municipal national short and short-term bond funds were also big recipients of new money.

Katie Rushkewicz Reichart, CFA, is a director of equity strategies for Morningstar.

Other categories didn't fare as well. After shedding $30 billion during the past year, moderate-allocation funds continued to lose money, with $1.6 billion of outflows in January. World-stock, large-growth, and world-bond funds also had sizable redemptions. And although many investors flocked to government-bond funds in 2008 as a safe haven from the market turmoil, these funds have recently had outflows as investors have started parking their money elsewhere. In terms of fund families, PIMCO, T. Rowe Price, and Dimensional Fund Advisers took in the most money in January while Putnam, Oppenheimer Funds, and ProFunds were at the other end of the spectrum.

RiverSource's Timely (but Trendy) Launch
RiverSource is wasting no time capitalizing on the economic stimulus plan, launching RiverSource Recovery and Infrastructure Fund just days after the stimulus bill was approved. The fund will target utility, energy, and industrial companies expected to benefit from the federal money tapped for new infrastructure projects. Warren Spitz, comanager of several funds, including  RiverSource Mid Cap Value  and  RiverSource Diversified Equity Income , has been named manager. The new assignment is not a stretch for Spitz, a contrarian investor who has made large sector bets in energy and industrial materials with a fair amount of success at his other charges. Nonetheless, infrastructure funds don't have the best track record. Investors may be better off with a more diversified offering.

State Street's Newest ETF
The $270 billion State Street Global Advisors continues to roll out fixed-income exchange-traded funds, launching SPDR Barclays Capital Intermediate Term Credit Bond  on Feb. 11. The ETF tracks the Barclays Capital Intermediate Credit Index, which is made up of investment-grade corporate and noncorporate bonds with maturities between one and 10 years. Investors can purchase it for 0.15%.

Marriages of Convenience
In a bizarre move, Hartford is merging several small specialty funds into a more diversified offering. Hartford Global Communications , Hartford Global Financial Services , and Hartford Global Technology , each with less than $30 million in assets, will merge into the $13 million world-stock fund, Hartford Global Equity , pending shareholder approval. The decision to fuse funds with such different objectives is perplexing and will not necessarily serve shareholders well. In order to minimize tax implications, the diversified Global Equity fund may be forced to hang on to some of the specialized financial and tech stocks for a while, which could interfere with the fund's strategy. Liquidating the struggling sector funds may have been a more shareholder-friendly move. Hartford also announced that Hartford Tax-Free California  will merge into Hartford Tax-Free National , pending shareholder approval. Meanwhile, it's curtains for Hartford Large Cap Growth , a fledgling fund that never got off the ground since launching in late 2006. The $12 million fund started distributing cash to investors Feb. 17.

Several ING sector funds have also joined more established and diversified siblings. ING Global Science and Technology  merged into ING MidCap Opportunities , and ING Growth and Income  acquired ING Financial Services  and ING Fundamental Research . As with the Hartford mergers, these moves don't seem very logical from a shareholder's perspective.

Harbor Adds Subadvisor
Northern Cross, LLC has been named co-subadvisor to Analyst Pick  Harbor International . Howard Appleby, Jean-Francois Ducrest, James LaTorre, and Edward Wendell will join Hakan Castegren from Northern Cross Investments, Ltd., as managers of the $16 billion foreign large-value fund. The new comanagers are hardly new to the fund, though, having served as analysts for years under Castegren, a two-time Morningstar Fund Manager of the Year who has run the fund since its 1987 inception. The change will have little impact other than on paper because the group was already highly involved in the decision-making process. Fees will remain unchanged.

Delaware Departures
Robert Collins, comanager of Delaware's 12 municipal-bond funds since 2004, will retire at the end of March. Comanagers Joe Baxter and Steve Czepiel are still with the firm, so the effects should be minimal. Philip Perkins of  Delaware Diversified Income  will also depart at the end of March, leaving the remaining six members of the team intact.


Securities mentioned in this article



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Katie Rushkewicz Reichart, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.
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