BOSTON -- Subadvisers are now managing about 20% of all long-term (nonmoney market) mutual funds, according to data from Financial Research Corp. About 42% of all international equity funds, for example, are managed by subadvisers, FRC found.
The median management fee for subadvised funds was higher than for internally managed funds -- 0.65% vs. 0.55%. Subadvised domestic equity funds carried an average 0.70% management fee compared to 0.68% for in-house managed funds.
But, for the year ended March 31, subadvised funds returned an average 17.35% compared to 16.63% for in-house funds, FRC found. Over three years ended March 31, subadvised funds returned a cumulative 59.62% vs. 56.55% for internally managed funds. Subadvised funds in all assets classes performed better than internal funds over the three years, with U.S. equity funds doing so by the widest margin (cumulative return 98.02% vs. 93.35% for internal funds).
Vanguard reports drop in expense ratios
MALVERN, Pa. -- The average expense ratio of the 94 mutual funds administered by the Vanguard Group of Investment Cos. fell almost 4% in 1997, resulting in $800 million in savings to its defined contribution plan clients.
The drop in the average expense ratio from 0.29% to 0.28% last year of average net assets brought Vanguard's expenses even further below the rest of the industry. The mutual fund industry's average expense ratio jumped to 1.24% in 1997 from 1.21% in 1996, according to Lipper Analytical Services Inc., New York.
Vanguard officials calculated the savings the expense reduction brought to retirement plan clients by applying the 0.96% expense ratio differential to Vanguard's 1997 average defined contribution plan net assets, excluding company stock. Vanguard has about 3,000 institutional clients with $150 billion in assets..
F. William McNabb, managing director of the Institutional Investor Group, said the company was able to lower expenses because of the robust growth of the corporate defined contribution plan client assets, the very strong performance of financial markets last year and Vanguard's at-cost corporate structure.
Lipper data for the 10 years ended Dec. 31, showed Vanguard's stock funds on average outperforming 65% of their peers. For the one year ended Dec. 31, Vanguard equity funds on average outperformed 58% of peer funds.
Janus closes overseas fund to new individual investors
DENVER -- Janus Funds closed the $4.2 billion Janus Overseas Fund to new individual investors April 20 to moderate cash flows. Laurence Chang was promoted to co-manager of the Overseas Fund from assistant portfolio manager. Helen Young Hayes is the fund's other co-manager. Mr. Chang also serves as the assistant portfolio manager for the $13.1 billion Janus Worldwide Fund, which Ms. Hayes manages.
The fund remains open to investments from employees of existing defined contribution plan clients and to investment advisers who make investments in the fund through omnibus accounts. As of March 31, $581 million was managed for defined contribution plan investors.
State Street to aid new Calvert mutual fund
BETHESDA, Md. -- The Calvert Group hired State Street Global Advisors, Boston, to subadvise its newest mutual fund, the Calvert Social Investment Fund Managed Index Portfolio. The socially responsible fund's mandate is to exceed the total return of the Russell 1000.
Calvert will use quantitative and qualitative analyses of the companies in the Russell 1000 to screen out companies that do not pass its social screening criteria. About 50% of stocks in the index will pass the social screen.
SSgA will then use an optimization model in order rebuild the portfolio so that industry weightings and investment characteristics are similar to those of the Russell 1000 using stocks that meet the social criteria.
The fund will be targeted to institutional investors, retirement plans, registered investment advisers and individuals.
Vanguard/PRIMECAP closed to new investors
MALVERN, Pa. -- The Vanguard Group of Investment Cos. closed to new investors one of its best-performing, actively managed equity funds -- the $10.2 billion Vanguard/PRIMECAP Fund.
The fund was closed to all new investors April 21. Existing individual shareholders are limited to investing $25,000 per year into the fund. New and existing participants in defined contribution plans are still permitted to invest in the fund in line with the requirements of their plan.
Vanguard officials are closing the fund for the second time in its history in order to control future asset growth, Jack Brennan, Vanguard's chief executive, said in a statement. The fund previously was closed for 18 months beginning March 7, 1995, because company officials believed then that accelerating levels of cash flows into the fund were coming from short-term, speculative investors.
Vanguard/PRIMECAP is very popular with defined contribution plan investors. It ranked 22nd in Pensions & Investments' annual survey of the funds most used by defined contribution plans, with $3.641 billion invested in it by defined contribution plan investors as of Dec. 31. The Vanguard/PRIMECAP Fund also has frequently topped P&I's one-, three- and five-year performance ranking of mutual funds most popular with defined contribution plans.
The fund has been subadvised since its inception by PRIMECAP Management Co., Pasadena, Calif.
Hancock fund board OKs 4-1 share split
BOSTON -- The Board of Trustees of the John Hancock Emerging Growth Fund approved a 4-to-1 share split effective May 1. The move was made in order to bring the share price down to make it more attractive to new investors, said Anne Hodson, president and chief operating officer of John Hancock Advisers. The price of an A share April 20 was $42.69; the B share price was $39.80.
* Scudder Kemper Investments, Boston, launched the Scudder Real Estate Investment Fund. The fund's management team -- Jennifer P. Carter, James "Mac" Eysenbach and Philip S. Fortuna -- seeks long-term growth of capital and current income by investing in real estate investment trusts and real estate-related companies in various markets, regions and property types. The fund has no front-end or back-end sales charges or 12b-1 marketing fees.
* Founders Asset Management, Denver, appointed Paul A. LaRocco manager of the Founders Special Fund. He replaces Michael Haines, who will concentrate on managing the Founders Frontier Fund and Doug Loeffler, who continues to manage the Founders International Equity Fund.
Mr. LaRocco recently was a vice president at OppenheimerFunds, where he managed the $950 million Capital Appreciation account for variable annuity clients and the Oppenheimer MidCap Fund, and was associate manager of the Oppenheimer Discovery Fund. A replacement is being sought.
* The Vanguard Group of Investment Cos., Malvern, Pa., received SEC approval for three new indexed mutual funds: the Mid Capitalization Stock Portfolio; Small Capitalization Value Stock Portfolio; and the Small Capitalization Growth Stock Portfolio. The Vanguard family of mutual funds now numbers 25.
* Security Capital Group Inc., Chicago, opened its first real estate mutual fund, the Security Capital U.S. Real Estate Shares, to public investors April 20. The fund is now available for individual and institutional investors.
The fund is managed by Security Capital Global Capital Management Group, which integrates in-depth proprietary real estate market research with sophisticated capital markets research and modeling techniques to identify and invest in those public real estate companies with the greatest potential for attractive returns.
The fund has been up and running since Dec. 20, 1996, with an average annual return of 23.1% through March 31.
* Diversified Investment Advisors, Purchase, N.Y., widened the spectrum of its Strategic Asset Allocation Fund family with the addition of the Short/Intermediate Term Horizon Fund and the Long Horizon Fund. There are now five time-weighted asset allocation funds in the series. All five invest in Diversified's existing manager-of-managers equity, bond and money market mutual funds. They are designed for use in the defined contribution plan market.
* Prudential Investments, Newark, N.J., added two mutual funds, the Real Estate Securities Fund and the High Yield Total Return Fund. The real estate fund is value-oriented and invests in REITs. The portfolio manager is Robert McConnaughey.
The fixed-income fund invests in high-yield bonds, seeking both income and capital appreciation. Fund co-managers are George Edwards and Paul Price, who use bottom-up analysis to select between 75 and 100 bond issues.
* Chase Global Mutual Funds Group, New York, reinforced its brand name identity by stamping its Vista mutual fund family with its own name. The 32 Vista Funds are now known as the Chase Vista Funds and have about $38 billion under management.
Christine Williamson can be reached at [email protected]