FYI: A blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by experts," Burton Malkiel famously argued in his classic 1973 book, A Random Walk Down Wall Street.
Regards,
Ted
http://online.barrons.com/news/articles/SB50001424053111903927604579634603846777722#printMode

@rjb112
$439---"like" wow. It wasn't so long ago (or was it?) that I recall a $100/yr rate. I had no idea. I dunno, for what you get--- would "deplorable" be too harsh? At some point, the little indignities stack up until .... change is required. [I just watched part of a Senate hearing today, where a rep from TD Ameritrade was compelled to admit that almost all retail investor trade orders were sent into a queue used by HF traders. How often? Most of the time, for quite some time. And how often was it more to TDA's financial benefit when they did it this way? Virtually every time, the rep answered. (sigh)]

Why David, how can you question their sincerity, how can you harbor any doubts of their abject devotion to your financial well-being?

Could it have anything to do with the fact that they charge me $439 for a three year subscription?

Why David, how can you question their sincerity, how can you harbor any doubts of their abject devotion to your financial well-being?
Move toward the light, David, just move toward the white light.
"Client solutions"
Manage "client dynamics"
Why do these phrases trigger tiny involuntary twitches, and have me feeling it is imperative I should immediately emit a primal scream and dash into the darkness? :) I dunno, it's a puzzle.
@Charles No need to over-worry; sometimes they let the engineers and authors live.

I'm not so sure she was upbeat in her conference as she was clear that the status quo goes on. (aka "nothing to see here, move along" aka "This is not the inflation that you are looking for" aka "This is not the bubble you are looking for, either, while we're at it", etc.)
Even CNBC was skeptical of some of her answers (how dare the financial comedy network question zee Chairwoman, even Steve Leisman of all people....)
http://www.zerohedge.com/news/2014-06-18/those-soaring-food-and-gas-prices-fed-has-name-them-noise
Amused by this comment in the comments section: "It's all discretionary...as in, it's up to the discretion of whomever is telling you the inflation rate, whethere or not to actually present the inflation rate to you."
Made actually a lot of changes today, but I will say these changes do not have me getting more conservative.
Fedex did have very good numbers this morning. I continue to like UPS/FDX and the rails (although CP has gotten ahead of itself.)

Many (most?) people who use MFs for fixed-income investing do so in diversified vehicles that to a greater or lesser extent are also multi-sector. There are also some who are more contrarian, who rotate successfully/opportunistically from one fixed-income asset class to another, as good value arises from dislocations. Some do both.
This blog briefly notes the positives of both, in the context of how each approach could be impacted by measures the Fed Reserve is "considering" as part of a financial crisis action plan:
http://blog.alliancebernstein.com/index.php/2014/06/17/multisector-plan-can-help-avoid-the-crowd-in-credit/
You see, according to the Fed trial balloon leakthinking, under dire circumstances, retail investors in some transparent, open-end mutual funds might stampede for the exits in large sector-specific funds (the horror!); the degree to which this spasmic disorder would threaten the banking system of the country is so unpredictable, yet similar in impact to what one might expect to come from the "shadow banking system," that one should create contigency plans for a run on these funds as if they are part of the "shadow banking system." At least that's the way I'm interpreting what I've read here and elsewhere about this contrivance discussion:
http://www.ft.com/intl/cms/s/0/290ed010-f567-11e3-91a8-00144feabdc0.html?siteedition=intl#axzz34uHmImp0
See what you think, esp. you dangerous single-silo credit allocators.

Of the value-oriented ones, it's interesting how very much better FLPSX does than HWMIX if you start in the summer of 2007, which is what I always advise.

Do you have a tool or financial calculator that you use to determine the total return of any mutual fund using whatever start and end date you want?
You can use Adjusted Closing prices from Yahoo Finance, but I'm not confident in the accuracy of this method.
It's easy to calculate percentage price change using any start and end date, but distributions [dividends, long and short term capital gain distributions] have to be added in to the calculation, making things more complicated. And you have to find out all the distributions that took place from the start and end date in question. The NAV goes down by the amount of any distribution.

Nice to see the few funds that I own that are on these lists were recommened to me by my financial advisor, funds that I would not have looked at if I was still picking only ntf funds and no load funds at my former brokerage house. She keeps earning her fee :)

The article is so typical of financial writers and publications, all about "what have you done for me LATELY". No wonder the average investor does so much worse than the funds she/he invest in.

Hi Ted,
It appears that you have decided to continue the march, at least for now. That's good. Thank you.
Indeed you have been doing this form of research for years, and I have benefited from it since the early FundAlarm days. Compared to your time on the job, Barry Ritholtz is a rookie. He was likely in the 4th grade when you posted your first listing.
I’m happy that you have elected to basically ignore the MFO naysayers except for your very perceptive summary sentence. This too reflects your overarching experience level.
I suspect some segment of these naysayers adhere to the following advice which was published about 7 months ago by Ritholtz titled “Reduce the Noise Levels in Your Investment Process”:
" (1) Constantly consume mainstream media. Financial television is an excellent source of actionable investing ideas.
(2) Play down data. It’s overrated. Stick with anecdotes from people you know personally and your gut instincts.
(3) Pay attention to pundits. They exist for the sole purpose of helping you reach a comfortable retirement.
(4) Get the inside dope. All of the important information about the stock market — especially when it is going to crash or rally — is known only to handful of secret insiders. If you can’t get their magic knowledge, blame them for any losses you incur.
(5) Stress about this. Exert lots of energy, spend lots of time and create lots of tension about all of the following: Federal Reserve and the Taper, the Dollar versus the Euro, the Tea Party and Congress, Hyper-Inflation, European Sovereign Bank Debt, Gold, China, Deflation, Austerity and the Hindenburg Omen.
(6) Don’t do the math. Numbers are vastly overrated, and probability analysis is for geeks anyway.
(7) Stay in your comfort zone. Focus only on those news sources that are in sync with your politics. Seek out sources that confirm your preexisting opinions and investment postures. Never read anything that challenges your beliefs.
(8) Think fast. Trading is where the big money is made! Don’t worry about the long term — it’s way off in the future. Measure your success in hours and days, not years and decades.
(9) Have a Super Happy Fun Time. There is no reason that you cannot also have a good time with your retirement account: It’s tax -deferred, so you have no capital gains consequences. Have fun with it — that’s what it’s there for anyway!
(10) Ask: What Have You Done For Me Lately? Never listen to people with good long-term track records who may have had a losing period. When Warren Buffett underperformed in 1999, you should have written him off. Investing is about recent performance!"
Of course, Ritholtz was just showing off his sarcastic side. He meant and believes just the opposite. He called this subsection of his article “How to Get More Noise and Less Signal”. I love it! In this arena you and Ritholtz share some common characteristics.
Thanks once again for doing this arduous task. It has saved me and many other MFO members countless hours of searching time while wisely directing our attention to meaningful candidate articles that will positively inform us in most instances.
Continue to continue the march.
Best Wishes.

FYI: Copy & Paste 6/13/14: Jason Zweig: WSJ
Regards,
Ted
Investing graybeards like to say that "bull markets climb a wall of worry." This one has been sleepwalking up a wall of boredom.
As of this Friday, the S&P 500 has gone 980 days without a 10% decline, according to Birinyi Associates, the fifth-longest such stretch on record. This past week's nervousness, set off by the insurgency in Iraq and the surprise defeat of U.S. Rep. Eric Cantor, is thus the perfect pretext for investors to think about what they will do when the market takes a serious beating.
For, sooner or later, it surely will—and those investors who have honestly prepared for it will stand the best chance of surviving unscathed. In a downturn, you won't be the same investor that you are now—unless you rely on rules and procedures, rather than willpower alone, to regulate your behavior.
New research shows that the kind of stress brought on by a collapsing stock market fundamentally changes how people make financial decisions.
In a series of recently published experiments, Mauricio Delgado, a neuroscientist in the psychology department at Rutgers University in Newark, N.J., has found that even a moderate amount of sudden stress can make people more sensitive to losses and indifferent to small gains.
In these experiments, people are put under stress by immersing their dominant hand in ice water (at about 39 degrees Fahrenheit) or wearing an arm wrap cooled to the same temperature. Shortly thereafter, most people show an impaired short-term memory and an elevated level of the stress hormone cortisol. Stress in the world outside the laboratory, often brought on by social interactions, is almost certainly more intense than this simple simulation in the lab, says Prof. Delgado.
People are then asked to choose between simple gambles with varying odds and different amounts of money at stake. Under stress, participants gravitated toward bets giving them a higher probability of making a smaller amount of money. When gambles paid off, brain scans show, the natural response in the reward areas of the brain was blunted by stress.
"Exposure to stress makes people more loss-averse and diminishes their overall sensitivity to reward," says Prof. Delgado. "And if a reward is of low magnitude, [people under stress] often don't care about it very much."
Thus, at the very moment when falling prices make assets more attractive to own, most investors are likely to focus on how much they are losing in the short term—rather than on how much they stand to gain if they hang on for the long term.
They are also likely to fall back on emotional—or what Prof. Delgado calls "habit-based"—decisions. "Stress tends to exacerbate your typical biases," he says. "If you usually make conservative choices, it will make you more conservative." And if you typically make risky choices to avoid locking in losses, he says, stress "will make you more risk-seeking." Other researchers have found similar patterns of behavior.
That helps explain why investors who swore they would never sell often end up fleeing to cash when stocks drop, while others add more to their positions than they ever anticipated.
In calm times, like the markets of the past few months, it's hard to imagine how you will feel when all the arrows turn to red from green. What's more, even in the heat of the moment, when your body and brain show the signs of acute stress, you might not be consciously aware of the pressure you are under.
So it's vital to make sure you have procedures in place now to control your future stress.
Start by asking yourself where the potential is greatest for nasty surprises. One obvious vulnerability: Companies that have rung up a long string of consecutive earnings increases are likely to fall much more steeply than average once their profits falter. If imagining the stock price falling by, say, one-third doesn't make you want to buy more, then you probably should consider selling now.
Force yourself to consider the total value of your portfolio, including all other assets, rather than just focusing on the price of your latest loser. That is often called "thinking like a trader," although you don't have to be a trader to do it.
By netting all your gains and losses against each other, research by several economists and psychologists has shown, you can reduce the intensity of your emotional response to falling prices. Be sure you have set up a spreadsheet or portfolio-monitoring software that displays the value of your overall portfolio more prominently than any individual holding.
If you haven't recently "rebalanced," selling a bit of whatever has gone up the most and adding the proceeds to whatever has gone down the most, now is an ideal time.
Taking moderate action now, while markets are still calm, should help you avoid doing something reckless when investing turns suddenly stressful.

David, how do you handle over zealous, groundhog day, ever repeating, broken clock posters?? It's hard not to engage them in sometimes contentious discussions.
Edit: OK, edited former post. I guess the best way and most harmonious for the board is to simply avoid such posters by not clicking on their posts.

Junkster, Appreciate your editing. I thought the earlier swipe at a former poster was unfounded and unkind. But, I'm with you in the essence of the rhetorical question you ask of David. I enjoy contention. IMHO contention is very much a part of being a "vibrant" board. Do we really want sterility? As qualifiers, I think this contention should be directed (1) at issues rather than personalities and (2) towards members you are reasonably confident can handle that kind of give and take. By that I mean don't run somebody into the ground who you believe will suffer injury as a consequence. Use some common sense in whom you choose to pick a fight with. I'll confess to having unwittingly gone overboard in contentiousness in the past. Part of the learning curve here is to learn when to stand up and when to stand down.
I do agree with David's admonition not to attack someone's portfolio - unless, that is, they have specifically invited criticism. But if somebody simply has the b**** to lay it out there as an example of their thought process and not as a model for imitation; than decorum, I believe, should dictate that we not attack their investment choices. Years ago I emailed a humble apology to a board member after criticizing his/her unusually high cash level during a board discussion. It had dawned on me sometime later (duh) that should the markets crater and this person and their spouse loose a large portion of their life savings, it would be they (and not me) that would suffer the financial consequences. Maybe all of us should keep that fact in mind.
It's a great board with some great minds. Let's keep it great. Regards

@STB65:
Many financial planners and financial advisers will not use high yield bonds in the mix, as they behave more like stocks and not much like Treasuries. They don't diversify away stock risk. And reducing stock market risk and diversification is the reason they are using bonds in a portfolio. So take for example David Swensen, who wrote Unconventional Success: A Fundamental Approach to Personal Investment by David F. Swensen (Aug 2, 2005). He goes into great detail about why he only recommends Treasury bonds in the bond allocation. He is the portfolio manager of the Yale endowment. Or Larry Swedroe, author of multiple books and articles. He will only use extremely high quality bonds in the bond allocation. Again, because junk bonds don't provide the diversification and risk reduction they are looking for. Take a look at how high yield bonds performed during the financial crisis of Oct 2007-March 9, 2009. Junk bonds performed like stocks, both on the way down and then on the way up after March 9, 2009.
I have tremendous respect for Rick Ferri, who does include junk bonds in his allocation for clients, and also Larry Swedroe, who does not. And also for David Swensen, who, although I do not believe he has financial planning 'clients', wrote his book to advise the non-professional investor about how to construct their portfolios. David Swensen in his book recommends 15% in TIPS and 15% in Treasuries, 20% in REITS, the other 50% in globally diversified stocks (and he specifies the stock breakdown by US, developed foreign, and emerging mkt)

FYI: Copy & Paste 6/13/14: Zachary Karabell: Barron's
Regards,
Ted
Editor's Note: Karabell is head of global strategy at Envestnet, a leading provider of wealth management technology and services to investment advisors.
We live in a world that emphasizes risk. That is true in general, but is especially so in the financial world. Since the financial crisis of 2008–2009, financial professionals have been acutely attuned to risk—and for good reason. Too many felt they were caught off-guard and unprepared by the near-implosion of five years ago. That in turn followed volatile periods from the Internet bubble of 1999 into early 2000, through the events of 9/11, and then a sharp market contraction until October 2002. After nearly 15 years of drama, it is hardly surprising that the financial world is primed for risk.
Hardly surprising, but a problem nonetheless. The heightened sensitivity to hidden risk muddies analysis, and can potentially lead to mispricing of assets and hence, less-than-optimal investment decisions.
The current yields and attitudes towards both high-yield ("junk") bonds and emerging-market debt are prime examples. Both are seen as risky assets with both known and unknown pitfalls. The International Monetary Fund (IMF) in April warned that many investors in emerging-markets bonds may be unaware and unprepared for a combination of slowing growth and rising rates that could impact many portfolios negatively, especially given the surge of money into emerging-markets bonds since 2008. There is now $76 billion in retail mutual funds focused on the space, up from $12 billion before 2008. The IMF also emphasized the increase in issuance, with $300 billion in emerging-market corporate bonds coming to market last year alone. That is frequently interpreted as a sign that the market is—to use a common cliché—"getting frothy."
But is it? It is too easy these days to make the argument for bubbles, bubbles everywhere, and for overpriced assets at every turn. In light of a volatile 15 years, where the downs have felt more severe than the ups, such arguments are intuitive and have emotional resonance. That does not, however, make them correct.
A Matter of Perceptions
Both high-yield ("junk") bonds and emerging-market debt are perceived as inherently more risky than many more vanilla investment options. There are at least two types of risk: greater chance of loss (more downside) and greater volatility. Compared with, say, blue-chip large cap companies such as IBM (IBM) or Walmart (WMT), or with investment-grade bond portfolios, or with U.S. Treasuries, junk and emerging-market debt are understood as riskier and hence provide higher returns to lenders in the form of higher-interest rates. They are also susceptible to price swings that can be intense.
Last June of 2013, when then chairman of the Federal Reserve (Fed) Ben Bernanke hinted that the Fed would begin to pare its bond-buying program, emerging-market debt sold off very hard, with prices dropping in many instances by more than 10% in the space of weeks. The reason was not a sudden change in the fundamentals of Turkish or Brazilian bonds, but rather the market perception that those bonds had seen strong inflows based largely on the presence of so much money in the global system as a result of Fed policies. The concern was that when the Fed began to trim the easy, easy money, those bonds would see both outflows and a drop in demand.
And yet, a year later, the Fed is aggressively trimming its bond-buying program, having reduced its monthly purchases almost in half and on a glide path to reducing them entirely by year-end. Emerging market bonds, meanwhile, have recovered all of what they lost in June 2013 and yields are actually lower after the recent run since May. The market interpretation that these assets were simply a derivative of a Fed bubble was wrong.
Of course, it may only be temporarily wrong. Another shock to the global system could well prove the risk interpretation correct. The ever-present concern that all financial assets are still being artificially boosted by central bank liquidity won't fully dissipate until central banks tighten globally. With the actions by the European Central Bank (ECB) announced on June 5, however, we are nowhere near an end to these policies. In fact, the ECB, led by its president Mario Draghi, is now embarking on its own policies of quantitative easing just as the U.S. Fed is pulling back.
Combined with the easy money policies of Shinzo Abe in Japan, we are in for a considerable period of significant liquidity. And then there is the surfeit of liquidity in sovereign wealth funds—well in excess of $5 trillion—and in corporate balance sheets which add trillions more. If you are waiting for a liquidity squeeze, you might be waiting for a long, long time.
The market price for high-yield and emerging-market debt suggests that the prices being paid and the rates being offered for these instruments are not pricing in much risk. Low-rated bonds still bear the moniker "junk" from a time in the 1970s and 1980s when low-rated or questionable businesses simply could not get financing from banks at any price and had to pay much more generously to investors to compensate them for the risk.
Today, however, many, many low-rated bonds have only a slightly higher level of actual risk—as defined by default risk—than bonds considered "safe." Over the past three years, the default rate for bonds rated "junk" (i.e. those rated 'BB' or lower by Standard & Poor's, or 'Ba' or lower by Moody's) has been only a few percentage points worse than those rated investment-grade. Except for a spike in 2009, in fact, when low-rated bonds had a default rate of more than 8%, so-called "junk" bonds have had a default rate of less than 5%, and in the past few years less than 2.5%. The very lowest ratings, C and less, have had higher default rates, as to be expected. But bonds with a B rating have had default rates of less than 1.5% since 2003.
The picture is similar with emerging-market bonds. Yet both emerging market and high-yield still trade at a significant premium to treasuries and investment-grade corporate bonds. Yes, those spreads have been compressing, and as more money has poured into these bonds in the past few years, they have compressed further.
The modest spread between high-grade bonds on the one hand and emerging markets and high-yield on the other is itself taken as an indication that investors may be investing too much in higher-risk assets. As more money has poured into funds that invest in those assets, prices have risen and yields have therefore dropped. The question for many now is whether those yields are appropriate given the nature of the risk.
Staking the Middle Ground Between Risk and Return
There is, of course, no easy answer here. There is the very low default rate, save for the worst credit quality. There is the reality that many emerging-market bonds, whether corporate or sovereign, are issued by countries and companies that are risky only because countries such as Mexico, Turkey, and South Korea were once considered riskier. And there is the fact that we live in a world suffused with capital with low inflation, which means that legitimate entities do not need to pay exorbitant rates.
If you believe that we remain in an artificial lull of easy money provided by central banks, that rates will rise sharply soon enough, that markets will roil, and that there is some new crises just beyond the advent horizon, then yes, emerging market and high-yield debt will suffer disproportionately.
If not, however, these assets may not have significantly greater downside than U.S. Treasuries and investment-grade corporate debt even as they carry a risk premium that assumes they are. Until the investing world stops fixating on risk and focuses more prominently on return, that will remain the case.

Kinda cherry-picked their interval there, dontcha think? 1989-2014
Also, did the review not consider the "dividend capture" strategy, that arose in some funds--- to one degree or another--- in the mid-2000s? That worked well until the financial crisis of 2008/9; thereafter... not so well would be putting it mildly. :) sigh

@jlev I understand your sentiments. That's why I added the caveat--- catch it at the right price--- because that would be the only way I could stomach the roller coaster. But that's the REIT index all over anyway, isn't it?
An additional concern has arisen for me recently re.PETAX: the distribution yield. It was great for quite awhile after the financial crisis, but lately... not so much. If it should prove to be highly variable as well, at certain times, then that would take away one of the positives of going with this fund as (a part of) one's real estate investments. IMO.

So it looks like Ian Lapey is out as lead portfolio manager of third avenue value fund.

Something is wrong here. I own TAVFX, and my kneejerk reaction is simply to sell it. It's in an IRA so there are no tax considerations. This is a big, big deal. I'm surprised there is so little discussion here or so little information on the web.
On the other hand, nothing drastic is likely to happen soon absent something drastic in the market itself. And based on what Marty Whitman has said, if I sell now I will be selling a basket of stocks stocks
1. At yooge discounts to their readily ascertainable net asset value
2. that have a super strong financial position
3. That Third Avenue management believes can grow at at least 10% per annum compounded.
(Seems as though the buyer would be getting the better end of that deal.)
On the 3rd hand :) there are certainly lots and lots of funds with an equally bright-looking future.
I feel like there is a dearth of information here, and I am really not liking the situation. As there are no tax consequences I am likely to say adios and start afresh.

Hi, guys.
The nice folks at the Leuthold Group share a copy of Perception for the Professional, their research publication for paying clients, with me each month. About 60 pages of data analyses and reports. Jun Zhu this month wrote "Dividend Paying Strategies -- Which is Best?" and the findings are interesting.
Zhu notes that dividend-oriented strategies have been exceedingly popular, though many now fret that those stocks have been badly bid up. There's also a fear that dividend paying stocks lag when interest rates are rising. That turns out to be true, but not an investable insight: rate rising cycles tend to be triggered with little warning and last an average of nine months.
Even allowing for a lag during the 20% of months in which rates have risen, the strategy works well over time. Zhu writes "In the falling rate and neutral months, dividend paying stocks outperformed non-dividend paying stocks by a large margin. Regardless of interest rate changes, from 1927 to 2013, dividend paying stocks were the winner."
Zhu argues that there are at least four distinct dividend oriented (or dividend-oriented? Drmoran notes that I over-hyphenate. Overhyphenate? Over hyphenate?) strategies that manifest themselves in funds and ETFs. They are:
1. broad focus on dividend-paying stocks, which typically imposes simple size and liquidity requirements, then invests in dividend paying stocks.
2. high dividend-yield, which targets the highest-yielding stocks.
3. dividend growth, which requires consistent increases in payouts over 5-10 years.
4. quality dividends, which adds screens for the quality of the firm's financial strength and management. Those might include debt load, return on equity, earnings stability and dividend coverage ratios.
Leuthold tested those strategies by looking at the performance of dividend oriented ETFs from 1989 - 2014. They admit that few of the ETFs represent pure instances on one strategy of another, but most are strongly aligned with one of them.
They found (1) the dividend strategies as a group substantially outperformed the S&P500 (12.2% annually versus 9.0%) with lower volatility (4.2% S.D. versus 4.3%), (2) that "companies which have raised dividends for 10 consecutive years are actualy the worst performers" and (3) the quality dividend strategy blew away the competition on returns without incurring heightened volatility.
Quality dividend ETFs returned 14% annually with 4.1% S.D. The other three strategies clustered between 10.9% - 12.2% returns with S.D.s of 4.0 - 4.5%.
Charles might be the one to ponder about the mutual fund implications of the research, since fund managers add the overlap of relative value and absolute value orientations. As I think about the funds we've profiled, Guinness Atkinson Inflation Managed Dividend (GAINX) strikes me as a quality dividend / relative value bunch while Beck, Mack and Oliver Partners (BMPEX) would qualify as quality dividend / absolute value.
Leuthold's list of "quality" ETFs includes:
Schwab US Dividend Equity (SCHD)
iShares High Dividend Equity (HDV)
FlexShares Quality Dividend Index (QDF)
First Trust Value Line Dividend (FVD)
WisdomTree US Dividend Growth (DGRW)
FlexShares Quality Dividend Dynamic Index (QDYN, with the note this is a higher beta product)
FlexShares Quality Dividend Defensive Index (QDEF, lower beta).
For what interest it holds,
David

Quoting: "Isn't Ukraine a risky bet, even for you?
This isn't much different than others. During the financial crisis, Lithuania ran into short-term solvency challenges because it couldn't access capital markets. We were the largest investors providing them short-term liquidity. Now, Lithuania is issuing debt with very low yields, and no one even talks about it. That took about four years. Hungary also took about two to three years to pay off. We may need to be patient. It may be three years before some of these factors can move in a positive direction in Ukraine."
.....I note that my PREMX still holds debt from The Ukraine among its top 5 positions--- but just 1.51% of total AUM. (Fund Manager is Michael Cornelius.) And the last time there was a change to the portfolio reported, PREMX had reduced its Ukrainian position.
http://portfolios.morningstar.com/fund/holdings?t=PREMX&region=usa&culture=en-US
(More from the Hassenstab thing:) "Everyone is focused on the shortage of capital globally as the Fed tapers. But they are ignoring what the BOJ is doing, which will more than offset that. They're getting the call wrong by being bearish on all emerging markets.
What does that extra money mean for emerging markets?
In 2013, the divergence in performance between the best and worst emerging market was more than 40 percentage points. We have always carefully picked countries with strong fundamentals and where we felt appropriate policy decisions were being made. Even though everyone has turned bullish recently, we would be cautious on more vulnerable places like Turkey."

FYI: Copy & Paste 6/7/14: Beverly Goodman; Barron's
Regards,
Ted
Last week, Brian Rogers, the longtime and highly successful manager of T. Rowe Price Equity Income (ticker: PRFDX), announced that he'll be stepping down in October 2015, on his 30th anniversary. He'll remain the firm's chairman and chief investment officer.
Just to reiterate: He'll relinquish his money management duties only, 16 months from now. "About half the people I've spoken to thought I just got fired, and about 30% thought I was leaving this fall," Rogers says with a chuckle.
But really, that kind of notice is what we should expect, especially on such high-profile funds as the $30 billion Equity Income, which gained 11.3% annualized from its 1985 inception through May, according to Morningstar, narrowly besting the S&P 500 and the Russell 1000 Value, but with much less volatility. "It reassures investors when there's a good succession plan in place," says Morningstar analyst Katie Reichart.
Rogers is reducing his responsibilities for personal reasons. "Around the holidays, I was reflecting on the fact that in 2015 I'll have been managing the fund for 30 years, and that I'd also be turning 60," Rogers says. "And in the very back of my mind was Jack Laporte." Laporte had been with the firm since 1976 and managed T. Rowe Price New Horizons (PRNHX), the small-company growth fund that quintupled in size under his 22 years of management. He retired at the end of 2012, and died in August 2013. He was 68.
John Linehan, 49, will replace Rogers on Equity Income -- but not just yet. "The next 12 months will look a lot like the last 12 months," Rogers says. Linehan, who ran T. Rowe Price Value (TRVLX) from 2003 to 2009 with much success, has been on the advisory council for Equity Income since 1999, and co-manages a separate account with Rogers. The two already talk daily, Rogers says, and the fund won't look very different under his management. In the meantime, Linehan will "spend a fair amount of time getting to know our [institutional] clients," Rogers says.
MANAGER CHANGES AREN'T necessarily good or bad, but they do need to be handled thoughtfully and transparently. It wasn't much of a surprise when legendary investor Bill Miller announced he was scaling back in the midst of a disastrous performance in 2010, after more than 15 years of outstanding returns. Sam Peters was named co-manager of what was then Legg Mason Value Trust; it has since been rebranded as ClearBridge Value (LMVTX). "Bill started talking to me at least a year before," Peters says. "When I was named co-manager, it was a real 'co-'; we both had veto power right away." The fund was in need of a breath of fresh air (assets had fallen to $4 billion from a peak of $21 billion in 2007), and Peters helped make some pretty big changes, such as opting for bigger companies and fewer names in the portfolio, and increasing allocation to the health-care sector and decreasing its stake in financial companies. The fund's active share, a measure of how much a manager deviates from the benchmark, rose from 60% to 80%. "We were very deliberate in not surprising people," Peters says. "A lot of our clients already knew me, and I got to know the others." He also had to field questions as to how he'd differ from the legendary Miller—some wanted big changes, others didn't. "We wanted people to know there would definitely be some change, but nothing dramatic." Peters became sole manager in May 2012; in 2013 the fund beat 92% of its peers.
NOT ALL HIGH-PROFILE FUNDS telegraph their changes so effectively. Fidelity Magellan (FMAGX) still seems to be reeling from Peter Lynch's departure in 1990. Lynch's successor, Morris Smith, lasted just two years. Bob Stansky, whose nine-year tenure is the longest since Lynch, presided over the fund's rise to peak assets of more than $100 billion in the late '90s, and its fall to $52 billion by the time he left in 2005. Harry Lange also struggled with performance and outflows. Current manager Jeff Feingold has improved performance in his less than three years on the job; Magellan now has $16 billion in assets. "If someone's not performing, Fidelity isn't shy about removing them," Reichart says.
Brian Hogan, president of Fidelity's equity group, which oversees $750 billion, points to the planning around the firm's most impressive funds: Will Danoff's $108 billion Fidelity Contrafund (FCNTX) and Joel Tillinghast's $47 billion Fidelity Low-Priced Stock (FLPSX). "We have surrounded Joel and Will with like-minded individuals," Hogan says. Danoff just hand-picked John Roth, manager of Fidelity New Millenium (FMILX) to co-manage Danoff's smaller fund, the $27 billion Fidelity Advisor New Insights (FNIAX); Roth is widely thought to be Danoff's eventual successor on Contra. Tillinghast took a three-month sabbatical in 2011, and the team created to manage in his absence then is still in place. Neither is likely to leave soon.
The average tenure of a T. Rowe manager is 10 years, compared to the industry average of five, but the firm has lost some impressive talent recently, including Kris Jenner, who took others from his team at T. Rowe Price Health Sciences (PRHSX) to start a hedge fund in 2013. Two other top managers -- Joe Milano and Rob Bartolo -- left the company, and the mutual fund business, soon after. "There were a handful of departures we weren't happy with," Rogers acknowledges. "But if you're going to do what they did, doing it in your 40s makes sense."