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Seven Manager Changes Spur Updated Analyst Ratings

Russel Kinnel

The People pillar is a big deal in our Morningstar Analyst Ratings. When manager departures happen, we act quickly to update our ratings. Sometimes we will put the rating under review while we gather data and then update again once we've drawn conclusions.

Not all manager changes are a disaster. Sometimes a firm has prepared for a change well, or a retiring manager is one of a talented team and not a severe blow to the fund's prospects. You have to know how a manager, the team, and fund company function to get to the bottom of a change. Here, then, are our revised ratings on seven funds. In the headings, I weigh in on whether the manager change is positive, neutral, or negative. That assessment is not our Analyst Rating--just a directional read on the manager change I provide for FundInvestor readers each month.

I encourage you to read our full analysis to get the complete story on each.

Fidelity Dividend Growth (FDGFX) | Change: Negative | Jan. 1, 2014
Ramona Persaud replaced Larry Rakers on the fund. Rakers is moving to Fidelity's asset-allocation group. Our Take: Rakers' strong track record and Persaud's short record make this a negative change. We have lowered the fund's rating to Neutral from Silver as a result. However, one positive is that Persaud is likely to follow a true dividend growth strategy, whereas Rakers was a wide-ranging investor with a penchant for cyclical stocks. The move may be a logical extension of Fidelity's effort to make its Equity Income funds actually focus on dividends for a change. Vanguard and T. Rowe Price run dividend growth strategies that have produced excellent risk-adjusted returns, and it would be great if Fidelity could muster something comparable.

Franklin Income (FKINX) | Change: Neutral | Jan. 27, 2014
Charles Johnson is no longer a named manager. Our Take: Johnson hasn't been involved on a day-to-day basis at the fund for a long time, so we're happy to see Franklin acknowledge reality. This doesn't have much effect on the fund, and we are maintaining our Bronze rating.

Harbor International (HAINX) | Change: Neutral | June 30, 2014
Ted Wendell will step down as comanager. Howard Appleby, Jean-Francois Ducrest, and James LaTorre will continue to run the fund. Our Take: Wendell's retirement isn't a surprise, and we have faith in the three remaining managers to keep the fund on course. We have retained our Gold rating.

PIMCO Global Multi-Asset (PGMDX) | Change: Negative | March 1, 2014
Mohamed El-Erian will leave PIMCO soon. Mihir Worah will take his place as lead manager. Worah runs real-return strategies for PIMCO, including funds like PIMCO Real Return (PRRDX). Comanagers Curtis Mewbourne and Vineer Bhansali will remain as comanagers. Our take: Losing the heir apparent to Bill Gross is a blow for all of PIMCO, including this fund. Although Worah is a real-return specialist, he has other experts on stocks and tail-risk hedging who will help with the fund. Given the fund's disappointing record, it will be interesting to see whether Worah makes changes to its strategy. We have placed the fund's rating under review.

We have also placed PIMCO Global Advantage Strategy Bond (PSAIX) under review in light of El-Erian's departure. There, Lupin Rahman joins comanagers Andrew Balls and Ramin Toloui at the helm.

T. Rowe Price Growth Stock (PRGFX) | Change: Negative | Jan. 16, 2014
Rob Bartolo resigned and was replaced by Joe Fath. Fath served as an associate portfolio manager on T. Rowe Price Institutional Large Cap Growth (TRLGX). Our Take: Fath has a decent record as an associate portfolio manager, but it isn't the same as having the final say on a portfolio. We'd also like to see what process tweaks are in the works. We have lowered our rating to Neutral from Bronze.

T. Rowe Price International Bond (RPIBX) | Change: Neutral | Jan. 1, 2014
Ian Kelson has stepped down, and Arif Husain has replaced him. Husain joined T. Rowe Price in August 2013 as head of international fixed income. Prior to T. Rowe Price, he was a director of European fixed income at AllianceBernstein. Our Take: The fund has struggled of late, so we're not too bothered about a change at the helm. We'll be watching for any strategy changes. We are keeping the fund at Neutral.

Russel Kinnel does not own shares in any of the securities mentioned above.

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