By Agency Reporter

Monday, 22 Nov 2010

BOSTON: Federated Investors Incorporated named Douglas Noland as manager of its Market Opportunity Fund, replacing Steven J. Lehman after returns trailed those of peers in the stock market recovery.

According to a report by Bloomberg on Friday, Lehman is no longer with the company, Pittsburgh-based Federated said on Thursday in a statement, without providing specifics. Noland, who heads Federated‘s alternative-equity team, also manages the Prudent Bear Fund.

Lehman, known as the ”house bear” by colleagues for his persistent gloomy view on stocks, held almost half of the fund‘s assets in cash in 2008 after predicting market declines.

The cash helped him limit the fund‘s decline to 6.7 per cent in 2008, when the Standard & Poor‘s 500 Index lost 37 per cent, including dividends. The $1.1bn fund kept 29 per cent of assets in cash as of October 31.

Federated Market Opportunity has trailed rivals in the stock rebound since March 2009.

The fund dropped an average of 0.9 per cent over the past five years, including reinvested dividends, lagging behind 95 per cent of similarly managed funds, according to data compiled by Bloomberg. It has lost by 0.8 per cent this year, trailing 98 per cent of peers.

The Chief Investment Officer for equity, Mr. Stephen Auth, said in a statement that under Noland, who oversees about $3.6bn in funds that employ techniques such as selling short, or betting against, stocks, the fund will strive to be ”competitive in both up and down markets.

Federated Market Opportunity Fund invests in stocks, bonds, commodities and currencies, and can seek to profit from shorting stocks.

”We see absolute return portfolios within mutual fund structures, such as the Federated Market Opportunity Fund, as an area of increasing interest to our clients,” Auth said.

Alternative mutual funds, including those that have the ability to short stocks and use other hedging techniques, have attracted deposits of $19.3bn this year, while investors have pulled $64.2bn from mutual funds that invest in US equities, according to data from Morningstar Incorporated in Chicago.

Federated, which manages $341.3bn in assets, has made more than a half-dozen acquisitions since 2006 to expand beyond money-market funds, which account for about 75 per cent of its assets.

In 2008, the firm acquired two funds from David Tice, the money manager known for his long-term bets against the stock market, as investors fled equities during the financial crisis.

The $1.9bn Prudent Bear Fund has declined by 9.7 per cent this year, beating 78 per cent of competitors. Over the past five years, it has advanced an average of 3.2 per cent, beating 94 per cent of rival funds, Bloomberg data show.

Noland has worked with Tice for more than a decade. The two funds Federated acquired from Tice, Prudent Bear and Prudent Global Income funds, along with Market Opportunity, formed the alternative-equity unit at Federated.

A spokeswoman for Federated, Ms. Meghan McAndrew declined to comment beyond the news release. Lehman didn‘t return a call seeking comment after regular business hours.

 

Source: Punch