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Must-Read Mutual Fund News

Amanda B. Kish, CFA
March 4, 2011

There's a lot going on in the mutual fund world, and if you miss something, it could end up costing you money. To keep you up-to-date and on top of things, we've scoped out some recent happenings in the mutual fund industry during the past week, and discussed how they may affect your portfolio.

Vanguard says goodbye
Quantitatively focused investing strategies have been absolute dogs in recent years, and many are still trying to climb out of the holes in which they still languish. Quant shops ran into a lot of difficulty with their models during the last recession and subsequent recovery, leading to a round of lagging performance across the board. Now the mutual fund space will offer two fewer quant options.

Vanguard recently announced that it will be closing its Structured Large-Cap Growth and Structured Large-Cap Value Funds. After underperforming in recent years, both quantitative funds will be liquidated around the end of May. Such a move is rare for Vanguard, which boasts a wide array of successful mutual funds and ETFs.

If you're a Vanguard investor, don't worry too much about the closing of these two funds. There are many other solid Vanguard options out there. For example, while they are not strictly quant-focused funds, investors can easily move into the Vanguard Growth ETF (NYSE: VUG  ) or Vanguard Value ETF (NYSE: VTV  ) at a low cost and get much of the same market exposure.

But more importantly, don't view this move, or the lagging performance of quant funds elsewhere, as a death knell for quantitative investing. Quant strategies are definitely having some dark days, but odds are good they'll make a comeback in the future. Quant funds can still be a good complement to more fundamentally focused options. Don't write off a quantitative approach just yet.

Muscle power
Bruce Berkowitz has earned a name as one of the most successful investors of the past decade, and apparently, he's not afraid to use some tough love to get the job done. Berkowitz's Fairholme Fund (FAIRX) is the single largest owner of Florida-based real estate developer St. Joe (NYSE: JOE  ) .

Amid a dispute over the company's direction, Berkowitz abruptly resigned from St. Joe's board of directors in early February. He then launched a campaign to replace certain members of the board with his own candidates. This week, Berkowitz emerged victorious; the company's CEO announced that he would be stepping down, along with three other directors. Investors should certainly pay close attention to further developments at St. Joe's in the coming months.

Berkowitz certainly isn't afraid to rattle some cages in an effort to salvage his stake in a company. He's also not afraid to take on hefty bets when he sees opportunity. Fairholme now devotes almost three-quarters of its portfolio to names in the financial sector. Besides St. Joe's, Berkowitz has loaded up on big-name banks and financial firms that were damaged during the financial meltdown, including AIG (NYSE: AIG  ) , Citigroup (NYSE: C  ) , and Bank of