Overlooked Portfolios Offer Steady Track Record

The Phoenix Total Return Fund has been something of a puzzle--even to the people who run it.

The portfolio has generated a smooth ride for shareholders using a varying mix of stocks, bonds and cash.

The fund has never had a down year since its debut in 1986 and has gained ground in 19 of the last 25 quarters.

It’s also part of the respected Phoenix fund group, which boasts two of the best-performing funds of the last 15 years.

Yet unlike most of its siblings, Phoenix Total Return has been overlooked by investors and brokers alike.

It started the year with only $58 million in assets--small by mutual fund standards--and has since moved up only modestly to $70 million.

“It’s something that has us scratching our heads,” says Frank Stanley, a portfolio manager and spokesman for Phoenix Investment Counsel.

“But our disadvantage is an advantage for investors, since the small size makes the fund more flexible.”

Morningstar Inc., a Chicago investment research organization, agrees and has included Phoenix Total Return on its list of the five most “forgotten” funds of 1993.

All of these portfolios can point to superior track records, proven managements and investment consistency. Yet all started 1993 with less than $100 million in assets, and only one has since breached that mark.

Investors generally like to see their funds grow, as that entails economies of scale and other benefits.

But small size also has some advantages in that the portfolio manager can buy and sell more quickly and easily.

“As a manager, I like to see measured growth and cash flows that aren’t so volatile,” says Edward A. Trumpbour, who runs the Delaware Value Fund, another forgotten selection.

The other unheralded funds on Morningstar’s list are Harbor Bond, Meridian and Weitz Value.

Morningstar calls Phoenix Total Return perhaps the most surprising entrant on the list, given its smooth performance, but there are some other interesting choices.

For example, Harbor Bond has been overlooked despite having a respected and highly visible manager in William H. Gross, a regular panelist on “Wall Street Week With Louis Rukeyser.”

Two other Gross-managed funds--Pimco Total Return and Pimco Low Duration--collectively count about $4 billion in assets, compared with $106 million for Harbor Bond.

Yet Harbor Bond is available to anyone with a minimum of $2,000 on a pure no-load basis.

With the Pimco products, by contrast, small investors must buy shares through selected discount brokerages, paying a small fee in the process.

Harbor Bond’s growth has been slowed by a lack of advertising and name recognition, says Ronald C. Boller, president of the Harbor group in Toledo, Ohio.

The group hasn’t done much advertising, in an effort to keep expenses down. “I figured that if people found out how good the funds are, they would sell themselves,” he says. “But it takes years to establish that these are good products.”

In the case of Meridian, growth was impeded by a lack of advertising and the fact that the fund for many years wasn’t listed in newspaper tables because, paradoxically, it didn’t have enough assets.

The 9-year-old fund, which is based in Larkspur, Calif., finally reached the critical $25-million asset mark, a key level needed to gain listing.

Its size has more than doubled since then. “As soon as our price could be followed, it seemed the media felt more like talking about us,” says Vivian Keegan, the fund’s administrator.

An interesting angle to the forgotten-funds story is that two of this year’s selections are load portfolios--implying that good funds aren’t guaranteed marketing successes even though they’re sold through the brokerage network.

In fact, 13 of the 15 funds that made Morningstar’s forgotten list during the previous three years charge loads, and several of these are still small.

This chronically forgotten group includes FPA New Income and FPA Perennial (4.5% and 6.5% loads, respectively; 800-982-4372); MIMLIC Asset Allocation (5%; 800-443-3677); Olympus Stock (4.75%; 800-950-2748); U.S. Boston Growth & Income (1%; 800-331-1244), and the Greenspring Fund (no load; 800-366-3863).

All of these are still rated above-average by Morningstar.

Forgotten Funds The following mutual funds have largely been overlooked by investors, according to Morningstar Inc., a fund research firm. All five portfolios have superior performance ratings, track records dating back at least five years and management consistency, yet all are reasonably small. Only one of the funds, Harbor Bond, has reached the $100-million threshold, and that happened only recently.

Recent Maximum assets sales Fund Type (millions) charge Phone Delaware Value growth $83 5.75% 800-523-4640 Harbor Bond corporate bond $106 No load 800-422-1050 Meridian small company $55 No load 800-446-6662 Phoenix Total Return asset allocation $70 4.75% 800-243-4361 Weitz Value growth $68 No load 800-232-4161