Some Portfolios Are Reopening Their Doors
“Well-built MF seeks willing investors for fun, profit. Must accept some risk-taking. Long-term relationship preferred.”
Mutual funds aren’t yet running personal ads to woo investors, but some formerly standoffish portfolios are again inviting company.
At least eight stock funds formerly closed to new investors have reopened this year. The latest: Longleaf Partners (phone: [800] 445-9469), a “value” stock fund and one of the better-performing U.S. funds of the last decade.
Most of the other reopening funds are focused on smaller stocks--which have been hammered relentlessly in this year’s market plunge. And that’s why these managers are looking for fresh cash to put to work.
“Current market conditions have created very attractive long-term investment opportunities,” said Steven Reid, manager of the Oakmark Small Cap Fund ([800] 625-6275), which reopened last month.
Other small-stock funds that have reopened include Montgomery U.S. Emerging Growth ([800] 572-3863); State Street Research Aurora A ([800] 562-0032); and Wasatch Aggressive Equity ([800] 551-1700).
Are these reopened funds better choices than funds that have remained open to new money all along? All of the small-stock funds mentioned above have performed better than the average small-stock fund in the two years ended Sept. 30, according to Lipper Analytical Services.
Indeed, many of them originally closed specifically to keep their assets manageable.
Still, these aren’t exactly the same portfolios as when they first opened--they’ve got more wrinkles and are wider at the waist.
Consider Oakmark Small Cap, with about $650 million in assets. Although certainly not a giant portfolio, its size is approaching the range where, some observers feel, performance starts to suffer for funds targeting small stocks.
Susan Belden, editor of the No-Load Fund Analyst newsletter in Orinda, Calif., says she likes the Oakmark family and the Small Cap fund but isn’t certain that its reopening marks a great buying opportunity. “‘We’re a bit ambivalent because the fund really isn’t that small,” she said.
One newly reopened portfolio, Montgomery U.S. Emerging Growth, already has said it will shut the doors again after it attracts $100 million more in assets.
The San Francisco-based fund, formerly called Montgomery Micro Cap, currently has about $300 million in assets.
For the moment, though, the focus isn’t on closing again but on attracting new cash--and buying stocks the managers believe are bargains.
Longleaf Partners Fund of Memphis, which plans to reopen on Friday, may attract a lot of attention. Its managers hold a concentrated portfolio of value stocks. They target shares selling at least 40% below what they think the companies are worth, and lately they’ve been finding more to buy--including in foreign markets.
The $3-billion portfolio gained 363% in the 10 years ended Sept. 30, versus a 276% gain for the average U.S. stock fund.
Meanwhile, Alpine U.S. Real Estate Equity ([888] 785-5578), previously called Evergreen U.S. Real Estate Equity before a group headed by longtime manager Sam Lieber purchased it, reopened earlier this year, but still has less than $40 million in assets.
Morningstar analyst Kevin McDevitt calls Lieber “‘an opportunistic manager who has proven that he can deliver outstanding returns.” But he also warns that the Alpine portfolio is more volatile and pays a much lower dividend than the typical real estate fund.
Indeed, while the fund is one of the best real estate funds as measured over the last two years, its performance this year has been among the worst.
