Putnam to Close Fund to New Investors

Putnam Investments, the fourth-biggest U.S. mutual fund company, will close its Small Cap Value Fund this month, making it the 11th small-company stock fund to shut its doors to new investors in the last year.

The fund, managed by Edward Shadek and Sheldon Simon, has grown to more than $1 billion in assets since it opened in May 1999. The fund will close on Jan. 31, Putnam said.

Many small-cap funds stop taking new investors before they reach $500 million in assets because managers say it’s harder to stay nimble buying and selling stocks with too large an asset base.

The biggest small-cap fund is the $12.4-billion Fidelity Low-Priced Stock Fund, also a value-oriented fund. It remains open to new investors.

According to fund tracker Morningstar Inc., there are 501 small-cap funds, 132 of which are value-oriented, meaning they hunt for stocks that appear undervalued relative to their earnings potential.

The small-value-fund category was the best performer in 2001 of major fund categories tracked by Morningstar. The average small-value fund rose 17.4%, compared with a 10.9% decline in the average domestic U.S. fund and an 8.6% decline in the average small-growth stock fund.

Putnam Small Cap Value Fund gained 19% last year.

Investors responded to small-value funds’ strong performance last year by shifting significant new money into the funds, fueling more fund closings.

Among the funds that closed to new investors in 2001 were Lord Abbett Small-Cap Value, Wasatch Small Cap Value, American Century Small Cap Value and Turner Small Cap Value.