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More Top Small-Value Funds to Close

Closures follow the shuttering of a number of other small-cap funds in recent weeks and coincide with more than two years of strong performance.

Kalin Liu, 05/09/2011

More small-value funds with strong records, American Beacon Small Cap Value AVPAX and Heartland Value Plus HRVIX, will soon close to new investors.

Their closures follow the shuttering of a number of other small-cap funds in recent weeks and coincide with more than two years of strong performance and rising valuation levels for the Russell 2000 Index and other small-cap benchmarks.

American Beacon said in a May 2 regulatory filing that it would close its $3.6 billion in assets Small Cap Value fund to new investors after it breaks the $4 billion in assets barrier. The fund has had more than $140 million in inflows this year as of March 31 and has gained 6.7% this year, better than nearly 70% of the small-value category and the Russell 2000 Value's 4.8% gain.

The fund, a former Analyst Pick, has gained 10.5% per year over the past 10 years through May 4 versus the Russell 2000 Value's 8% annualized gain.

American Beacon closed the fund from 2005 to September 2008 due to capacity constraints at some of its six subadvisors.

Meanwhile, Heartland Value Plus, a $2.2 billion fund that focuses on small, dividend-paying companies, announced it will close to most new investors on May 16.

The fund, which has gained 13.1% annually over the past 10 years and beat 99% of the small-value category, has had $776 million in inflows for the past 12 months ended March 31.

The firm said in a regulatory filing that it decided to close the fund after considering its size and the availability of small-cap stocks that meet the fund's investment criteria. The fund's size played a bigger role in the closing than the fund's managers' ability to find values, the company said in an e-mail response to questions. Still, small-cap indexes are near all-time highs and the number of undervalued companies that appear attractive is lower than it was a couple of years ago, the firm said. The prospective price/earnings ratios of the Russell 2000 and Russell 2000 value have gone from the high single digits at the March 2009 nadir of the market to the mid- to high-teens as of March 31, 2011. The Russell 2000 has gained 144% cumulative and the Russell 2000 Value 140% cumulative from March 9, 2009, through May 4, 2011.

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