Seven intriguing new funds to add to your watch list.
Most of the funds launched this year are forgettable "me too" funds, but a handful are worthy of your attention. It's easy to lose track of them amid all the dross, so here then are my picks for the best new funds of 2009. You might want to put them on your watch list.
In compiling the list I looked for good managers who have proven track records at other funds. You can ignore the untested managers for now and come back in a few years, but these are funds that you might find intriguing, if not compelling, right away. One thing to be wary of with new funds, though, is that some come with high expense ratios because assets are low. I've never quite understood why the lack of other shareholders should penalize fundholders, but that's how it usually works. In some cases, you may want to wait for expenses to come down before you buy. I've grouped the funds into no-load and load.
Akre Focus AKREX
Manager Chuck Akre split apart from FBR Focus FBRVX to start his own fund. Three of his top analysts stayed behind to run the FBR fund after he left. However, Akre's brilliant record at FBR Focus inspires confidence at his new charge. Akre looks for companies with sustainable returns on equity of 20% or greater, and he keeps the portfolio concentrated in around 40 names. So far the fund has had a very stable net asset value, so it would appear that Akre is holding a ton of cash and only gradually buying stocks.
The scoop on expenses: Before the breakup, you got Akre and his analysts for the relatively steep expense ratio of 1.42%. Now you get Akre or the analysts, so the two funds ought both be charging less than you paid for the whole team. They don't see it that way. This fund's retail shares charge 1.46%, and that's after an expense cap that could be allowed to expire after Nov. 10, 2010.PAGEBREAK
PIMCO Global Advantage Strategy Bond PGSDX
With all the funds that it's been launching, PIMCO ought to have something worthy of this best-of list. This fund is the innovative idea of basing a foreign-bond portfolio on the size of countries' economies rather than their debt. The fund's newly created benchmark, PIMCO Global Advantage Bond Index, will lead the fund to invest less in highly indebted economies in favor of financially healthier ones. Thus, the fund figures to have a little higher-quality debt than PIMCO Foreign Bond PFBDX. It's also worth noting that, as the global name implies, it will include U.S. debt to the tune of about 27% of assets. The fund will be actively managed against that benchmark. What makes the fund particularly appealing is that it's led by Mohammad El-Erian, who did a great job at PIMCO Emerging Markets, briefly ran Harvard's endowment fund, and then returned to serve as CEO of PIMCO. El-Erian is joined by Ramin Toloui, who helped to build the index.
The scoop on expenses: Retail shares charge 1.10%. That's a little high for a world-bond fund. T. Rowe's costs 0.80%, and PIMCO Foreign Bond costs 0.90%. With a 0.85% management fee and a 0.25% 12b-1 fee, it looks like expenses won't be going down. (I put the fund in the no-load group, but it's also available in A shares, Institutional shares, and just about any other share type you can think of.)
Vanguard FTSE All-Wld ex-US SmCp Idx Inv VFSVX
This fund sounds kind of DFA-like to me. It's a foreign small-cap index fund. Most investors can lead happy productive lives without owning a foreign small-cap index fund, but I can see the value. Most foreign funds have large-cap-dominated portfolios, and this fund is a low-cost way to round out your portfolio. On the other hand, Vanguard International Explorer VINEX actually costs less than this fund. Finally, isn't "all-world ex-U.S." an oxymoron?
The scoop on expenses: Investor shares cost 0.60%, Admiral shares cost 0.35%, and the ETF VSS costs 0.38%.