Plus, changes at an Analyst Pick, something new from Fidelity, and more.
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As small caps continue to cool off in the current environment, a smattering of closed funds that traffic in small and midsized companies have swung their doors open. Pioneer Oak Ridge Small Cap Growth ORIGX, run by David Klaskin, cofounder and chief investment officer of subadvisor Oak Ridge Investments, is among the latest to accept new investors. Klaskin's low-turnover, value-conscious style may be less aggressive than some growth managers', but it's kept volatility muted relative to racier peers and offered reasonable downside protection. Pioneer initially closed this offering to new investors when assets reached $225 million in late May 2005, and they remain near that level today.
After experiencing substantial outflows--roughly $4 billion over the past two years--Lord Abbett Mid-Cap Value LAVLX has also reopened. Poor relative returns in recent years have likely spurred on the outflows, but we think the fund is worthwhile. It still boasts a solid long-term record and a skillful, seasoned manager in Ed von der Linde. The fund first closed in September 2003, following a period of rapid expansion.
Wasatch Advisors has also recently reopened a quartet of funds focused on smaller companies: small-growth funds Wasatch Ultra Growth WAMCX and Small Cap Growth WAAEX, as well as Wasatch Core Growth WGROX and small-blend Wasatch Small Cap Value WMCVX. Wasatch is a highly regarded small-cap research group, so these funds have a strong research backbone behind them. We're also encouraged Wasatch has shown commitment to fundholders by closing funds in the past at reasonable levels.
Delaware Small Cap Value DEVLX has also reopened, but we're a bit skeptical about this move. Although it has seen net redemptions in recent months, lead manager Christopher Beck is still running roughly $1.9 billion in this strategy (down from $2.5 billion as of Nov. 30, 2006), and the fund's profile has tilted toward larger companies in recent years as a result. Given its penchant for larger names, the fund may not be suitable for investors seeking pure small-cap exposure. Other recent fund openings we'd think twice before buying include Dreyfus Midcap Value DMCVX and Franklin Small Cap Growth FSGRX.
TCW Out at Masters' Select Funds
Litman/Gregory, advisor to Masters' Select funds, has removed Los Angeles-based TCW as a subadvisor on two of their funds. The team of Steve Burlingame and Craig Blum, who also ran large-growth offering TCW Select Equities TGCEX, had run 20% of Masters' Select Equity MSEFX, a Morningstar Fund Analyst Pick in the large-blend category, and a third of Masters' Select Focused Opportunities MSFOX. Litman/Gregory made this decision after Burlingame's unexpected departure from TCW in February, which left Blum in sole charge of the TCW strategy. The advisor became concerned about the TCW team's stability when Burlingame's resignation marked the third in a string of significant departures since they were first hired in October 2003.
In place of the TCW team, teams from subadvisors Sands Capital Management (Frank Sands, Jr. and Michael Sramek) and Turner Investment Partners (Bob Turner, Chris McHugh, and Bill McVail) now each run 10% of Select Equity. Sands Capital alone has taken over TCW's duties on the smaller Focused Opportunities. Sands' bottom-up investment process favors established, steady growers trading at reasonable prices, while Turner's approach, which combines quantitative, fundamental and technical analysis, is riskier. Litman/Gregory displayed sound judgment in selecting subadvisors in the past, so we're not terribly concerned about this change. Turner has also built an impressive and lengthy record running Vanguard Growth Equity VGEQX, a large-growth Analyst Pick.PAGEBREAK
Fidelity Joins the Long/Short Field
Last week, Fidelity entered the growing field of so-called long/short funds with the launch of Fidelity 130/30 Large Cap FOTTX. Keith Quinton, who has managed Fidelity Tax-Managed Stock FTXMX since February 2004 and Fidelity Disciplined Equity FDEQX since October 2006, calls the shots at the new fund. He aims to keep 130% of the fund's assets in traditional "long" positions that he expects will appreciate in price and 30% of assets in "short" positions designed to benefit from underperforming stocks. An expense cap brings the fund's price tag down to 1.30% of assets per year, which is pricey relative to other no-load funds that invest in large companies.