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A Closed Fund Watchlist

For contrarians only. 

Russel Kinnel, 09/30/2014

A fund closing to new investors is rarely a permanent move. Eventually the fund will face enough outflows to prompt it to reopen. That's often a wonderful contrarian buying opportunity. If you only like funds with hot three-year returns, avert your eyes because hot funds don't reopen.

Every once in a while a fund will be closed for so long that it needs to reopen because its existing shareholder base is in redemption mode. More often than an aging shareholder base, the cause is a slump in performance. So, you've got to be a bit of a contrarian to hop on the reopening. I've selected six Morningstar Medalists that are good bets to reopen in the next couple of years. So, add the ones you like to your watchlist, and they might become available.

Royce Premier RYPRX has a Morningstar Analyst Rating of Gold, but it has been in a slump. Poor five-year returns have led to $1.3 billion in outflows at this $6.6 billion fund. But we have confidence in Chuck Royce and Whitney George. They look for low debt levels and fundamentals like solid return on invested capital and free cash flow. By Royce standards, the 50-70 stock portfolio is concentrated.

ASTON/TAMRO Small Cap ATASX has seen only a modest $240 million go out the door over the past 12 months. However, the fund has only $963 million left, so it may be the best bet on this list to reopen in the near future. Managers Philip Tasho and Tim Holland meld earnings growth and valuations into a tame small-growth portfolio. The fund's long-term record remains strong even though 2013 was a dud.

Lazard Emerging Markets Equity LZOEX has produced outstanding returns over all the trailing time periods, yet it has seen $900 million in outflows. It still has $16 billion in assets under management, so I think it's less likely to reopen, but take a close look if it does. James Donald's mild-mannered but flexible value strategy has been quite consistent: The fund has outperformed peers in eight of the past 10 years.

Perkins Small Cap Value JSCVX hasn't been open for a long time, but it's currently in one of its downward ebbs, so keep your eyes peeled. The Perkins crew runs a focused value style that produces solid long-term results and occasional slumps. The folks who make out like bandits are the ones who buy after the slumps rather than after the rallies. The fund has lost about a third of its assets the past year--it's now down to $1.9 billion in assets.

Fidelity Small Cap Value FCPVX is one of my favorite Fidelity funds. Chuck Myers runs a focused Buffett-style small-cap fund that really behaves differently from most other Fidelity funds, making it a good diversifier for those with all-Fidelity portfolios. With $900 million in outflows the past 12 months, this fund might reopen come 2015.

AllianzGI NFJ Small-Cap Value PNVDX got a little larger than management wanted, and the firm went so far as to cull a portion of its 401(k) business. That tells me it may let assets shrink a bit more before reopening. Still, this $7.7 billion fund has shed $1.3 billion in the past 12 months ended July 2014, and that's a fair amount to handle. The fund has a Silver Analyst Rating as it still has the same excellent strategy and management it's had all along. Yes, its three-year Morningstar Return ranking is weak, but it's in the top 10% for the trailing 10 years, and its dividend-oriented strategy is a good one.


Russel Kinnel is Morningstar's director of mutual fund research. He is also the editor of Morningstar FundInvestor, a monthly newsletter dedicated to helping investors pick great mutual funds, build winning portfolios, and monitor their funds for greater gains. (Click here for a free issue). Mr. Kinnel would like to hear from readers, but no financial-planning questions, please. Follow Russel on Twitter: @russkinnel.

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