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By Shannon Zimmerman | 09-07-2012 09:00 AM

Why Did This Oakmark Fund Reopen?

Oakmark manager Clyde McGregor says with interest rates remaining low for much longer than he had anticipated, the reasons for previously closing one of his funds no longer made sense.

Shannon Zimmerman: I began at the top of the segment by saying there were two news items connected to Oakmark Equity and Income. We haven't gotten to the second one yet. The fund has recently reopened to all investors. For a good long while it was closed, except if you went through Oakmark directly.

Clyde McGregor: Two years.

Zimmerman: Two, right. That's a good long while, I think. And you could get in as well if you were an existing shareholder, but otherwise there was limited availability. Now, it's opened again. I know that during the last 12 months or so there have been some redemptions…

McGregor: Sure. When a fund is partially closed you are going to have net redemptions. That's a reality.

Zimmerman: Sure, sure. And it's still one of the largest funds in our moderate-allocation category, about $19.2 billion is what we show. I want to ask you about the decision to reopen the fund or to make it wider in availability. Was that driven by, "Assets have come down somewhat, and we think that we have capacity"? Or are there other considerations that you had?

McGregor: Well, the capacity issue was in the background, but it's more that we think that what the fund offers makes sense today. We think the equity side is very attractive. Our reasons for closing the fund were very fixed-income-specific, and when Ed Studzinski, my comanager, and I closed the fund in 2010, it was with the thought process that this suppression of interest rates being done by the [central banks] worldwide would not be a three-, five-, seven-year phenomenon, whatever it's going to prove to be.

Zimmerman: Right.

McGregor: Now that that reality has been stretched out as it has, we came to the decision that our reasons were not quite moot, but no longer made as much sense. So, there is a reality of making it easier to manage the fund with more balanced flows, but with all the short-term issues we have, we didn't exactly have a redemption problem. The fund was $20 billion at its peak; it's $19 billion now. This has not exactly been a critical item that way. We just feel that the fund is attractive enough as it is that we want people to be able to use it.

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