Fund Times: Emerging-Markets Fund Closes, Another Launched

 Matthews Pacific Tiger (MAPTX), a Morningstar Fund Analyst Pick, has announced it will close to new investors as of June 8, 2006. The near-$3-billion fund will continue to accept assets from existing shareholders as well as from certain investors, including financial advisors with existing clients in the fund, retirement plan participants with fund investment, and employees, trustees, and officers of the fund and its advisor.

We're encouraged by Matthews International Capital Management's decision to close the fund to new money before asset size becomes unmanageable. The managers at this fund still invest in an all-cap style, including in smaller-market and smaller-cap opportunities, so closing the fund now should help it maintain flexibility and liquidity in these more thinly traded areas. With an average market cap close to half the category norm, this fund should also continue to provide better diversification than many of its category peers. Matthews has a better history in shareholder-friendly asset management than many advisors who invest in Asian firms. It closed  Matthews Asian Growth & Income (MACSX) as assets increased there.

Templeton Announces New BRIC Fund
Franklin Templeton Investments has announced the launch of Templeton BRIC Fund, which focuses on companies in Brazil, Russia, India, and China (thus the acronym). The fund will be managed by longtime Templeton emerging-markets hand Mark Mobius, who has more than 30 years experience in investing in these types of markets. The firm's deep bench of emerging-markets research analysts will support Mobius. By prospectus, the fund must invest at least 80% of its net assets in BRIC companies, or in companies that produce a large share of revenue and profits in those countries. The fund will be benchmarked to the MSCI BRIC Index.

While this fund should provide investors with fairly concentrated exposure to selected companies in four of the world's fastest-growing economies, there are questions about this approach. Both Brazil and Russia have resource-rich economies that have prospered recently, as broad-based commodity prices have increased. Should commodity prices see significant declines, however, it could be difficult for management to find good opportunities. Additionally, the political risks of these nations, and the companies that operate within them, are many. Mobius and the Templeton team have a good deal of experience in navigating risks like these, but investors should still be careful here.

Fidelity to Close Small Cap Stock Fund
Fidelity Investments has decided to close  Fidelity Small Cap Stock (FSLCX) to new investors as of June 16, 2006. Existing investors as of that date can continue investing in the fund. "Small-cap funds have had a run of strong performance relative to other asset classes over the past several years�. We've analyzed the situation closely, and believe that it's in the best interests of shareholders to close the fund to new investors at this time," said Bruce Herring, Fidelity's chief investment officer for growth, value, small-cap, and mid-cap sectors, in a statement released today.

We couldn't agree more. In fact, we've been calling for the fund to close for years. At more than $5 billion in total assets, the fund is one of the largest in the category, and though we've been happy with management's performance overall, we think the large asset base has hampered his flexibility. Now, at least, inflows may moderate.

Schneider Small Cap Value Moves from Hard to Soft Close
The doors swing open and shut pretty frequently at  Schneider Small Cap Value , a Fund Analyst Pick that just announced existing investors can send money again. This is one thing that impresses us about the fund. Schneider Capital Management founder and Schneider Small Cap Value manager Arnie Schneider attempts to manage assets very carefully here, since maintaining liquidity can be more difficult in the small-cap space.

In January 2006, the fund opened to new investors for the first time in four years, closing again in February as assets reached his stated goal of $100 million. Effective today, however, the fund will be accepting new money from existing shareholders, according to a statement filed with the SEC. Schneider runs close to $1 billion in the small-cap space, across all funds and accounts, and we've been almost as impressed with the firm's shareholder-friendly concern for managing asset size as we have with management's dedicated value style and extraordinary performance.

Rydex Launches Broad-Market Index Funds
Rydex Investments has launched four new index-tracking funds, two of which will be leveraged. Rydex Russell 2000, Rydex Dynamic Russell 2000, and Rydex Inverse Dynamic Russell 2000 will all track the Russell 2000 Index, with Dynamic and Inverse Dynamic using leverage to attempt to capture 200% and -200% of the index's daily movements, respectively. The final offering, Rydex S&P 500, will function more like traditional index fund (as will Rydex Russell 2000), without the use of leverage. Though some have interpreted the addition of these funds, which track popular broad-market indexes, as an attempt on Rydex's part to attract a broader range of investors, we think their appeal is probably limited to a more narrow audience. This is particularly the case with the leveraged funds, which take on a good deal more risk than the typical broad-market index fund.

Two Fidelity Select Funds Get New Managers
Fidelity Investments has announced that Richard Manuel Jr. has replaced Valerie Friedholm at  Fidelity Select Home Finance (FSVLX), and Alton Miles III has been named manager of Fidelity Select Automotive (FSAVX), both as of June 1. Manuel previously worked for RiverSource Investments in Boston, as a financial service company equity analyst, and before that as an analyst for Putnam Investments. Miles joined Fidelity from AllianceBernstein, where he served as an equity analyst following the auto industry.

Tweedy Browne Wins Hollinger Suit
Hollinger International  has agreed to settle a lawsuit brought against it by asset manager Tweedy, Browne & Co. for $3.5 million, according to documents filed with the SEC. Tweedy's recovery helps compensate the firm for legal expenses incurred in its push to see Hollinger improve its financial dealings.

American Century Spokesman Exonerated
Lance Armstrong, spokesman for the American Century lineup of LIVESTRONG target-date retirement funds, was cleared of doping charges relating to his 1999 Tour de France victory. The results of a recently released Dutch investigation exonerated Armstrong and accused his accusers of misdeeds.