How to Get Into Good Funds With Limited Availability

Most of the time we write about funds that are widely available in either no-load or load channels. But there are other funds that have more-limited availability that are worth the effort of tracking down. Today, I'll spell out some of the best in this group and tell you how to get in. My hope is that this will save you some time and spare you the frustration of trying to buy a position in a fund that isn't readily available.

If you know of other ways to get into these funds than the way I've written about, please post a comment below.

DFA Funds
Dimensional Fund Advisers was a pioneer in passive investing and it still runs some of the best passively managed funds. Rather than trying to match an index perfectly, DFA aims to be close, while providing liquidity in order to capture the bid-ask spread. Most index funds tend to take a haircut on bid-ask spreads. In effect, they are passive when it comes to stock selection but active with their trading. You can see the success of this approach by comparing results of DFA's small-cap funds with those of other index funds.

In order to keep trading in its favor, DFA puts some tight limits on access to keep investors from hopping in and out. Only planners that are dedicated to passive investing and have also been approved by DFA are allowed in. That avoids having investors hop into the funds and then back into actively managed funds, but it also means many of us can't get in. However, DFA funds are also available in 401(k) lineups regardless of whether they are dedicated to passive investing.

 Sequoia (SEQUX)
This one is not nearly as hard as DFA to access. The last time Sequoia fund was open to new investors, mutual fund supermarkets didn't exist. As a result, you won't find the fund in some supermarkets, including Fidelity. But it is in Schwab, T. Rowe Price, Vanguard, and TD Ameritrade, among others. Sure, you have to pay a transaction fee, but the fund's expense ratio is low and over 10 or 20 years, that fee is tiny. I also discussed Sequoia in a recent column about great funds that could soon close; it's simply one of the best around.

 Mairs & Power GrowthMPGFX
Mairs (pronounced Mars) and Power is a quiet Minnesota investment shop that has steadily done the job for clients. For years, the fund didn't venture far from Minnesota for investments or even to register for sale in other states. In 2002, it was only available in 24 states. Now, though, it's nationwide. However, manager Bill Frels still sticks to the Midwest for most of his stock picks. He likes well-run companies that dominate their market. Put those two together and you get a portfolio with the likes of  3M (MMM),  Medtronic (MDT), and  Target (TGT).

Like Sequoia, you can find this fund in Schwab's transaction-fee network but not in Fidelity's.

Vantagepoint
Are you Vantagepointing your retirement? It's not a bad idea if you can. Like a better-known giant, Vanguard, Vantagepoint has low costs and great subadvisors. For example,  Vantagepoint Equity Income  is farmed out to Southeastern Asset Management (Longleaf), Brian Rogers of T. Rowe Price, and Barrow Hanley which runs  Vanguard Windsor II (VWNFX). The fund charges 0.88%, which is pretty good, though not quite in Vanguard's league. Vantagepoint also has some strong target-date funds. Getting in is not easy, however. The funds are only available in government employee retirement programs.

USAA
USAA funds are aimed at servicemen and women and their families, but the rest of the investing public is allowed in. USAA farms out most of the fund management and has hired some good managers, including  USAA Aggressive Growth (USAUX) manager Tom Marsico. Marsico managers are barred from investing in funds they subadvise, but that doesn't apply to other USAA funds. For example, muni funds such as  USAA Tax-Exempt Intermediate Term (USATX) are run in-house by managers who invest in their funds.

The challenge with USAA is finding a fund supermarket that will let you buy its funds. Schwab and Fidelity don't, but TD Ameritrade, Vanguard, and T. Rowe Price have USAA in their no-transaction-fee lineup. 

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