Will These Hot-Selling Small-Cap Funds Close in 2011?
Thanks to 2010 inflows, there are no guarantees these funds will be open long.
It's fund-closing season. We are nearly two years into a strong market rally and the fund closings are starting to come fast and furious. IVA, Calamos, Wasatch, Perkins, and WHG are among the fund companies to have closed a fund.
To get a handle on some possible closings this year, I pulled up a list of still-open small-cap funds with sizable inflows in 2010. Funds typically close in order to avoid growing too large to effectively employ their strategies or to stem the tide of inflows, which can present problems regardless of total assets under management.
I wouldn't necessarily rush to get in simply because a fund is closing, but if you had your eye on the fund, consider this a nudge to decide sooner rather than later. The reason you don't need to rush is that there is something of a contrarian indicator in closings. They typically happen when a fund's asset class and/or strategy are riding high. Generally, performance after a fund closes tails off a bit, though it would have been worse had the fund not closed.
Russel Kinnel has a position in the following securities mentioned above: RYSEX. Find out about Morningstar’s editorial policies.