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Fund Spy: Morningstar Medalist Edition

These Medalists Are Closed but Left the Backdoor Open

You can get into these great funds if you really want to.

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In recent years, fund companies have experimented with various ways of closing funds. One thing I’ve seen more often is funds closing their doors halfway: They close the fund to investors using fund super­markets but leave them open to those who invest directly with the fund company.

This really serves two purposes. First, it slows down the rate of inflows. Second, it leaves more profits for the fund company because it doesn’t have to pay a No Transaction Fee plan provider like Schwab or Fidelity the usual 35 basis points in fees. I don’t really mind the practice, except that whenever I write about those funds, some readers complain to me that the funds are closed because that’s what it says when you pull up the fund in the NTF supermarkets. So to clear the decks, I thought I’d write about a few of the very best funds in this camp. If you don’t already have an account with that firm, you’ve got to decide whether it’s worth the extra difficulty of having another account.

 AMG Yacktman Focused (YAFFX) and  AMG Yacktman (YACKX)
The funds have transitioned largely from Donald Yacktman to his son Stephen Yacktman, but we still give them Morningstar Analyst Ratings of Silver and Gold, respectively. They saw a surge in popu­larity that prompted them to close the funds to NTF programs a few years ago. And that’s a good thing--they run focused portfolios, yet assets grew to more than $10 billion in both funds. Since then, the funds have lost some luster; they’ve lagged their peers significantly over the trailing three- and five-year periods. However, I don’t blame the manager transition or the asset growth.

Instead, it’s really a matter of style. The managers are cautious value investors who will build cash if they can’t find enough attractive investments. It’s a fine strategy for protecting against the downside, but it means the funds will lag in a rally. Maybe asset size is a bit of a hindrance, but I doubt it’s playing a major role. In any case, both funds are now in redemptions. AMG Yacktman Focused saw $2.9 billion in outflows over the past 12 months ended April 2015, and AMG Yacktman has had $1.9 billion go out the door. The difference in their analyst ratings is because AMG Yacktman Focused charges a full 50 basis points more than AMG Yacktman.

 Oakmark Global (OAKGX)
Managers Clyde McGregor and Rob Taylor ply the Oakmark strategy across the planet. They want strong businesses trading for cheap prices. They look to same-industry buyouts to verify the correct multiples for companies. The portfolio has mostly classic value names like  Union Pacific m(UNP) and  Credit Suisse (CS), but there are some growth favorites like Samsung thrown in to boot. Over time, they’ve produced excel­lent relative performance in bear and bull markets alike. Lately, net flows have been pretty flat.

 Vanguard Wellington (VWELX)
This remains one of the great bargains of the fund world. You can tap Wellington’s great stock and bond management resources for just 0.26% a year. It, too, has had very few missteps. Flows have slowed to $230 million in the past year, which is good to see at a $91 billion fund.

 Wasatch Small Cap Growth (WAAEX)
Jeff Cardon has built a remarkable record over nearly 30 years at this fund. He looks for financially healthy companies with strong growth potential, but he pays attention to valuations, too. My greatest concern is that Cardon could retire sometime soon, even though he says he has no plans to do so. The fund also has a wild card in the form of a 9% stake in India, which is pretty unusual for a U.S. small-cap fund. The fund has had $370 million in net outflows for the past 12 months through April.

For a list of the open-end funds we cover, click here.
For a list of the closed-end funds we cover, click here.
For a list of the exchange-traded funds we cover, click here.
For information on the Morningstar Analyst Ratings, click here.

Russel Kinnel has a position in the following securities mentioned above: WAAEX. Find out about Morningstar’s editorial policies.