Fund Times: Openings, Closings & Manager Changes

Nygren Connects with AOL
Bill Nygren, who has spurned most bellwether technology stocks in his tenure at Oakmark Select (OAKLX) and Oakmark (OAKMX) funds, recently bought shares in the world's largest Internet service provider.

In a recent letter to shareholders of the Oakmark fund, Nygren, Morningstar's 2001 Domestic-Stock Fund Manager of the Year, said AOL Time Warner , which has crashed nearly 90% from its Internet boom heights, has finally fallen to the point where "reasonable returns now appear much more achievable."

When the conglomerate's market value fell to less than a fourth of its peak in the second quarter, Nygren said he was able to buy a commanding media company with a market-leading Internet firm thrown in for free. "At Oakmark, we were never comfortable with the valuations placed on Internet stocks, but at the current price for AOL, the market appears to value the world's largest ISP at less than zero--that works for us!"

In the second quarter Nygren also added health and drug companies Abbott Laboratories (ABT) and Bristol-Myers Squibb (BMY); defense and aerospace manufacturer Boeing (BA); utility Duke Energy (DUK); and hardware retailer Home Depot (HD) to Oakmark's portfolio.

At Oakmark Select, Nygren bought Stilwell Financial , an asset management holding company whose major component, Janus Capital, practices a brand of investing that is at the other end of the spectrum from Nygren. Still the value manager admires the way Janus has been able to build its brand name and provide custmer service and thinks the market is lowballing all of Stilwell's asset management businesses.

Now We’re Closed, Now We’re Not
The spiraling market has created some opportunities for investors shopping for small-cap stock funds. A couple of offerings that either closed or planned to close to new investors have recently decided to reopen or stay open.

Wasatch Ultra Growth Fund (WAMCX) announced in June that it planned to close last Wednesday, and Buffalo Small Cap  (BUFSX) had been shut since April. Both funds were trying to keep their asset bases from swelling to the point where it became tough to trade smaller stocks.

But thanks to the market slump, asset size isn’t a problem any more. Ultra Growth has lost nearly a fourth of its value this year, but it’s still in the top half of small-cap growth category.

Salt Lake City-based Wasatch Funds wanted to close the fund before it reached $500 million and picked the date to cut off new inflows when the fund had more than $320 million in its coffers. The fund’s assets have since slipped to $289 million, so Wasatch thinks it’s safe to leave it open for a while.

For similar reasons, Wasatch also decided to open three other funds that had been closed to new and existing investors: Wasatch Core Growth (WGROX), Micro Cap (WMICX), and Small Cap Value (WMCVX) are now taking new investments from existing shareholders again.

Mission, Kan.-based Kornitzer Capital Management cited "a reduced asset base and an increase in the number of attractively priced small cap stocks" as its reasons for reopening Buffalo Small Cap. The $845 million fund also has suffered steep losses this year. It has dropped more than 23%, but it’s still in the small-growth category’s top half and its three-year returns are better than 98% of its peers’.

T. Rowe Offers One-Stop Retirement Portfolios
T. Rowe Price plans to roll out four new funds of funds designed to offer one-stop shopping for people looking for retirement account portfolios, according to Securities and Exchange Commission filings.

The T. Rowe Price Retirement 2010, 2020, 2030, and 2040 funds will invest in a mix of T. Rowe stock and bond funds. They all will operate on the premise that investors should gradually move their money from stocks to bonds as they approach retirement.

Each fund will start with a set allocation and adjust it as their termination date nears. For example, Retirement 2010 will be the most conservative offering, keeping the 57% of its portfolio in stocks and 43% in bonds. It will move more money into bonds over the next eight years. Similarly, Retirement 2040 will start out as the most aggressive offering with 90% of its assets in stock funds and 10% in bond offerings, but will grow more conservative over time.

Vanguard Buys the Whole Index
Shareholders of Vanguard Small Cap Index (NAESX) can now honestly say they own every stock in the Russell 2000 index. This month the fund, which had invested in a representative sample of the index’s constituents instead of all 2000 stocks, stopped using the sampling method and bought the whole bogy, according to SEC filings. The change shouldn’t alter the fund’s ability to track the benchmark since the portfolio, at last count, owned nearly 1,900 of the stocks anyway, said Morningstar senior analyst Bill Harding.

Strong Loses Focus
Milwaukee-based Strong Funds plans to merge Strong Advisor Focus, managed by Tom Pence, with Strong Advisor Select (STAEX), managed by Ron Ognar, pending a September 13 shareholder vote, according to SEC filings. Both funds are supposed to pick the stocks of 30 to 40 fast-growing companies. Both funds have similar records: They’ve suffered steep losses since their inception late in 2000. So far this year they’ve both lost about 23%, but are still in the top half of the large-cap growth category. The Focus fund has about one tenth of the $61 million in assets that the Select fund does, though.

Smells Like Team Spirit
SSgA International Stock Selection (SSAIX) won’t divulge the name of its managers in its prospectus anymore, according to SEC filings. It joined the regrettable list of funds and fund families that that have decided to merely list "team-managed" in the section of the document devoted to portfolio management instead of a more detailed manager biography. Steven Cheshire used to be listed as the sole manager.

AXP Rethinks Nasdaq 100 Fund
Three years and a busted tech-stock bubble later, American Express has decided a Nasdaq 100 index fund wasn’t such a great idea. Its AXP fund family plans to merge its AXP Nasdaq 100 Index   with its AXP Total Stock Market Index Fund, pending a November 13 shareholder vote, according to SEC filings. The less-than-$20 million Nasdaq fund has lost at least of third of its value in each of the last two years and so far in 2002.