Alec Lucas: Morningstar has long recognized Pasadena, California-based Primecap Investment Management as an outstanding active manager, and that continues with the recent announcement of Primecap’s James Marchetti as the inaugural winner of the Rising Talent Morningstar Award for Investing Excellence. Investors in one of Primecap’s six U.S. open-end funds, all of which receive a Morningstar Analyst Rating of Gold, would do well to understand their differences. Primecap subadvises three strategies for Vanguard and directly manages three Odyssey-branded funds. These six funds use Primecap's high-conviction multimanager system and fall into three pairs.
Primecap Odyssey Aggressive Growth and Vanguard Capital Opportunity look for companies with rapid earnings growth, many of which are mid-, small-, and micro-cap stocks. Vanguard Capital Opportunity’s larger asset base puts more limitations on its ability to buy micro-cap stocks.
Primecap Odyssey Growth and Vanguard Primecap look for companies with rapid earnings growth and invest across the market-cap spectrum, with Vanguard Primecap's larger asset base putting more limits on its flexibility.
Primecap Odyssey Stock and Vanguard Primecap Core look for companies that are attractive for a variety of reasons, including better than expected growth potential, mispriced assets, or turnaround potential.
There is overlap in the portfolios of each pair. There is also overlap, though to a lesser extent, across all six funds. In general, each Odyssey fund is more aggressive than its Vanguard counterpart. All six funds, however, have excellent long-term records and would make a great long-term addition to a diversified portfolio.
At present, only Primecap Odyssey Growth and Primecap Odyssey Stock are open to new investors, but that could change. If it does, investors should be prepared to make an informed choice.