3 Big Yet Competitive Funds

Susan Dziubinski: Hi, I'm Susan Dziubinski for Morningstar.com. Sometimes funds can get too big for their own good and the growth in assets interferes with the manager's strategy and can hurt performance. Today, we're looking at three very large funds that continue to accept new investments, but their asset growth hasn't derailed performance. All three funds earn Morningstar Fund Analyst Ratings of Gold.

Katie Reichart: T. Rowe Price Blue Chip Growth is an appealing Gold-rated fund that hits on all the high points. Manager Larry Puglia launched the fund in 1993 and has posted a superb long-term record that beats the Russell 1000 Growth Index and large-growth peers. The fund stayed reliably consistent over time in terms of its portfolio construction despite its growing asset base. Puglia relies on T. Rowe's talented analyst team, which is particularly skilled in technology and communications, which are big parts of the fund. And the fund has had some longtime winners in picks such as Amazon, but it's hardly a one-trick pony. The fund is diversified across more than 100 stocks, which helps Puglia maximize the best ideas he has of T. Rowe's analyst team across sectors. The strategy is now over $100 billion in assets. So, it's one of the biggest in the large-growth category, but its size hasn't slowed it down yet. The portfolio remains highly liquid and focused on large-cap companies, and its performance hasn't skipped a beat. T. Rowe also has a good record of closing funds at the manager's discretion, so that provides further confidence.

Alec Lucas: American Funds Washington Mutual has nearly $120 billion in assets. But the fund isn't quite as big as it looks thanks to American's patented multimanager system, which divides the fund's asset base into separately managed sleeves. Those sleeve size range in size from about $7 billion to $17 billion by the fund's seven named managers, and two sets of analysts also manage money in the fund. The fund has a very conservative orientation. It focuses on blue chip dividend-paying stocks and has an excellent record, especially in market downturns like late 2018 when it preserved capital better than the S&P 500 to the tune of 4 percentage points, has a very good long-term record and remains a standout option.

Tony Thomas: Dodge & Cox Stock is still a fine option, even though it has a $70 billion asset base. For one thing, it's got great managers, it's got a 10-person investment committee that's making the portfolio decisions, and they have a deep analyst team that's got plenty of resources to support the managers. The process is also conducive to running a lot of money. They invest in a lot of large-cap liquid stocks, and they have low turnover. So, there's not a lot of trading that needs to take place. And finally, they have experience running this amount of money. Before, they've run $70 billion back in 2007. The firm has shown a willingness to close funds when there are capacity questions, including closing this fund in its past, and I think that the managers really have the resources to be able to manage this amount of money, and I think the track record to prove that they can.