3
Morningstar FundInvestor
September 2
014
practice. I think all fundholders should be given a fair
deal. If it’s worth launching, then the fund company
can eat some costs for a while. Typically, they eat
only a small amount of the costs but leave the actual
price paid by investors well above average. You
wouldn’t open a restaurant that charges double if the
restaurant is only half full. Not everyone does this,
though. Vanguard, Dodge
&
Cox, Fidelity, and Amer-
ican Funds generally offer funds that are fair deals
from the start.
Finally, new funds are more likely to have less-experi-
enced managers. Fund managers have to learn some-
where, and it’s often at new funds.
Should You Avoid New Funds?
New funds perform a little worse over their first three
and five years than the general fund world, but I
wouldn’t avoid all of them. You just have to know the
limitations and tune out all the marketing dross
around a new fund. Instead, look for seasoned man-
agers and decent expenses. Ideally you want low
costs; failing that, at least insist on middling costs
and a manager track record at other funds where
fees came down quickly with asset growth.
There may not be many keepers among new funds,
but if you pay close attention, you’ll see some that
are. If a manager of a fund with a Morningstar
Analyst Rating of Gold or Silver launches a new fund,
then by all means dig deeper. If the fund has low
costs, you have much better chances of success. And
if a new fund employs a strategy where small assets
are an advantage, then that vaunted flexibility may
actually be an advantage. Funds that trade less-liquid
securities like small caps or high-yield bonds come
to mind.
œ
A Few New Funds With Potential From Seasoned Managers
Name
Ticker
Morningstar Category
Prospectus Net
Expense Ratio
(%)
Minimum
Investment
($)
The Scoop
American Funds Dvlpg Wld Gr&Inc
DWGAX
Div. Emerging Mkts
1.39
250
American brings dividend
focus to emerging markets.
Vanguard Global Min Vol
VMNVX
World Stock
0.20
50,000
Vanguard buys less-
volatile stocks and hedges
currency risk.
Artisan High Income
ARTFX
High-Yield Bond
1.25
2,500
Artisan hired Bryan Krug
from Waddell & Reed to
run this.
Sarofim Equity
SRFMX
Large Growth
0.71
2,500
Similar to Fayez Sarofim-
run Dreyfus Appreciation.
Meridian Small Cap Growth
MISGX
Small Growth
1.35
99,999
Meade and Schaub formerly
of Janus Venture and Triton
run this one.
Janus Unconstrained Bond
JUCTX
Nontraditional Bond
1.07
2,500
Gibson Smith has done
a great job at other Janus
bond funds.
