11
Morningstar FundInvestor
June 2
013
A rising market doesn’t mean more assets and corre-
spondingly lower fees for all mutual funds. Let’s
take a closer look at several funds whose price tags
are rising at a time when they don’t need any
further headwinds.
American Funds Growth Fund of America
AGTHX
Even the biggest actively managed equity fund in the
United States can be buffeted by cash flows. This
large-growth fund enjoyed a strong run of relative per-
formance from the
2000
–
02
bear market until late in
the mid-
2000
s equity rally, and its asset base peaked
at roughly $
200
billion. Returns have since cooled—
its trailing three- and five-year returns are mediocre—
and investors have pulled out a net $
80
billion over
the past three years through April
2013
. As a result,
assets are down to a still-massive $
121
billion.
The expense ratio for the fund’s A shares increased to
0
.
71%
in
2012
from
0
.
62%
in
2008
, although that
share class still earns a Morningstar Fee Level of Low.
Calamos Growth
CVGRX
This fund also has seen hot money flow out and costs
rise as relative returns have waned. It hit $
20
billion
in assets in early
2006
as investors poured money in
following stellar returns. But Calamos Growth has
since seen seven consecutive years of net outflows
(more than $
1
billion each year, and more than $
4
billion in
2007
) as the fund has largely struggled—it
landed in the bottom decile of its category in four
of those seven years, and it is there again in
2013
for
the year to date through May
31
,
2013
. The A shares’
expense ratio has consequently risen to
1
.
29%
in
2012
from
1
.
20%
in
2007
, which means that it earns
an Above Average fee level despite a still-substantial
$
4
.
9
billion asset base.
Leuthold Core Investment
LCORX
,
Leuthold Asset Allocation
LAALX
These funds have struggled in recent years because
of poor stock-picking and mistimed asset-allocation
calls. Core Investment has trailed the vast majority of
its competitors over three and five years because of
stock selection, although its longer-term record is still
strong. Asset Allocation has struggled mightily in
three of the past four years. Investors have withdrawn
a net $
1
.
17
billion from Asset Allocation and $
940
million from Core Investment over the past three years,
and the funds’ price tags have risen: The expense
ratio for Core’s Retail shares increased to
1
.
18%
in
the January
2013
prospectus from
1
.
11%
in
2008
, and
Asset Allocation’s retail shares went to
1
.
38%
from
1
.
23%
over the same period. (The latter fund’s Insti-
tutional shares increased
11
basis points in just one
year.) Asset Allocation now earns a High fee level.
Litman Gregory Masters International Institu-
tional
MSILX
,
Litman Gregory Masters Smaller
Companies Institutional
MSSFX
Both of these funds just saw their expense ratios rise.
International’s Institutional shares increased to
1
.
15%
from
1
.
11%
the previous year and from
1
.
03%
in
2007
. The fund isn’t much smaller now than it
was in
2007
, so the cost difference is odd. Investors
pulled a net $
272
million from the fund in
2012
after a poor
2011
, but flows have since stabilized. Its
fee level is Above Average.
The price tag for Smaller Companies’ Institutional
shares made a big jump between
2007
and
2009
as
its asset base shrank dramatically because of in-
vestment losses and redemptions. It then dropped a
bit, but it has since edged up to
1
.
58%
(compared
with
1
.
30%
in
2007
). The fund’s fee level is High even
among small-cap funds, which tend to be more
expensive.
œ
Contact Greg Carlson at
Several Funds Raising Fees
Red Flags
|
Greg Carlson
What is Red Flags?
Red Flags is designed to alert
you to funds’ hidden risks.
Such risks can take many forms,
including asset bloat, the
departure of a solid manager,
or a focus on an overhyped asset
class. Not every fund featured
in Red Flags is a sell, and in
fact, some are good long-term
holdings. But investors should
be prepared for a potentially
bumpier ride in the near future.
