Every fund investor with gray hair knows the Icarus-
like story of
Fidelity Magellan
FMAGX
. It was
brilliant, but, after Peter Lynch left, it was run by mere
mortals even as its asset size soared ever higher.
It was the biggest fund by far, and that proved its
undoing. It has been a weak performer for nearly two
decades, and it has fallen back to earth. The fund
surpassed $
100
billion, but today it’s a humbled
2
-star
fund with just $
15
billion in assets.
But there have been other, less famous stories such
as
Calamos Growth
CVGRX
, which was great
when it was small and pedestrian when huge. There’s
also
Franklin Balance Sheet Investment
FRBSX
,
which we’ve illustrated in the graph below. It became
popular quickly by making money in
2000
and
2001
,
then losing only a little in
2002
. The fund gained $
500
million in new flows in
2001
and an additional $
941
million in
2002
. It closed to new investors in
2002
,
finishing the year with a total of $
2
.
5
billion in assets
under management.
That was a pretty quick close, but it might have been
too late. The fund tripled in size from
2000
to
2003
and grew to $
5
billion in
2006
. Management moved
the fund from borderline micro-cap (around $
250
million average market cap) to the small/mid border
just as rapidly from
2000
to
2003
as illustrated in
the graph. The little dot is the first portfolio in
2000
and on up to the biggest dot in
2003
.
Thus, investors ended up with a different fund than
the one they bought. And it showed in performance,
too. For the trailing
10
years, this once-strong per-
former’s
8
.
4%
annualized return ranks in its category’s
bottom quintile.
Franklin MicroCap Value
FRMCX
,
run by the same team using a similar process, closed
in at the beginning of
2001
with assets at a mere
$
110
million. Its
10
-year return by contrast was
11
.
1%
annualized—nearly
300
basis points better than
Franklin Balance Sheet.
I wouldn’t say assets were the only difference here,
but they were important. And before you accuse me
of pulling a Malcolm Gladwell by stringing together
a few anecdotes as though that proves something,
I offer an example of a fund that was not ruined by
asset growth.
T. Rowe Price Small-Cap Value
PRSVX
closed in May
2002
with assets of $
3
billion.
It, too, had been borderline micro-cap. But it didn’t
migrate to mid-cap land. It moved up slightly but has
remained near the low end of small caps. And its
Drawing the Line on
Asset Bloat
Fund Reports
4
Artisan Small Cap Value
Dodge & Cox Income
Primecap Odyssey
Aggresive Growth
Tweedy, Browne Worldwide
High Dividend Yield
Morningstar Research
8
Foreign Funds Get Active
The Contrarian
10
More of My Portfolio
Red Flags
11
Here Comes the Tax Bill
Market Overview
12
Leaders & Laggards
13
Manager Changes and News
14
Portfolio Matters
16
A Conversation With
Jack Bogle
Tracking Morningstar
18
Analyst Ratings
Income Strategist
20
FundInvestor 500
22
FundInvestor 500 Spotlight
23
Follow Russ on Twitter
@RussKinnel
RusselKinnel,
Director of FundResearch and Editor
FundInvestor
November 2013
Vol. 22 No. 3
Research and recommendatio s for the s riou fund investo
SM
Continued on Page 2
Deep Value
Core Value
Core Growth
High Growth
Core
Micro
Small
Mid
Large
Giant
Franklin Balance Sheet’s Move up the Style Box
2000–2003
