3
Morningstar FundInvestor
November
2013
You can use them to compare with your funds. If it’s
a fund with low turnover, you could give it a little
more slack; if it has high turnover, you might want a
fund with assets below that median closing level.
I find it most useful for funds where one or all man-
agers operate together as opposed to running
separate sleeves. (One note on the data: We record
the most recent closing or reopening date, but
we don’t maintain the full history, so I don’t have all
the closings to draw on.)
I’ve run this median closing data past some trading
cost consultants, and they told me it was pretty close
to the levels where they recommend closing.
For U.S. small caps, the median closing level is $
723
million, and for foreign small caps, it was a nearly
identical $
730
million. The smallest closing level was
$
15
million for
Birmiwal Oasis
BIRMX
, and largest
was
AllianzGI NFJ Small-Cap Value
PSVIX
, which
closed at $
5
.
9
billion.
Surveying the Morningstar
500
funds, I see that
many funds above that median closing level are
closed, multimanager, or passively managed. How-
ever,
T. Rowe Price New Horizons
PRNHX
is
not. With $
14
billion in assets, it’s worth keeping an
eye on. The plus side is that the fund isn’t getting
a lot of inflows this year, and T. Rowe Price has both
a good record of closing funds and of funds per-
forming well after closing. Asset size is part of why
the fund received a Morningstar Analyst Rating of
Bronze rather than Silver or Gold. As I noted in the
cover story on small caps in the July issue, flows
into small-cap funds have been rather mild consid-
ering the strong five-year returns.
For mid-caps, the median is $
2
.
9
billion as set by
Artisan Mid Cap
ARTMX
.
Schroder US Small &
Mid Cap Opportunity
SMDVX
closed at $
275
million, while
T. Rowe Price Mid-Cap Growth
RPMGX
closed at $
16
.
7
billion. Most of the really
big mid-cap funds are in redemptions, so the markets
are fixing some of the problems. Fidelity Low-Priced
Stock is a massive $
44
billion, but at least it’s slightly
shrinking. In that fund’s case, Tillinghast has proved
his mettle, but when he retires I’ll start to worry.
The first fund I found with one-year flows above $
1
billion was
American Century MidCap Value
ACLAX
, which has $
4
.
7
billion in assets. In fact, the
fund has brought down turnover as assets have
grown. However, the number of holdings and market-
cap exposure have not changed. Performance has
slumped lately, but as I said before, I’d be cautious
about assuming cause and effect there. I’d say the
fund is starting to send some warning signs, but it’s
early days. It merits a close watch, but I’m not
worried yet. Yes, there are some large-cap funds that
have closed to new investors, but it’s a small list,
and most of the names are focused.That makes sense,
as focused large-cap funds naturally feel a much
greater impact of flows than others. For example,
Janus Twenty
JAVLX
closed at $
9
billion in assets,
and
Sequoia
SEQUX
partially closed at $
4
.
9
billion.
The diversified
Vanguard Primecap
VPMCX
and
Vanguard Primecap Core
VPCCX
closed on the
same day in
2009
at around $
26
billion and $
3
.
8
billion, respectively. The two have a ton of overlap,
so really it’s more like a closing at $
30
billion. Our
median is $
4
.
3
billion for the focused
Touchstone
Sands Capital Select Growth
PTSGX
. The foreign
large-cap median is very close to that figure, too.
That’s not a bad guideline for a focused large-cap
fund, but I wouldn’t apply it to a diversified fund.
Among focused large-cap funds in the Morningstar
500
, Fairholme and
Longleaf Partners
LLPFX
are
currently on an asset diet, as each has had more than
$
1
billion in outflows the past year, so no worries
there.
Yacktman
YACKX
and
Yacktman Focus
YAFFX
have both seen inflows of more than $
2
billion in the
past year, and both are north of $
10
billion. The good
news is that they are comfortable holding cash. Still,
it’s something to watch.
Conclusion
Closing a fund is one of those areas where a fund
company’s and fund shareholders’ interests can
diverge. I rarely put asset size at the top of my factors
when looking at a fund, but ignoring its effects is
a mistake.
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