(PUB) Investing 2015

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3 Morningstar FundInvestor October 2015
nications LVLT, and Vail Resorts MTN. Management
allowed those positions to rise perhaps because it
hasn’t found much else to buy. At least this can’t be
pinned on asset growth.
Aston/Fairpointe Mid Cap CHTTX saw a spike from
0 .72 to 1.69 in June 2015. The fund closed to new
investors in 2013, and the bloat ratio suggests that
was a good idea. The fund continued to draw sizable
inflows even after closing as existing investors
kept contributing more money. However, the trend
reversed in 2015 , and the fund has had modest
outflows as performance has been poor this year.
T. Rowe Price New Horizons PRNHX saw its bloat
ratio rise from 1.89 to 2.65 in March 2015 . The fund
did take in $1.2 billion in 2013 before it closed on the
last day of the year. That pushed the fund’s bloat
ratio up under Henry Ellenbogen, but it might not be
going higher now that the fund is in modest redemp-
tions. Even so, with $16 billion total assets under
management, Ellenbogen has some real limits on the
stocks he can buy and the speed he can trade them.
Biggest Decreases in Bloat Ratio
Eventide Gilead ETGLX had a huge drop from 3.90
in 2013 to 0.06 in March 2015. The answer is turnover.
It came down from 487% in 2011 to 91% in 2013 and
17% in 2014. Ironically, the cause may be asset growth.
The fund was less than $100 million in 2011 and just
$300 million in 2013 compared with $2.1 billion today.
Although it now owns more days’ trading volume in its
stock, management really changed the way it invested
by paring turnover in order to handle more money.
Here, the bloat ratio is capturing a change brought on
by asset growth, only it’s because of a drop in the
turnover ratio. (See Red Flags for more on this fund.)
Janus Venture and Janus Triton are the flip side of
Meade and Schaub going to Arrowpoint. The funds’
replacement, Jonathan Coleman, likes his portfolios
more diffuse than they do. Thus, Janus Venture fell
from 4.8 to 1.6. Coleman has about 40 more names in
his portfolios than his predecessors did. Janus finally
got around to closing Triton now that it has more than
$7 billion in assets.
American Century Small Cap Value ASVIX has come
down sharply to 1.97 from 6.70, though it remains in
the most-bloated decile of its peer group. The fund has
seen about $800 million go out the door over the
past two years; that’s about one third of assets. The
fund lost its lead manager in 2014, and it has been
a middling performer in recent years. It is encouraging
that outflows have cut the fund’s bloat significantly.
Those outflows might lead it to reopen in the coming
months, but given the manager change I wouldn’t
rush in.
Fairholme FAIRX was an interesting story among
large caps. The fund’s bloat ratio fell from 1.6 to 0.2,
largely because of outflows. Yet, I wouldn’t give
the fund an all-clear on liquidity. While number-two
holding Bank of America BAC is a position equal
to less than one day’s trading volume and top holding
American International Group AIG is four days’
trading volume, there are some huge positions in the
rest of the top 10. The St. Joe Company JOE is 56
days’ trading volume, and the fund’s Fannie Mae and
Freddie Mac positions wouldn’t be easy to unload.
The Least-Bloated Funds
Most of the Morningstar 500 funds have above-
average bloat ratios because they have above-average
asset bases. But there are some diffuse small-cap
funds that might be worth a look. T. Rowe Price Diver-
sified Small Cap Growth PRDSX , with a Morningstar
Analyst Rating of Silver, has a bloat ratio of just 0.05,
placing it in the least-bloated quartile of small-growth
funds. Vanguard Explorer Value VEVFX spreads
assets among multiple advisors, and it is still pretty
small. Its 0.05 bloat ratio is in the bottom third of the
small-blend Morningstar Category.
Among mid-cap funds, Harbor Mid Cap Value HIMVX
has a bloat ratio of just 0.01, which places it in the
least-bloated quartile of mid-value. Westport WPFRX
has a bloat ratio of 0.01, which also places it in the
least-bloated quartile.
Where to Find Bloat Ratios
We will post bloat ratios for U.S. equity funds in the
Morningstar 500 on mfi.morningstar.com. K