Our look at some of the best closed mutual funds around continues. You may still be able to get into some of these funds through your retirement plan, so check for availability! After examining some of the best large-cap funds, we now turn toward the smaller side of things.
Asset bloat can be a particularly nasty problem for small-cap funds. It's much more difficult for funds with heavy asset loads to stay nimble in the small-cap space. Good small-cap managers will proactively close their funds as soon as they think assets are becoming unwieldy. Here are a few of the finer examples.
Royce Premier (RYPRX)
I think Royce is one of the best small-cap shops in the industry. The company has been around for more than 30 years, focusing exclusively on small-cap investing. I like that they know what they do well, and they don't try to be everything to every investor. Among the funds Royce has closed, Premier remains the most attractive. Co-managed by firm founder Chuck Royce, Whitney George, and Lauren Romeo, it patrols the larger end of the small-cap universe, seeking out more established stocks such as Lincoln Electric
Premier's performance has been stellar, with the exception of the late 1990s and again in 2006. The late 1990s can be partly explained away by the fund's value orientation; 2006 was just a bad stock-picking year. I wouldn't lose too much sleep over one year of bad performance, but Royce's current assets, at nearly $5 billion, will doubtlessly make management's job increasingly difficult. Keep a wary eye on asset levels here; as long as they don't impede management's flexibility, this fund has plenty of upside left.
Rainier Small/Mid Cap (RIMSX)
Rainier may not be a big-name player in funds, but the firm does command more than $12 billion in assets, and it operates a superb closed small-cap fund. The Rainier Small/Mid Cap fund's five-person management team is led by Jim Margard, who's been with the fund since its 1994 inception. This team uses fundamental and quantitative research to identify smaller stocks with potential for positive earnings revisions. Right now, management likes such stocks as Cytyc
Rainier's growth-at-a-reasonable-price approach has recently served it well. The fund has finished in the top quartile of its Morningstar peer group every single year since 2001. Its moderate growth approach stands out when reviewing its performance in 1999, when it lagged the mid-growth benchmark, and in 2000-2002, when it beat that index. Assets are high here, at roughly $4.7 billion, but the fund's freedom to venture into mid-cap territory gives managers greater flexibility. Despite its 94% turnover, the fund remains an excellent choice for its fortunate current investors.
American Century Small-Cap Value (ASVIX)
This closed American Century fund lacks the shine and the readily apparent appeal of the Royce and Rainier funds, but it's been a consistent performer. The Small-Cap Value fund is run by co-managers Ben Giele and Steve Roth. Giele has managed the fund since 1999, while Roth was promoted from analyst to manager late last year. These two look for stocks in the cheapest third of the small-cap universe, including picks Fulton Financial
This fund's performance has been solid across the board, although aside from 1999, we really haven't seen the market treat small-cap value stocks too harshly. Small-Cap Value has ranked in the top half of its peer group in roughly half of the calendar years since its inception; that might not seem impressive, but small-cap value stocks have been one of the market's top-performing areas in that time. The Small-Cap Value fund tends to be slightly concentrated, with more than 40% of its portfolio in financials and industrial materials, but that's worked well for it in the past. It's not a showstopper, but it gets the job done.
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