When it comes to investment management, there are a few prominent names that stand out -- names like Bill Gross, Marty Whitman, and Ken Heebner, for example. But far less heralded are those fund shops that employ a team approach and don't rely on any one superstar investor to get the job done. While it's easy to identify with a big-name investment guru, investors who shun team-based approaches miss out on some of the brightest investment talent around -- including one shop that has consistently ranked ahead of its peers.
Limited access
As a supplement to its line of index funds, Vanguard has a long history of selecting excellent managers to subadvise some of its actively-managed funds. One of the best long-term subadvisory relationships that Vanguard has developed has been with California-based PRIMECAP Management.
The folks at PRIMECAP have been cranking out hits for roughly two and a half decades with their team-based investment approach, which has produced some of the best results in the business. The team here runs the legendary Vanguard PRIMECAP Fund (VPMCX), which has ranked ahead of 98% of its large-cap growth peers in the past 15 years. Sister fund Vanguard PRIMECAP Core (VPCCX) is a newer offering, but it has put up similarly impressive numbers during its five-year lifespan. Vanguard and PRIMECAP have also teamed up to offer the slightly more mid-cap focused Vanguard Capital Opportunity (VHCOX), which has outpaced 99% of its competition over the past 10 years.
Unfortunately for those who don't already own them, all three of these Vanguard/PRIMECAP funds are now closed to new investors. That's a major downer for investors who want access to one of the greatest investment teams around. Of course, if you're lucky enough to have access to one of these funds within your retirement plan, you can probably still get in since investors are frequently able to buy funds that are closed to the general public within their 401(k) or other employer-sponsored retirement plan. But scores of other investors may be plain out of luck.
Launching a new odyssey
Fortunately, all is not lost for investors who didn't get into one of these PRIMECAP-run Vanguard funds before they shut the doors. There's another, newer line of mutual funds run by the same team of talented folks -- the PRIMECAP Odyssey line-up. These funds have only been around for five years and are a bit more expensive than their Vanguard counterparts, but they utilize the same team approach and reasonable growth-oriented investment philosophy. As a result, they've also managed to rack up some pretty impressive results during their life.
PRIMECAP Odyssey Growth (POGRX) seeks out companies with above average earnings growth that is not fully reflected in its stock price. Right now, the team is finding a lot to like in the health-care arena, placing roughly 34% of fund assets in this sector. Names like Amgen (NASDAQ:AMGN) and Eli Lilly (NYSE:LLY) land amongst the fund's top 10 holdings. As might be expected for a growth-oriented fund, tech also plays a pretty big role here, with companies such as Google (NASDAQ:GOOG) and IT infrastructure firm EMC Corporation (NYSE:EMC) amongst the fund's largest positions.
Odyssey Growth has posted an annualized 4.7% return over the past five years, compared to gains of less than 1% for the average large growth fund and the S&P 500. The fund outranks 94% of its peers over the past five years and sports a low 13% annual turnover. PRIMECAP Odyssey Growth would make an excellent addition to the large-growth slot in any investor's portfolio.
More of a good thing
If mid-cap growth investing is more your thing, you might want to consider looking at PRIMECAP Odyssey Aggressive Growth (POAGX), the mid-sized version of Odyssey Growth. PRIMECAP management employs the same growth-leaning approach to finding stocks in the middle of the market cap spectrum as they do on the larger end.
Odyssey Aggressive Growth looks somewhat similar to its larger sibling, with respect to sector allocations. However, it delves more into the small- and mid-cap space, with pint-sized health-care names like molecular diagnostics company Cepheid (NASDAQ:CPHD) and birth control manufacturer Conceptus (NASDAQ:CPTS), as well as tech stocks like video-game producer Electronic Arts (NASDAQ:ERTS).
Odyssey Aggressive Growth ranks in the top 10% of all mid-growth funds in the past five years with a 5% annualized return, versus a flat performance for the average fund in this category. There may be a bit more volatility here than with its larger counterpart, but longer-term results have been quite promising. This fund is an absolute winner for the mid-cap growth investor.
There are few teams in the investment business that have as strong a track record behind them as the folks at PRIMECAP Management. While Vanguard has closed off access for all of their funds run by the PRIMECAP team, you still have a few options to pick from, thanks to the PRIMECAP Odyssey line. These funds are open for now, but don't delay too long -- these doors could eventually close to new investors, too!
