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Fund Spy

These Funds Have Scary Fees


We don’t rate the priciest funds. It’s not likely worth the effort to tell you why you shouldn’t buy Nysa (NYSAX) and its 4.57% expense ratio or Midas Magic (MISEX) for 3.49%. (Side note: The SEC name rule requires Midas Magic to be at least 80% magic.) But there are some notable funds with fairly high fees. It’s a shame because these funds do have some appeal outside of their fees. A choosy investor can do better.

 Eventide Gilead (ETGLX)
Until recently, this fund had been a really strong performer. But we gave it a Morningstar Analyst Rating of Neutral even before its recent tailspin in part because it charges an expense ratio of 1.35% and its high turnover rate likely means it racks up above-average trading costs. Manager Finny Kuruvilla also faces the chal­lenge of managing a much larger fund than he had been running. The fund has had inflows of $1.1 billion over the past 12 months through September, which drove assets up to $1.8 billion. The strategy combines Christian screens and an aggres­sive-growth strategy. It will be interesting to see whether the fund’s success is sustainable, but its fees will make that a real challenge.

Gabelli Asset (GABAX)
If only you could tap Mario Gabelli the portfolio manager without having to pay Mario Gabelli the CEO. Gabelli is a good investor who focuses on cash flow and stable franchises, but he's one of the highest-paid CEOs in the fund industry despite running a small firm. That big paycheck requires high fees--to the tune of 1.35% here. This unrated fund also has quite a bit of key-man risk--there could be a big drop in talent should the manager step aside.

 Marsico Growth (MGRIX)
Is Tom Marsico worth paying a premium? No. He has a strong 30-year record, but it’s been a long time since he consistently outperformed. The fund charges 1.37%--that's 45 basis points above the no-load large-cap median, and more than double  PRIMECAP Odyssey Growth’s (POGRX) expense ratio. A sharp drop in firm assets under management and some key departures add to Marsico’s challenges. The fund has only had one top-third showing in the past 10 years, and it probably won’t improve on that record this year. Once again, here is a fund with some appeal, but not enough to make it a good bet.

 Thornburg Value (TVAFX)
This fund is on the rebound after a disastrous stretch. However, poor performance led to a big exodus, which in turn led to higher costs. The fund charges 1.37%, which is pricey for a large-cap fund. The fund has had quite a bit of manager turnover--two have left in the past five years, and Rob MacDonald just joined Connor Browne in February 2015. Browne is fairly seasoned, but this is more or less MacDonald’s first go at management outside of a short stint at another fund. It’s nice to see the fund outperform nearly all of its peers this year thanks to Alphabet (GOOG),  Mondelez International (MDLZ), and  Gilead Sciences (GILD), but we need more than a good nine months to recom­mend it.

Royce Micro-Cap (RYOTX)
This fund charges 1.48%--that’s high for a small-blend fund, though not as extreme when compared with others that focus on micro-caps. Micro-caps don’t cost more to research, but funds that focus on them generally have to close at a lower asset level than other small-cap funds, so there are less economies of scale to share. We don’t rate the fund, but its poor five- and 10-year records don’t make it a compelling option. Its returns lag  DFA U.S. Micro Cap (DFSCX) by a wide margin, so we can’t blame micro-caps, either. Manager Jennifer Taylor has been at the helm for nine years, and she at least deserves credit for investing more than $1 million of her own money in the fund.


Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.