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Investing Specialists

Investors Would Like These Closed Funds to Reopen

Morningstar.com's readers discuss which closed funds they'd like to own--and offer tips and tricks for getting into limited-access funds.

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Actively managed funds are the Rodney Dangerfields of the investing world: They're getting no respect from investors. "We're really seeing an unprecedented level of outflows at actively managed funds," says Russ Kinnel, editor of Morningstar FundInvestor. In the latest issue, Kinnel notes that 17 funds in the Morningstar 500--a list of the best and largest mutual funds--suffered outflows of at least 50% of assets under management in the year ending Jan. 31; 80 funds on the list lost 25% or more of their assets over the same period.

As a result of these outflows, some once-closed funds with good long-term performance are reopening, including Silver-rated ASTON/Fairpointe Mid Cap (CHTTX), Bronze-rated Royce Premier (RYPRX), Gold-rated Royce Special Equity (RYSEX) and  Silver-rated Artisan Global Value (ARTGX).

This flurry of reopening prompted us to ask our readers: What closed funds would you like to see reopen and why? To read the complete thread or add your thoughts, click here.

Keep 'Em Shut!
Understandably, most readers who own now-closed funds want the funds to stay that way. After all, most funds close because managers want to maintain their investment style, and continuing to accept new dollars at an uncontrolled rate can interfere with that goal.

"I do not want the closed funds I own to reopen, diluting their ability to adequately handle inflows and outflows, unless the fund managers deem that reopening would not curtail performance," says rogern. "I'd want them to remain closed if they closed for future performance reasons," adds longameyes2.

Others don't want their now-closed funds to reopen because that may mean the fund has recently underperformed. "I have no desire to see any closed fund reopen as it is likely to mean that management has been unable to meet the fund's past earnings history and old fundholders are abandoning ship," writes seaside1. "My advice is to not waste one's time wringing one's hands over closed funds but go forth and invest elsewhere to meet your financial goals."

Yet, in small-cap fund categories, especially small value, some of the best funds are closed to new investors. Investors in these categories may find themselves making compromises. Notes jmrutledge, "I realize I could always go with a passive index, but small value is one corner of the universe where I prefer active management due to lack of research coverage and low trade volumes for many of these stocks."

Naming Names
Readers named more than two dozen funds they'd like to see reopen. Topping the wish list: Gold-rated T. Rowe Price Capital Appreciation (PRWCX). "Simply the best of the best," according to Wanttoretire. "PRWCX for me, too," says BobMc7. "It probably won't happen until it underperforms for a while, which will probably happen at some point." Closed to new retail investors since June 2014, the fund does accept investments from current shareholders. Moreover, its new institutional I-class shares (launched last December) are available in some retirement plans, where the $1 million minimum investment is waived.

Notably, seven T. Rowe Price funds made the list, a testament to the firm's dedication to preserving the investment styles of its managers. "T. Rowe Price has acted in fundholders' interests by closing funds with surging asset bases," notes Morningstar senior analyst Greg Carlson, who follows the family. Gold-rated T. Rowe Price Mid-Cap Growth (RPMGX) and Silver-rated T. Rowe Price New Horizons (PRNHX) both earned multiple mentions.

Other funds receiving multiple mentions were Gold-rated funds run by the Primecap team: PRIMECAP Odyssey Aggressive Growth (POAGX), Vanguard PRIMECAP (VPMCX), and Vanguard PRIMECAP Core (VPCCX). "Primecap knows how to help existing fund owners by keeping many of their funds closed," notes rogern. Gold-rated Sequoia (SEQUX) and Brown Capital Management Small Company (BCSIX) also received multiple mentions.

Vanguard Wellington--And 'Closed' Funds That Aren't
Ironically, Gold-rated Vanguard Wellington (VWELX) received almost as many votes as T. Rowe Price Capital Appreciation--even though there are ways for new investors to get into this fund. "Investors can purchase it directly from Vanguard (i.e., not through a broker or 401(k))," clarifies CautiouslyOpt.

Other readers have had some success getting into other seemingly closed funds. "Vanguard allows Flagship clients ($1 million with Vanguard) access to some otherwise closed funds," says ViveBene. Dirkronk did a partial IRA rollover with T. Rowe Price and was able to get into T. Rowe Price Capital Appreciation: "Try it. All they can say is no."

Susan Dziubinski has a position in the following securities mentioned above: POAGX, VPCCX. Find out about Morningstar’s editorial policies.