Newspaper article St Louis Post-Dispatch (MO)

The Ins and Outs of Closed Mutual Funds How Do You Decide Whether to Invest?

Newspaper article St Louis Post-Dispatch (MO)

The Ins and Outs of Closed Mutual Funds How Do You Decide Whether to Invest?

Article excerpt

Every year, a few mutual funds decide to close their doors to new accounts while others - previously closed - open up again.

The Quantitative Numeric Fund (800-331-1244), a small company growth fund managed by John Bogle Jr., recently said it is suspending fund share sales as of March 31. That means potential shareholders of this 2 1/2-year-old fund don't have long to act.

"We're closing the fund for two reasons," said C. Lynn Wickwire, senior vice president at the Quantitative Group. "John Bogle Jr. feels very strongly that if you continue to take money in, we're not going to, first, realize the fund's investment objective and, second, remain in the small-cap market."

All mutual funds have an investment objective and a strategy for achieving that goal. The Quantitative Numeric Fund's objective is long-term capital appreciation. It aims to meet that goal by investing in small companies (the average capitalization of the companies in its portfolio is $800 million) that are selected from a quantitative - i.e., mathematical - model. One of the criteria used in identifying companies to buy are changes in earnings estimates.

According to Morningstar Inc., a Chicago-based mutual fund research firm, the total return for this fund at year-end in 1992 and 1993 was more than 28 percent; in 1994 it was more than 4 percent. That gives the fund an average annual total return since its inception of 25.5 percent. Even though the short performance history of the fund has been impressive, too much money could mean problems.

Wickwire said the model has identified a certain number of stocks as good to buy. And because the fund's policy limits a stock's holding to 2 percent of the fund's assets, inflows of too much money could mean that 2 percent cap might have to be increased. Or, Wickwire said, the list of stocks earmarked as good buys might have to be changed. …

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