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Closed funds reopened
Old 02-23-2008, 03:48 PM   #1
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Closed funds reopened

I ran across a Marketwatch article regarding the reopening of several funds after being closed to new investors for a few years. I'm only familiar with two of the funds,Dodge & Cox Stock (DODGX) and Dodge & Cox Balanced (DODBX). Both have good track records with moderately low expense ratios.
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Old 02-24-2008, 08:57 AM   #2
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Dodge & Cox seems to run a good shop at a fair price. The optimistic side of me wants to believe that this is a positive indicator of market sentiment.

The cynical skeptical pessimistic side of me wonders "What's in it for them?" Maybe this is just another way for them to cover redemptions without having to sell more holdings-- I can see a couple supervisors telling their fund manager "Boss, we gotta reopen now or we'll be outta cash in two months. We need that fresh dumb money to pay off redemptions!!"

Of course the funds may already have hefty cash positions from having sold investments as they became fully valued. Or at least that's what their 60-day-old reports will tell us.

Someday I'd like to read a fund-opening announcement letter that says "And to help you share in our excitement at re-opening the fund, we're also going to share the extra profits by lowering our expense ratio!!"

BTW Tweedy, Browne Global Value's expense ratio is at an all-time high and they're re-opening the fund. T,B started up a dividend/value fund a few months back. And I got a letter from Fidelity announcing the re-opening of Magellan. Maybe Dodge & Cox was afraid of missing out on all the cash rushing back into the market.

I'm glad we don't hold any more mutual funds. Next week we'll finish rebalancing our Berkshire Hathaway shares and start buying DVY, IJS, & PID... their expense ratios haven't gone down either, but at least they haven't gone up!
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Old 02-24-2008, 10:29 AM   #3
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Yeah, I noticed quite a few opening up again that had nice runs over the past few years. Add Third Ave Intl, Oakmark Intl Small Cap, Royce Micro/Small, etc.

For those of you that like to play with some side money but don't like to pick individual stocks it may be a decent move into one or more. Some are holding a decent pile of cash and if the managers are talented they could put it to good use when stocks are on the cheap.

The one shop that refuses to reopen and put a freeze on all new purchases in FPA. There is one other shop with a small cap value fund that looks appealing to me right now.
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Old 02-24-2008, 10:49 AM   #4
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So a Fund gets "fat" and stops new players from entering. Then something happens and everyone heads for the door leaving room for new suckers investors. I would think that the obvious way to capture new money would be to call it a "wonderful event!"

I would (if it were me) start with a "quick search" on, for example, MAXfunds.com | A better way of looking at mutual funds. before rushing in. And, in any event, do your due diligence before proceeding.

Disclaimer: I did not research this any further than stated above and I own no shares in the subject funds.
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Old 02-24-2008, 01:40 PM   #5
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From Mike Santoli's column in tomorrow's Barron's:
Quote:
If professional investors are bored, then individuals are deeply in hate with stocks, from the available evidence. TrimTabs estimates that investors have pulled nearly $60 billion from stock-mutual funds so far this year while adding more than $70 billion to money-market funds and small CDs. They're fleeing equities after a nearly 20% drop (now closer to 13% off the highs), while heading to cash just in time for Federal Reserve rate cuts to erode the yields on those accounts.
The fund managers are openings funds for the reason above.
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Old 02-24-2008, 02:32 PM   #6
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The folks at Longleaf have become aggressive on requesting new money and opening their Partners fund lately. They like what they see, good companies at good prices......as always, proof will be in a few years to see if they are right or not.

Hillbilly

FYI: I am a partner with Longleaf.
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Old 02-26-2008, 02:27 PM   #7
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WSJ had an article on this today, page D3, "Is a Great Opportunity Knocking". Lists all the ones mentioned here along with First Eagle Global. Says it is not a sign of an imminent turnaround, but still a positive for value stocks, which obviously have had a tough run over the last year or so.
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Old 02-27-2008, 09:20 AM   #8
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Quote:
Originally Posted by Hillbilly View Post
The folks at Longleaf have become aggressive on requesting new money and opening their Partners fund lately. They like what they see, good companies at good prices......as always, proof will be in a few years to see if they are right or not.

Hillbilly

FYI: I am a partner with Longleaf.
So when is Longleaf Small Cap going to reopen? - I'm hoping for that one.

Personally, I think long time closed funds reopening is a very bullish sign. It indicates that an asset class has fallen hard out of favor and investors have been fleeing. Also, reopening the fund to bring in new cash to cover redemptions helps out the remaining holders of the fund.

Audrey
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Old 02-27-2008, 10:02 AM   #9
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Quote:
Originally Posted by audreyh1 View Post
bring in new cash to cover redemptions helps out the remaining holders of the fund.
Exactly
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Old 02-27-2008, 11:47 AM   #10
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DODGX is basically a large cap value fund. The large cap value category has had a fairly rough time of it over the last year or so. So it's not surprising that DODGX has not had a great year. The expense ratio is 0.52%. One fund to compare it to is DFA's US Large Cap Value DFLVX. The records compare favorably over the 1, 3, 5, and 10yr periods when recalling that you can only get DFA exposure through an FA who will charge you perhaps 1% or more for this.

I own some DODGX. Wouldn't personally buy DODBX because I want to control my equity/bond allocation more directly. Here is a link to DODGX returns:Dodge & Cox Stock Report (DODGX) | Total Returns
I read the DODGX reasoning regarding their reopening and it sounded OK to me.

Nords comments on Tweedy Brown I can agree with. I used to own TBGVX and it did well for several years. But I got smarter about ER's and their ER=1.37% is really outrageous given their size --- it's just greed and not in the interest of shareholders.
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