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Which Top Small-Cap Mutual Funds Accept New Investors?
FYI: Few of the top-performing small-cap mutual funds of the past 10 years are still open to new investors.
Success has a bad side for small-cap funds. Performance lifts assets and attracts more assets from new investors. But most fund managers have a limit to how much money they can run efficiently in the small-cap space. Regards, Ted http://license.icopyright.net/user/viewFreeUse.act?fuid=MjAwODE0Njk=
I have been wanting to get back into NEFJX for sometime now as it has remained closed to new investors for a good number of years. It looks as though the A shares have 337 million in asstets while some other funds I have reviewed for possible purchase are much, much larger. And yes, it is a fund that I have used, in the past, for special investment (SPIFF) purposes. Maybe that is why they closed it? LOL.
I have linked its M* report for those that have an interest. Notice its 10 year performance as well as its one, three and five year numbers. Reminds me of an old song titled ... Leader of the Pack ... youtube link below.
A top performing small cap may not always be one. A fund comes to mind a few years ago I had RYPRX. It was closed and became too large. They are now mid cap.
Thanks davidrmoran I appeciate your presenting these for my review. Currently, if I were going to add a fund to my small/mid cap sleeve, in the growth area of my portfolio, I am not sure what my choice would be; and, I would probally just add to my existing position IIVAX as it is the smallest postion of the three funds currently held. The other two funds being PCVAX and PMDAX. In hindsight, I should have held on to NEFJX.
I added HDPSX about a year ago, holds less than 100 stocks. Although it has grown to $2B in assets, still has 75% in microcap and small cap stocks. Can be volatile, as many small cap funds are, with higher than average standard deviation, but its return compensates for this increased volatility. Initial purchase 1k. open to all investors.
Why a table of 13 funds? That's a pretty odd number, not to mention unlucky.
Should Triton be on the list, or should one follow the managers (to Meridian Growth and Small Cap Growth funds)? And since they listed Triton, how about listing Janus Venture, formerly managed by the same team of Meade/Schaub (though its 10 year performance is about 0.10% below the bottom of the 13 fund list)?
Note - the Meridian funds have not done well since the managers moved there.
In the same performance ballpark as Venture one finds Wasatch Micro Cap Value (WAMVX) - it's open and its average market cap is smaller than any of the other funds on the list.
Speaking of microcaps, where's Driehaus Micro Cap Growth (DMCRX), whose 10 year performance would rank #2, just behind Lord Abbett Micro Cap Growth (and just ahead of Triton)? It's open, has a $10K min, and is available NTF at a few brokerages.
Getting back to the tail end of the table, another fund that just misses the cutoff is Lord Abbett Alpha Strategies I. Mortals can't buy that ($1M min), but the A shares (ALFAX) are available load-waived at various brokerages. Since it's a fund of funds, it's a way to buy into Lord Abbett Micro Cap Growth I, which is at the top of the list.
Maybe if IBD increased the size of its list to 17, we'd have more good options. That might work for Fox News, too
not much of a track record yet, but I've been happy with DMCRX.
(I was writing up my post and didn't see this.)
M* gives a ten year record for this fund, and since the source of the table was M*, I didn't look more closely - I just assumed that IBD mechanically used M*'s data.
You are right that the fund does not have a ten year record. It prepended the record of its predecessor fund, Driehaus Emerging Markets Small Cap Growth Fund, L.P. As the prospectus notes, that predecessor fund was not registered as a mutual fund (1940 Act), so it was playing under different rules.
Hi, msf and gmarceau -- Thanks for the background info on DMCRX! Didn't know its history, just know that it's been a great holding for me...can't even remember where I first learned about it. I think I was just screening for funds on Schwab.com.
msf -- It prepended the record of its predecessor fund, Driehaus Emerging Markets Small Cap Growth Fund, L.P. I was under the impression that DMCRX is US focused and DRESX is emerging markets focused...or am I confused?
Also, I have a general question about micro-cap funds....what happens if a company grows rapidly and is no longer a "micro-cap"? Is the equity sold and replaced with another (possibly not as good), when (obviously) it's a quality holding if, due to growth, it's no longer a micro-cap?
You're right - I scrolled down too far in the prospectus before cutting and pasting - Driehaus did this "prepending" with a number of funds. For DMCRX, it prepended Driehaus Micro Cap Fund, L.P. - hope I got it right this time. The prospectus also says that in addition to DMCRX succeeding this LP fund, it also took in the assets from Driehaus Institutional Micro Cap Fund, L.P. (That was essentially a clone.)
What happens when a a company in the portfolio grows (or shrinks, for that matter) out of a fund's target cap size depends on the fund. Some funds say that they will continue holding the stock so long as it looks like a good position. This can result in modest style drift. Funds with more rigid sell policies will likely have higher turnover but better style purity.
It sounds like DMCRX will (or at least is allowed to) keep companies even if they grow out of microcap range. The prospectus says: "For purposes of the Fund, the investment adviser currently considers a company to be a micro-cap company if it is within the same market capitalization range at the time of investment as those included in the Russell Microcap® Growth Index. "
Style drift of individual stocks is also an issue with index funds. What index companies (like MSCI) have done over the past several years is build "buffer zones", so that a company is not automatically thrown out of an index just because it becomes too large, or too growthy, or too whatever. The company may be given some time before getting kicked out, in case this cap change is temporary. Or a stock may be kicked out only after the company changes its cap size by a lot (i.e. not just going a little over the line). These ways index funds don't turn over as much.
FYI, there is a lower minimum of $2000 for DRMCX and DRESX when buying in an IRA, at least at TDAmeritrade (both funds) and Vanguard (only DRESX is available). Given their high turnover, you would probably want to keep these funds in a tax-advantaged account.
ALFAX is available at Scottrade in taxable/nontaxable accounts (with 5.75% load) for minimum investment of $1,500.00 with subsequent investment minimums of $100.00.
ALFYX is available at Scottrade through an advisor for an initial minimum of $1M.
Seems to me unusual that a fund with such a good track record (i.e. DMCRX) would have a negative 5-yr alpha. Maybe it comes with the (true microcap) territory in this asset class?
I'm not unhappy with my own small-cap: MSCFX Mairs and Power. It was flying high and on fire in '13, but not so much, now. Someone in here referred to it as "aggressive." (Ted?) I put profit from it into its big sister, MAPOX. Also just plain lackluster this year. But I hear there's a lotta THAT going around this year, in 2015.
@Crash: You might want to consider pairing MSCFX if you still own it with a small cap international fund, at times they run in opposite cycles, as one zigs the other zags. Small caps funds are the most frustrating to watch, I agree, but I would not write off a fund from the Mairs and Powers family so easily. Quality shop. My small cap intl is OSMYX, one of my best performers this year, if you have access to load funds without paying the load such as through an advisor.
I don't know how to get access to the institutional share class OSMYX of Oppenheimer Int'l Small Company without going through a plan (e.g. 401(k)) or advisor, but you can purchase load-waived A shares OSMAX NTF though a variety of brokers (Fidelity, TDAmeritrade, etc.).
That's cool. Thank you to slick and to msf. No, I was not meaning to express that I would get rid of it. I understand that every year cannot be a great one. Most of my other stuff is with TRP in a rollover 401k, and my PRWCX stake is becoming a problem due to its own SUCCESS. It's already about one-third of my entire portfolio, now. I might look for a TRP International small-cap offering, then. Good idea.
Comments
I have linked its M* report for those that have an interest. Notice its 10 year performance as well as its one, three and five year numbers. Reminds me of an old song titled ... Leader of the Pack ... youtube link below.
http://www.morningstar.com/funds/XNAS/NEFJX/quote.html
And, another take ...
Should Triton be on the list, or should one follow the managers (to Meridian Growth and Small Cap Growth funds)? And since they listed Triton, how about listing Janus Venture, formerly managed by the same team of Meade/Schaub (though its 10 year performance is about 0.10% below the bottom of the 13 fund list)?
Note - the Meridian funds have not done well since the managers moved there.
In the same performance ballpark as Venture one finds Wasatch Micro Cap Value (WAMVX) - it's open and its average market cap is smaller than any of the other funds on the list.
Speaking of microcaps, where's Driehaus Micro Cap Growth (DMCRX), whose 10 year performance would rank #2, just behind Lord Abbett Micro Cap Growth (and just ahead of Triton)? It's open, has a $10K min, and is available NTF at a few brokerages.
Getting back to the tail end of the table, another fund that just misses the cutoff is Lord Abbett Alpha Strategies I. Mortals can't buy that ($1M min), but the A shares (ALFAX) are available load-waived at various brokerages. Since it's a fund of funds, it's a way to buy into Lord Abbett Micro Cap Growth I, which is at the top of the list.
Maybe if IBD increased the size of its list to 17, we'd have more good options. That might work for Fox News, too
M* gives a ten year record for this fund, and since the source of the table was M*, I didn't look more closely - I just assumed that IBD mechanically used M*'s data.
You are right that the fund does not have a ten year record. It prepended the record of its predecessor fund, Driehaus Emerging Markets Small Cap Growth Fund, L.P. As the prospectus notes, that predecessor fund was not registered as a mutual fund (1940 Act), so it was playing under different rules.
The fund seems to follow a momentum strategy from what I could see on their website.
Also, I have a general question about micro-cap funds....what happens if a company grows rapidly and is no longer a "micro-cap"? Is the equity sold and replaced with another (possibly not as good), when (obviously) it's a quality holding if, due to growth, it's no longer a micro-cap?
What happens when a a company in the portfolio grows (or shrinks, for that matter) out of a fund's target cap size depends on the fund. Some funds say that they will continue holding the stock so long as it looks like a good position. This can result in modest style drift. Funds with more rigid sell policies will likely have higher turnover but better style purity.
It sounds like DMCRX will (or at least is allowed to) keep companies even if they grow out of microcap range. The prospectus says: "For purposes of the Fund, the investment adviser currently considers a company to be a micro-cap company if it is within the same market capitalization range at the time of investment as those included in the Russell Microcap® Growth Index. "
Style drift of individual stocks is also an issue with index funds. What index companies (like MSCI) have done over the past several years is build "buffer zones", so that a company is not automatically thrown out of an index just because it becomes too large, or too growthy, or too whatever. The company may be given some time before getting kicked out, in case this cap change is temporary. Or a stock may be kicked out only after the company changes its cap size by a lot (i.e. not just going a little over the line). These ways index funds don't turn over as much.
DRESX was profiled by David last year here: http://www.mutualfundobserver.com/2014/03/driehaus-emerging-markets-small-cap-growth-fund-dresx-march-2014/
http://www.bizjournals.com/prnewswire/press_releases/2013/11/18/CG18400
ALFAX is available at Scottrade in taxable/nontaxable accounts (with 5.75% load) for minimum investment of $1,500.00 with subsequent investment minimums of $100.00.
ALFYX is available at Scottrade through an advisor for an initial minimum of $1M.