When funds reopen to new investors, it usually signals a response to significant outflows, which have eased capacity constraints on the strategies. These outflows often follow periods of underperformance. As a contrarian investor, buying funds when they reopen can be advantageous, as it typically indicates they are investing in an out-of-favor area, and their capacity challenges have lessened. Here are three great funds that have recently reopened to new investors.
1. Vanguard Primecap VPMAX
Vanguard Primecap is a Gold-rated fund managed by some of the best managers and analysts in the industry. This fund straddles the large-growth/large-blend line and has a track record of strong performance, with 15-year returns north of 14% annualized. Although it has lagged large growth in the past two years, it has beaten large blend, partly due to holdings like Eli Lilly but lacking high-flyers like Nvidia. With a low expense ratio of just 31 basis points, this fund remains an excellent bargain for investors seeking a mix of growth and blend.
2. Vanguard Primecap Core VPCCX
Similar to Vanguard Primecap, the Vanguard Primecap Core fund also straddles the large-growth/large-blend line. It has recently reopened to new investors and charges an expense ratio of 46 basis points. This fund has a solid performance history, with 15-year returns exceeding 14% annualized. Despite recent underperformance in the growth sector, largely due to its exclusion of stocks like Nvidia, its investment in companies like Eli Lilly provides a solid foundation for future growth. As a Vanguard fund, it offers exceptional value and is managed by top-tier professionals.
3. T. Rowe Price New Horizons PRNHX
The T. Rowe Price New Horizons fund, which recently reopened to new investors, is a Silver-rated fund that invests in small- and mid-cap growth stocks. Managed by Josh Spencer since 2019, this fund has a solid team of analysts dedicated to covering smaller growth companies. Although recent returns may appear unimpressive, this is primarily due to its higher allocation in small caps compared to its peers. The fund’s management has shown a commitment to preventing asset bloat by previously closing the fund, ensuring a focused investment strategy.
Conclusion
Reopened funds often present unique opportunities for contrarian investors. Vanguard Primecap, Vanguard Primecap Core, and T. Rowe Price New Horizons are three exceptional funds that have recently reopened to new investors. Each of these funds is managed by experienced professionals and offers solid long-term performance. Their reopening indicates a strategic response to outflows and underperformance, making them attractive options for investors seeking value in out-of-favor areas.
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