By Jonathan Burton
In the latest example of a top mutual-fund unlocking its doors to waiting investors, Third Avenue Small-Cap Value Fund said it will accept new shareholders for the first time in more than two years.
The $1.8 billion portfolio, which specializes in smaller companies, plans to reopen on May 19 to enable the bargain-minded fund to take advantage of a more favorable investment climate, said Curtis Jensen , Small-Cap Value's manager and co-chief investment officer of Third Avenue Management.
The fund closed in February 2006 after Mr. Jensen found slim pickings for his deep-discount investing strategy and the fund's cash levels neared 40%.
"We weren't willing to sacrifice our discipline and get invested just for the sake of being invested," Mr. Jensen said.
"Today the reverse is true," he said, noting that the portfolio is almost fully invested. "We are sitting with more ideas than capital. Our inventory for new ideas -- our 'on-deck circle' -- is healthy and robust. That's presented opportunities for us."
Small-Cap Value becomes the most recent high-profile portfolio among a squadron of small-cap aces to reopen in recent months, including Royce Opportunity and Wasatch Small Cap Value. They join some respected large-cap funds that also are taking new accounts again, such as Sequoia Fund, Longleaf Partners Fund and Third Avenue International Value Fund.
Value-stock funds in particular are finding that in today's volatile market, remaining closed can be an impediment. Managers don't want to sell securities to compensate departing shareholders, and they need new money to buy attractive stocks at even wider discounts.
Small-Cap Value has been a standout at Third Avenue Management, a boutique New York firm with a strong U.S. and international fund lineup and a reputation for owning eclectic, out-of-favor stocks. The firm's founder is value investor Marty Whitman , who runs the flagship Third Avenue Value Fund and co-managed Small-Cap Value with Mr. Jensen until mid-2001.
Under Mr. Jensen, Small-Cap Value has stuck to its discipline of buying companies below the manager's estimate of its true market value. Mr. Jensen favors an assortment of sectors, with a large stake in U.S. and Japanese real estate as well as holdings globally in forest products, paper and energy.
The new opportunities are widespread, Mr. Jensen said. For example, he said the fund has added to positions in two Japanese companies, Sapporo Holdings /zigman2/quotes/200413497/delayed JP:2501 -6.25% and shopping-center operator Parco. Sapporo is a well-known brewer, but Mr. Jensen sees value in its land holdings. "It's a real-estate company masquerading as a beer maker," he said.
Mr. Jensen's focus on financially sound companies has also helped the portfolio avoid much of the credit-crisis damage that has tarred other funds, said Bridget Hughes , mutual-fund analyst at investment researcher Morningstar. "He's a very patient and thoughtful investor," she said. "He thinks a lot about valuation and downside risk."
This risk-conscious strategy has landed Small-Cap Value's performance in the upper ranks of its peers; a 2.3% decline over the 12 months through Monday ranks in the top 10% of its category, while its five-year annualized 15.7% return tops more than 80% of its rivals, according to Morningstar.
Mr. Jensen said he doesn't expect a quick turnaround for small-cap stocks, which have suffered as investors flocked to more-predictable havens.
"For anybody whose time horizon is less than a year, I'd say this is not the right place" to invest, he added.
Nationwide's New Chief
Nationwide Financial Services Inc. named Michael S. Spangler head of its Nationwide Funds Group. The group had about $30 billion in assets through the end of March. The Columbus, Ohio, company said Mr. Spangler, 42 years old, most recently served at Morgan Stanley Investment Management.
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