BOSTON Feb 21 Mutual fund giant Fidelity
Investments will bar new clients from putting money into one of
its successful portfolios focused on smaller companies after
strong returns helped assets balloon by roughly one third in the
last twelve months.
The $3.5 billion Fidelity Small Cap Value Fund,
which handily beat the Standard & Poor's 500 index with a 20.13
percent return in 2012, will no longer accept cash from new
investors after March 1, the company said in a statement on
This is the second time in two months that Fidelity has
closed one of its small company stock offerings to new accounts,
taking a step that has been applauded by analysts as being good
for investors and managers as they struggled to put the extra
money to work.
Small Cap Value, co-managed by Chuck Myers and Derek
Janssen, is one of the Boston-based asset manager's best
performers, boasting research firm Morningstar's highest five
star rating and an average annual return of 10.54 percent since
its launch in 2004.
With holdings like TCF Financial Corporation,
Superior Energy Services and consumer goods company
Hanesbrands, which have all scored strong returns this
year, the fund has climbed 10.38 percent so far this year, more
than double the Standard & Poor's 500 Index' 5.18 percent gain.
It has also outperformed the Russell 2000 index that
measures the performance of smaller companies, which is up 6.02
Demand for the fund had been strong for years but picked up
dramatically early this year when rising markets tempted
investors to finally put more money into stock portfolios. At
the end of 2011 assets stood at $2.3 billion.
"Small Cap Value Fund has experienced a steadily growing
asset base and more recently strengthening investor cash flows,"
Brian Hogan, president of Fidelity's Equity Group said. "We've
analyzed the situation closely, and believe that it's in the
interests of shareholders to close the fund to new investors at
The move comes only weeks after Fidelity announced in
January that it would close its Small Cap Discovery Fund, also
managed by Myers, to new accounts. Fidelity's equity division
manages 333 mutual funds around the world and only a tiny number
are closed, including its $44.4 billion Fidelity Growth Company
fund, managed by Steven Wymer, which stopped taking new clients
"It is a very important move especially because Fidelity has
not always had the best record for closing their funds," said
Katie Reichart, who covers Fidelity at Morningstar.
But the company's decision also further limits investors'
choices among funds that specialize in small undervalued
companies, she added. "In this category a lot of the good funds