A Path to the Back Door
NEW YORK — There are numerous ways to get into a closed fund. Among them:
* Look for a similar fund in the same family. Fidelity (800-544-8888), for example, has at least three small-cap funds: Fidelity Low-Priced, up 27 percent through Oct. 17; Fidelity Small Cap, up 28 percent; and Fidelity Emerging Growth, up 22 percent.
There has been increasing speculation that Fidelity might close out the popular Low-Priced. If it did, the other two could provide solid small-cap exposure.
* Look for manager duplication. Take the Babson Enterprise Fund (800-422-2766), managed by Peter Schliemann. It is up 34 percent through September and is closed. But Mr. Schliemann also manages Babson's Enterprise II Fund, which is up 33 percent through September. Although Fund II buys stocks of mid-sized companies, unlike Enterprise I, the investing style is basically the same, according to a Babson spokeswoman.
* Get in through a "fund of funds," which is typically available for a small transaction fee (in some cases even it may be waved) through discount brokerage houses such as Jack White, Fidelity, or Schwab. A fund of funds is a mutual fund that invests in other mutual funds, often including small caps.
* Send the check anyway. "It can work," says Paul Ellenbogen of Morningstar. Sometimes, he says, "the check will be deposited inadvertently." Or the management company "may decide to cash the check" because monies on hand are all deposited.
While it is not always possible to know when a fund will close, there are clues, experts say. For example, when a fund's size hits one of two checkpoints: $500 million for small-cap and ultrasmall-cap funds; and $1 billion for larger funds.
You can also look for fund redemptions. If a fund has a rash of withdrawals, you can ride in while others are riding out. But find out why investors are withdrawing. If a successful strategy or manager has been replaced, you should think twice before committing your money.