Bigger Not Always Better For Mutual Funds Several With Small Assets Have Shined

Bigger doesn’t necessarily mean better in the $3 trillion mutual fund industry.

For every “big and bland” fund that’s attracting scads of money, there’s a fund with less than $150 million in assets that’s reported consistently strong returns over the past five years, said Catherine Voss Sanders, senior analyst at Morningstar Inc.

The list of “forgotten” funds that Morningstar recommends includes Mairs & Power Growth, Enterprise Growth, Hotchkis & Wiley International, Franklin Convertible and Flex-funds Muirfield.

The 38-year-old Mairs & Power Growth Fund has amassed just $77 million in assets, even though it ranks among the top 15 percent growth stock funds of the past 15 years, rising at an annual clip of 15.6 percent, Voss Sanders said. The fund rose 47.7 percent last year, placing it among the top-performing funds in the country.

The fund has stayed small in part because it was available only to investors who live in Minnesota for the first 11 years of its existence. Today it’s available in 12 states.

Enterprise Growth, managed by Ronald E. Canakaris, also concentrates its investments in just 30 stocks. The fund is a “who’s who list of classic growth stocks,” with holdings of companies such as Home Depot Inc., Intel Corp., Gillette Co. and Coca-Cola Co., Voss Sanders said. It rose 40 percent in 1995, and it’s up 15.9 percent a year over the past 15 years.

The $135 million Hotchkis & Wiley International Fund looks for financially sound international companies that pay above-average dividends, Voss Sanders said. The fund has risen at an annual rate of 14.7 percent over the past five years, she said.

Franklin Convertible Securities Fund is a “forgotten fund in a forgotten fund category,” Voss Sanders said. The convertible funds group oversees less than $5 billion in assets, making it the smallest fund class that Morningstar tracks.

“Franklin’s convertible fund has been particularly adept at grabbing a good share of the stock market’s gains, while avoiding its pains,” Voss Sanders said.

The fund is up 18 percent a year since the end of 1990.

For people who try to time changes in market direction, take a look at Flex-funds Muirfield, Voss Sanders said. The fund avoided losing money in 1994 by staying away from equities, and rose almost 25 percent last year.