Another Value Fund Closing

The Third Avenue Small-Cap Value Fund will close its doors to new investors at the close of business on February 28. The fund, managed by Curtis Jensen, has $2.3 billion in assets. Fully 39% of the portfolio is in cash.

Let's see. All three Longleaf funds are closed to new investors. Ditto both of the Tweedy Browne funds. Do these -- and other -- fund closings of top-notch value managers mean little is out there worth buying?

Maybe. Yet maybe not.

With the Third Avenue Value Fund managed by Marty Whitman remaining open, this is looks to be a "small-cap" thing. That is, larger portfolios have a harder time getting in and out of positions when investing in small companies. And Third Avenue Management apparently doesn't foresee enough to do in the near future with a portfolio over one-third in cash.

Further evidence is that the Longleaf Small-Cap Fund has been closed to new investors for years. In fact, Mason Hawkins and Staley Cates said a few months ago that it will almost certainly NEVER reopen. And the Tweedy Browne funds -- American Value and Global Value -- invest in both large and small cap names. (I happen to like not establishing market cap limits.)

My feeling is these closings speak more to assets under management becoming a bit unwieldy for the managers involved, as opposed to a lack of things to do for those of us with assets not totalling in the billions. Though I don't think there's a surplus of bargains out there.

Anyway, I wish I had the "problem" of finding enough to do with a multi-billion dollar portfolio.

Comments

[nodoodahs]

I agree 100%, it's a capital thing. The big funds have a choice: either twist the definition of "value" in order to buy "something" or close to new investors in order to remain nimble enough to buy _real_ value.

This is the reason why I like to rattle the cages of the Buffett-worshipers who follow his current buys and current portfolio. PUH-LEEZE! If you followed Buffett's career and teachings, and had a modest sum to invest, you wouldn't go NEAR what WB is buying or has bought over the last couple of decades. There is far too much compelling value out there, but it's just too small for him to buy ...

[John]

Agreed. I like to think, though I can't prove, that the Buffett of the Buffett Partnership days would have bought TAP instead of BUD. But I own TAP, so perhaps it's just wishful thinking.

I also saw Buffett say on the old "Adam Smith" PBS show back in the early-to-mid 1990s that if he were a youngster starting out in investing he'd buy the same sort of things he did in the 1950s.

Some say you can't find enough of those companies now, but that's what he said (if memory serves).