Vanguard Re-Opens Capital Opportunity And PrimeCap Funds

by Carla Johnson, InvestorsOffshore.com

11 April 2001

The Vanguard Group, America's second largest mutual fund firm, announced earlier this week the re-opening of two funds: the Vanguard Capital Opportunity Fund and the Vanguard PrimeCap Fund.

In order to curb accelerating cash inflows into the Capital Opportunity fund Vanguard implemented a 'cooling-off' closure period in March last year. The Fund was closed to new accounts and current shareholders were permitted to invest up to US$25,000 annually. At that time, Vanguard Chairman and CEO John J Brennan expressed concerns that the fund's successful performance record was attracting short-term investors.

Vanguard closed the PrimeCap Fund to new accounts and placed a US$25,000 annual restriction on additional shareholder investments in April 1998 as a precautionary measure to control the fund's future growth. Mr Brennan explained: 'In light of the current market climate and more subdued investor sentiment and activity, we believe that we can prudently re-open the two funds and remove the investment limitations for existing shareholders. These actions, however, should not be viewed as a recommendation to purchase fund shares or to invest additional assets in stocks.'

The PrimeCap Fund is due to open for new accounts on 23 April, 2001. The Fund has total net assets valued at US$19.1 billion and employs a long-term, fundamental approach to select stocks of companies from a broad range of industries with increasing unit sales, superior return on equity and quality management teams. The Fund holds 117 stocks with a median market capitalisation of US$14.6 billion.

The Capital Opportunity Fund, which is already in operation, has total net assets worth US$4.6 billion and invests in small and medium-sized companies that demonstrate rapid earnings growth. The Fund owns 123 stocks with a median market capitalisation of US$5.6 billion.

Mr Brennan claimed: 'After discussions with the principals of PrimeCap, we are confident that re-opening the funds will not in any way hinder their investment flexibility. While cash flows have moderated considerably in the two funds, Vanguard will continue to monitor flows to ensure that PrimeCap's investment team can continue to implement its distinct strategies in the management of the respective funds.'

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