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Discontinued Fund

Discussion in 'Managed Funds & Index Funds' started by poyner, 25th Jul, 2007.

  1. poyner

    poyner New Member

    Joined:
    17th Jul, 2007
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    Location:
    Brisbane, QLD
    Hi All,

    In 2002 I started a 'CFS Diversified -nil entry fee' managed fund and have been contributing a modest monthly amount to it ever since. A year or two ago, this fund was closed to new investors. I didn't really think too much of it at the time and the fund seems to have continued growing OK. However, I've started thinking about the reasons that they may have closed the fund to new investors? Has anyone been through this before? Any thoughts?

    Cheers,
    Nathan
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    9th Jun, 2005
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    Location:
    Sydney, Australia
    There are a few reasons that funds are closed to new investors:

    1. their strategy doesn't work as well when there are more and more funds coming in so that they get too big and start to have too much impact on the market. This is not usually a bad thing ... indeed I have seen funds which do extremely well get closed to new investors (CFS W/S Small Companies - Core fund, which I think is an absolutely brilliant fund ... so glad I invested when I did - this will become one of my "foundation" funds due to its great returns and relatively low volatility)

    2. the fund failed to gain enough support to make the cost of running worthwhile

    3. the performance has been so bad that they stop new investors and hope that the others all pull their money out so they can close it completely ??
     
  3. coopranos

    coopranos Well-Known Member

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    11th Oct, 2006
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    Perth
    One possibility is that certain investment strategies only with up to a certain level of capital, after which it becomes more of a hinderance than a help.

    It can get to a point where the very size of the investment may move the market, or the position sizes in different investments must be so large that it is just not possible to exit that investment due to market liquidity.
    The fund managers run all sorts of analysis on their funds to find the maximum amount their particular strategy will allow them to safely use.
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I think funds which invest in smaller companies may be susceptible to exactly what coopranos described - which is I suspect why CFS closed the W/S Small Companies - Core fund.