From: jhc@iris.uucp (James H. Coombs)
Subject: Re: 2oth Century
Reply-To: jhc@iris.brown.edu.UUCP (James H. Coombs)
Organization: IRIS - Brown University
Distribution: misc
Date: Mon, 12 Oct 1992 05:31:41 GMT

In article <1992Oct11.001718.6721@elroy.jpl.nasa.gov> shw@elroy.Jpl.Nasa.Gov (Stephen H. Watson) writes:
>James Coombs writes:
>>In article <1b4mpkINN35d@gap.caltech.edu> watson@ccsf.caltech.edu (Stephen H. Watson) writes:
>>>In article <1992Oct8.212833.21428@cs.brown.edu>, jhc@iris.uucp (James H. Coombs) writes:
>>>|> In article <MFSJBD.92Oct8090724@dante.nmsu.EDU> mfsjbd@nmsu.EDU (Jeff Davis) writes:

>>>|> As for 20th Century
>>>|> Ultra, well, how can you trust a small-company fund that has allowed
>>>|> itself to grow 7-fold?  $330 million on 10/31 1990 and $2,148 in 1991.
>>>|> Well, you can't, and a recent column in Fortune confirmed my
>>>|> suspicion:  they are now investing in larger companies.  In short, they
>>>|> have sacrificed their investment mission to their greed.  

>>>In fact, the prospectus for ALL 20th Century funds clearly states

>>And how does the prospectus change things?  Because their prospectus

>type, but it seems that as a fund increases in size, it would
>have to invest in larger companies in order to show a net
>gain (Magellan buying a few thousand shares in some start-up
>company is not going to make a dent in its $20B assets...)

Absolutely.  And there is the problem.  If you want a fund that does
not change its character on you, then you need to find a family that
closes its funds when it can no longer find appropriate investments for
the cash it has to invest.  It seems to me hazardous to buy a fund that
doesn't make that sort of guarantee: what is the basis of the
investment decision, otherwise?  Let's say that there is a sudden
outpouring of money.  Will the fund then start investing in small
companies?  Very different for a fund that is committed to investing in
large caps, which it can continue to perform adequately in spite of the
individuals who run their money in and out of the market.

>Second, what is all this about greed?  Are you only greedy if
>you buy shares in a large company?  Besides, the fund is
>SUPPOSED to make money.  That's why I give them mine...(although
>I own 20th Century Growth, not Ultra).

There is a difference between making money for you and making money for
itself (themselves).  The investment advisers generally take a
percentage of NAV.  When the fund grows, the amount they take grows.
According to AAII *No-Load*, Ultra has an expense ratio of 1%, and 1%
of 2,148 million is a lot more than 1% of 330.  Notice also the change
in portfolio turnover: 137%, 140, 132, 141, and down to 42 in 1991.
The lower turnover may be desirable, but it certainly is a big change.
The 1% expense ratio is not high, so I wouldn't feel justified in
saying that they should lower it because they are doing less work
(lower turnover?, easier to evaluate large companies, etc.).

20th Century Growth is a different story for the same period.  The
assets only doubled from 1990 to 1991, and the fund invests in larger
companies.

I was interested in Ultra, but it just isn't the same fund.  I also
have suspicions about 20th Century in general now: if I invest, exactly
what can I count on?  As you suggest, better read that prospectus very
carfully.  I think they should have closed Ultra and steered new money
to Growth.  They must know that they are accepting money into Ultra
from investors who naively believe that the fund is the same one that
racked up big results investing in small caps.

--Jim
jhc@iris.brown.edu -- don't trust reply-to fields