Q. A friend suggested that I invest in Marsico Focus Fund. What’s your opinion of that fund?
J.R., via the Internet
A. Its stock-picker is its biggest strength. Tom Marsico is a savvy and experienced portfolio manager who favors large growth stocks, companies undergoing change and major themes such as Baby Boomer demographics.
He is also a large shareholder in the fund that bears his name. So long as he’s its manager, investors can expect solid results from a rather eclectic mix of about 25 holdings.
The $2.2 billion Marsico Focus Fund (MFOCX) gained 20 percent over the past 12 months to rank in the top one-fourth of all large growth funds. Its three-year annualized decline of 4.5 percent puts it in the top 6 percent of its peers.
Such a concentrated portfolio does, however, make it vulnerable to weakness in a few stocks and more volatile than a Standard & Poor’s 500 index fund. Though it certainly qualifies as a worthy large-capitalization fund for an average investor’s account, it has several other issues.
“One consideration is its 1.35 percent annual expense ratio, which isn’t high but should nonetheless be coming down a bit as the fund gets bigger,” said Bridget Hughes, analyst with Morningstar Inc. in Chicago. “Another is the fact that the manager is well known and relies on gut instinct, so if he were to retire, questions would be raised about the fund.”
Still, Marsico has given no indication he’s stepping down. James Hillary, who became the fund’s co-manager earlier this year, previously managed Marsico 21st Century Fund for three years with good returns. Marsico also has a staff of 17 analysts and traders in place at his investment firm.
Health care, hardware and financial services each represent about 20 percent of the fund’s stocks. Consumer services is another major area. The top holdings include Intel, UnitedHealth Group, SLM, Genentech, Cisco Systems, Citigroup, Electronic Arts, Viacom B, Fannie Mae and Merrill Lynch.
This “no-load” (no sales charge) fund requires a $2,500 minimum initial investment.
Q. I know which mutual fund in which I want to invest, but how do I know which share class to buy?
B.W., Lisle
A. Different mutual fund companies may assign different letters to their various types of funds. Regulators have brought charges against firms that don’t adequately explain sales charges involved.
However, in most cases:
– The “A” share class is a front-end “load” (sales charge) paid when you initially invest.
– The “B” share class is a back-end load or redemption fee paid when you exit the fund.
– The “C” share class is a “spread” load that represents a percentage that’s charged over a set number of years.
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There are “no-load” (no sales charge) funds sold directly, but their firms are unlikely to offer lettered share classes in addition.
“It’s a psychological marketing thing, since some people like the idea of paying now and some prefer the idea of paying later,” said Don Cassidy, senior research analyst with Lipper Analytical Services in Denver. “The back-end load does seem to stop a few investors from selling.”
The fund’s prospectus must detail how the fees are handled. With load funds, the broker or financial adviser must carefully explain the particulars.
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Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, #184, 369-B Third St., San Rafael, CA 94901-3581, or by e-mail at [email protected].