The headline news out of Malvern, Pa., last week was the reopening of Vanguard Capital Opportunity Fund (MUTF:VHCOX) to new investors, setting the minimum investment at $3,000. At the same time, Vanguard removed limits on additional investments made by existing investors.

We don’t think this is such big news, and frankly it’s a bit confusing given that Capital Opportunity has done so well lately and could attract the kind of hot money Vanguard tries to avoid by closing funds in the first place.

I think it’s worth looking back for a moment at what has transpired since the fund closed in March 2004. Although Capital Opportunity has seen more money flow out than in, with net total outflows of $4.5 billion since closing, it actually is larger today, with $8.7 billion in assets, than when it closed at $7.5 billion. PRIMECAP Management’s returns have more than offset those withdrawals. Since closing, Capital Opportunity is up 103% through the end of March compared to a 64% gain for Vanguard 500 Index Fund (MUTF:VFINX) and a 73% gain for Vanguard Total International Stock Index Fund (MUTF:VGTSX).

So why reopen the fund now? While assets grew in the fund, what really grew was the size of the companies in the fund. When it closed, the median size of the companies in the fund was $7 billion or so and today it’s around $21 billion, or about three times the size. That is a big leap! (And it’s an even bigger leap if you consider that in PRIMECAP’s first couple years of managing the fund, the median company size was around $2 billion.)

The average company in Vanguard Total Stock Market Fund (MUTF:VTSMX) has also grown over the period of Capital Opportunity’s closure, but only from $27 billion to $38 billion. Capital Opportunity is now a large-cap fund, and the distinctions between it and PRIMECAP or PRIMECAP Core continue to diminish.

While we continue to recommend Capital Opportunity for our newsletter subscribers, we still prefer PRIMECAP Odyssey Aggressive Growth (MUTF:POAGX) over the reopened Capital Opportunity. Since Odyssey Aggressive Growth’s inception in October 2004, it has gained a total of 141% vs. 99% for Capital Opportunity. The Odyssey fund, with fewer assets, still has the ability to own those small- and midcap companies that once powered Capital Opportunity’s returns.

Editor Dan Wiener and Research Director Jeffrey DeMaso publish The Independent Adviser for Vanguard Investors, a monthly newsletter that keeps abreast of recent developments at Vanguard, and the annual FFSA Independent Guide to the Vanguard Funds.