Vanguard announced recently its Vanguard Capital Value Mutual Fund (MUTF:VCVLX) has reopened. The deep-value investment fund went through two managers before hitting its stride with the third and closing its doors. After that, Vanguard Capital Value added a fourth manager, has reopened to new mutual fund and 401k investors.

But the Capital Value that charmed shareholders last year with massive gains, and high turnover, is not the same animal it once was.

Since David Palmer joined Peter Higgins on the fund in Dec. 2009, performance has been bumpy against the fund’s Russell 3000 Value benchmark. As the chart shows, Higgins enjoyed a stellar run (steeply rising line) against the benchmark in 2009–so stellar Vanguard closed Capital Value on Oct. 9, 2009 to “cool off.”

capital value vanguard mutual fund

Not long after Palmer was added to the fund, relative performance began to sag (falling line). It has recently perked up. From the end of November 2009 through Friday’s close, Capital Value has gained 17.1% compared to returns of 24.9% for the Vanguard Small Cap Value Index Mutual Fund (MUTF:VISVX) 20.2% for Vanguard Mid Cap Value Index Fund (MUTF:VMVIX) and 13.6% for Vanguard Total Stock Market (MUTF:VTSMX), a good showing.

It’s too soon to say whether the combined efforts of Capital Value’s two managers, and their 135-stock portfolio (double the size of the Higgins-only portfolio) has legs. It’s tough to manage a portfolio when outflows are overwhelming inflows, as they have here since the fund first closed. But I’m changing my rating on the fund from Hold to Buy given the fact that with new cash flowing in, this should afford the managers the opportunity to put some new money into their best ideas.

If you’re interested in purchasing Capital Value I wouldn’t delay. With just $703 million in assets at the end of October, a surge of new money could force yet another “temporary” shutdown.