Buy the Manager, Not the Fund

penny stocks, young investorsMutual funds are vehicles for investing in portfolios of securities: stocks, bonds, commodities, whatever. When run at low cost, they can be a very good way to build a diversified portfolio. But they are simply a vehicle.

However it’s the driver of that vehicle, not the vehicle itself, that matters. That’s why I’ve never advocated simply buying mutual funds for their own sake. With literally thousands of mutual funds available to individual investors, you have to be a bit more discerning. As it turns out, there are some mutual funds, but not many, that allow little guys like you and me to invest side-by-side with some of the biggest and savviest institutional investors in the world. How? By investing in funds run by some of the best money managers in the business.

One such manager is Primecap Management, the Pasadena-based stock-picking boutique that runs $37 billion in a trio of Vanguard funds. Without exception they are the absolute single best growth-stock manager in Vanguard’s stable. No one else comes close.

Unfortunately, most of the Primecap-managed funds under the Vanguard fund family (my specialty) are not available or not great for the kind of aggressive growth that Primecap is known for. Both the Vanguard Primecap Core Fund (VPCCX) and the Vanguard Primecap Fund (VPMCX) are closed to new investors. There is a fund Primecap manages, Vanguard Capital Opportunity Fund, that is still open to new money, but because the fund’s size has ballooned past its original intent, it doesn’t measure up to Vanguard’s other aggressive mutual funds.

What (and Where) Now?

Vanguard doesn’t want you to know this, and in fact they make it exceedingly difficult to take advantage of this opportunity, but you can and should invest in Primecap Management’s private-label Primecap Odyssey funds. You can’t buy them through Vanguard’s brokerage arm, though they are available through Fidelity and Charles Schwab (SCHW) or direct at

The Primecap Odyssey funds have low minimums of $2,000 and are smaller, nimbler and packed with Primecap  Management’s best and newest ideas. It’s always tough to manage funds when more cash is flowing out than in, which can be a problem for closed funds. That’s not the case at the Odyssey funds. I highly recommend them, and use them for most of my private clients’ accounts at Adviser Investments, as well as in my own personal account.

In any case, if you are looking for a substitute for the now-closed Primecap Core, I recommend you buy Primecap Odyssey Stock (POSKX). This is the closest match. However, if you want a bit more oomph, then substitute PRIMECAP Odyssey Growth (POGRX) instead. The growth fund has a bit more of “growth” mandate to its stock picks and I think will outperform over long periods of time. Either way, you’ll still be investing with one of the best managers around.

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Senior Editor Dan Wiener and Editor/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.

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