Frank Russell Trust Co. has added a second small-capitalization stock fund to its stable of institutional commingled funds.
The managers are: Fiduciary Trust Co. International for growth; Barclays Global Investors, value; and Westpeak Investment Advisors L.P., for a mix of the two.
New managers might be added as the fund's assets grow.
Nola Williams, portfolio manager, said the firm chose managers with a range of styles. The fund is benchmarked against the Russell 2500 index, which includes stocks in the small-cap Russell 2000 as well as the 500 smallest stocks in Russell's large-cap 1000 index. Such a benchmark provides similar return characteristics to the Russell 2000, but with less volatility and more liquidity, she said.
The new fund, the FRTC Small Cap Fund, launched Jan. 2, so far has attracted $15 million in assets, mainly from investors in Russell's first small-cap fund, Equity II, which has $1.25 billion.
Ms. Williams said while the universe of small-cap managers tracked by Frank Russell Co., the consultant, has grown 40% in four years to 153 managers, there remains a shortage of small-cap managers. That's because many firms limit new business growth after being open for a year or two.
In fact, 40% of the 153 managers are closed to new business. Although the stock market's valuation has expanded considerably over four years, the asset threshold for firms has remained steady, around $1.25 billion.
"It's reassuring to us when people are controlling asset growth," she said. But it also means she has to be opportunistic about hiring managers in order to get in before the door shuts to new business.
She said growth managers and firms with high turnover strategies have to control asset growth more carefully than value managers with lower turnover strategies.