T. Rowe Price to close one fund to new investors


Suffering an embarrassment of riches, T. Rowe Price Inc. said yesterday that for the first time in 21 years it has closed the door at one of its mutual funds to almost all new investors.

The T. Rowe Price Small-Cap Value Fund said it would continue to accept money from current investors, and from those who participate in employer-sponsored payroll deduction retirement plans. The company said the closing was temporary, but there is no target date for when it might reopen.

In closing the fund, the Baltimore mutual fund company has joined a growing number of other fund companies. About 40 stock and bond funds are closed to new investors. Last month, Fidelity Investments closed its Low-Priced Stock Fund after it tripled to $2.8 billion in assets in six months, becoming the largest small-cap stock fund in the country.

T. Rowe's Small-Cap Value Fund buys undervalued stocks of companies with less than $200 million in market capitalization. Born on June 30, 1988, the fund jumped to $264 million in assets last year, from $53 million at the end of 1991. Partly because of its two-year overall return of 62.2 percent, more than $100 million in new investments arrived in just the first two months of this year, T. Rowe Price said.

"I don't have a raw-materials problem," said the fund's manager, Preston Athey. "What I have is a difficulty placing large amounts of money" in the market all at once.

A small-cap stock that trades thinly usually has a large spread between the "bid" and "ask" prices. Where the difference between the bid and ask prices for a well-known stock like Chrysler Corp. would be no more than 12.5 cents a share, a company Mr. Athey likes called Safeguard Health could be sold for $8.50 yesterday but purchased for $9.00.

The recent mutual fund boom has made successful investing a trial for some fund managers, particularly those who invest in small companies, whose stock trades thinly. "You're so large that in order to take a significant position in small issues, you become an issue yourself," said Betty Hart, a spokeswoman for the Investment Company Institute in Washington, the fund industry's trade association.

Funds also are barred by law from buying more than 10 percent of a stock. So a fund that becomes too big can find it difficult to buy enough of a small company's stock to add much to the fund's performance.

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