Dodge & Cox builds a buzz with creation of new fund

By CHARLES A. JAFFE
RICHMOND TIMES-DISPATCH COLUMNIST
Published: February 27, 2008

Look at any mutual fund with a long-term track record so good that it has almost become a household name, and you’ll come to one undeniable conclusion:

It sure would have been great to have owned the fund from the very beginning.

But the fund industry’s flagships and name brands weren’t on anyone’s radar screen back when they were newborn, and were already legends by the time most investors recognized their greatness.

While money managers crank out dozens of new funds every month, most are cookie-cutter forgettable, with no outward signs of potential greatness.

So when word got out this week that San Francisco-based money managers Dodge & Cox are opening a new global stock fund, it created a buzz.

Dodge & Cox may well be the best fund firm in history. It’s a humble, publicity-shy firm with a 78-year history of superior management. Unlike the industry giants who pop out a new fund every time the market burps, Dodge & Cox built its reputation with just four funds; all four of those funds are in the top 30 percent of their peer group over the last five years and the three funds with records of more than a decade (Dodge & Cox International was the last new issue, created in 2001) are all in the top 10 percent of their Morningstar peer group over the last decade.

In short, each of the firm’s four funds is a standard-bearer in its asset class, and Global Stock could be next.

Dodge & Cox Global Stock fund will follow the firm’s valueand team-oriented strategy to pick stocks from around the world. It will invest in midto large-sized companies from at least three different countries and will keep at least 40 percent of its assets in non-U.S. stocks.

In short, it aims to combine the best of Dodge & Cox Stock (DODGX)—which just reopened to new investors—with the best of Dodge & Cox International (DODFX), with some decision-making as to where assets are best deployed based on market conditions.

The new fund won’t have an easy time getting out of the box.

New funds typically get a pop from being small and nimble without much attention from anyone. That’s not going to happen here. Financial advisers had been asking Dodge & Cox to go global for years, so there will be a flood of money at the outset. Moreover, overlap in the management teams means the new issue likely will focus on the same stocks as the established funds.

Investors should consider whether the new fund—or the reopened Stock or Balanced funds—might be worth buying. That decision starts with a portfolio review, determining if you have a need for a global fund (or one of the reopened funds).

Then, it requires having the confidence to invest with a firm such as Dodge & Cox and be patient; the firm’s value style may be out of step with the market for awhile, so the new fund could be opening into a trough.

Finally, determine if the fund can replace something you own now.