The PRIMECAP diet

Posted by: Lauren Young on March 2, 2006

Dan Wiener, editor of the Independent Adviser for Vanguard Investors, just published an interesting round-up of the buying habits of Vanguard’s fund managers. According to Wiener, few Vanguard managers actually eat their own cooking—in other words, they fail to invest big sums in the funds they manage.

“What’s astounding is the sheer number of managers that have absolutely no stake in their funds,” Wiener writes. “Nothing, nada, nyet. Paid millions, they haven’t put a single, solitary buck into their charges.”

The true standout is PRIMECAP Management, where virtually all of the firm’s top managers have more than $1 million invested in Vanguard PRIMECAP, Vanguard Capital Opportunity, and newcomer Vanguard PRIMECAP Core. Thanks to Dan’s savvy advice, I’ve been a shareholder in Vanguard PRIMECAP for more than a decade now.

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Vanguard PRIMECAP, incidentally, is A-rated by BusinessWeek's Mutual Fund Scoreboard in the large-cap growth category. Unfortunately, it's also closed to new investors.

There are some good alternatives: Vanguard PRIMECAP Core, a new Vanguard fund which seems to move in tandem with Vanguard PRIMECAP, is a decent option. And PRIMECAP, which is based in Los Angeles, also offers three funds under its own brand, known as PRIMECAP Odyssey.

A caveat: PRIMECAP's home-grown portfolios, which were launched in November 2004, have higher expense ratios of 1.25% since they haven't achieved a huge asset base yet. Yet the performance out of the gate has been pretty good, so these chowhounds are definitely worth a look.

Reader Comments

sredni vashtar

March 3, 2006 4:27 AM

Well, you can see that as a diversification. Their careers (and, therefore, incomes) depend quite a lot on how well their funds perform, so they quite naturally don't want to put any more eggs in this basket.

Big Steve

June 10, 2006 2:32 PM

Just bought into Primecap Core this past week.
Hope it's a wiener, I mean winner!

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About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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