Oakmark to Shut Down Portfolio

In an unusual admission for a mutual fund company, the parent of the Oakmark Small Cap stock fund said Wednesday that it would liquidate the portfolio because the managers were unable to produce strong returns for shareholders.

Chicago-based Harris Associates, which operates the $350-million fund, said it expected to shut it down by Sept. 28 and give the money back to investors.

Fund companies usually deal with poorly performing funds by proposing to merge them with other portfolios within the same management company, said Roy Weitz, editor of Tarzana-based FundAlarm.com, an industry watchdog.

A merger allows a fund company to hold on to the assets -- and the management fees they generate.

Oakmark’s willingness to simply hand the money back to its investors “is a real quality move,” Weitz said.

“We are committed to delivering superior investment performance to shareholders in all of the Oakmark Funds,” John Raitt, chief executive of Harris Associates, said in a statement.

“We haven’t been able to accomplish this goal in the Small Cap fund and, therefore, after careful deliberation, we have concluded that it is in the best interests of fund shareholders to liquidate the fund,” he said.

The Oakmark Small Cap fund was created in 1995 and had strong years in 1996 and 1997. But its track record since has been erratic. It performed better than the benchmark Russell 2,000 small-stock index from 2000 through 2002 but badly lagged behind the index in 2003.

This year the fund is down 3.9%, while the Russell index is down 2.6%.

Harris Associates said shareholders of the Small Cap fund could choose to transfer their money to another Oakmark fund or redeem their shares for cash before the liquidation date.

There are six Oakmark funds in addition to the Small Cap fund. Oakmark, which manages $54 billion in all, is known for its “value” style, meaning it often favors stocks that are out of vogue with much of Wall Street.