Closed Funds Still Rake It In

Mutual funds often turn away new money once they have grown so big that the fund manager has difficulty putting additional capital to work in a reasonable amount of time.

While that's generally a good thing for existing investors, it may give them a false sense of security. Just because a fund it closes its doors to new money doesn't mean it won't continue to gather significant assets.

Funds that advertise themselves as being closed often continue to accept money from existing investors. This is referred to as a "soft" close. It isn't as effective at stemming inflows as a "hard" close, in which funds stop accepting money from both new and existing investors.

And some fund closings are softer than others. Christine Benz, director of mutual fund analysis at Morningstar, says that nominally closed funds often allow investment advisers who already have some client assets in the fund to add new client assets as well.

In addition, some "closed" funds that remain widely available on 401(k) platforms may continue to see substantial inflows.

Benz cites the (FDIVX)Fidelity Diversified International Fund (FDIVX) and the (DODGX)Dodge & Cox Stock Fund (DODGX) as two examples of funds that have closed but continue to see significant inflows. Both shut their doors to new money in 2004 but still managed to claim a spot on the list of best-selling funds in 2006, according to data from Financial Research Corp.