Fund name: Masters Select Focused Opportunities (no ticker)

Objective: The fund seeks capital appreciation by investing in the common stock of mid- and large-cap domestic and foreign companies. For the SEC’s purposes, the fund is classified as non-diversified.

Adviser: Litman/Gregory Fund Advisors. Litman/Gregory runs four other sub-advised funds (including Masters Select Equity, International, Value and Smaller Companies), publishes the No-Load Fund Analyst, and manages money for high net-worth individuals.

Managers: Assets are divided evenly between three teams of sub-advisors. Chris Davis and Ken Feinberg represent Davis Selected Advisers (home of Davis NY Venture, Selected American, Selected Shares). Mike Embler and Peter Langerman represent Franklin Mutual Advisers (where they manage all or parts of Mutual Beacon, Recovery and Shares). Finally, Craig Blum and Steve Burlingame run TCW Select Equity. Litman/Gregory has the right to change sub-advisors or add additional teams.

Opening date: June 30, 2006.

Minimum investment: $5000 for regular accounts, $2500 for regular accounts with an automatic investment plan, $1000 for IRAs.

Expense ratio: Expenses are capped at 1.50% through the end of 2007. The advisor estimates that if the fund gathers $100 million in assets – which is not hard to imagine – actual expenses would be 1.25%.

Comments: Litman/Gregory has a pretty straightforward approach: identify a marketable fund type ("Value") and split management of the fund between teams of famously successful fund managers from the outside. L/G’s results have been pretty consistently strong, and their funds’ expenses have been below-average.

Focused Opportunities is probably their most daring venture to-date: Each of three teams is responsible for one-third of the portfolio and each is charged with finding five to seven stocks, no more. Since each team has a different focus (value, GARP, growth), it seems unlikely that more than one team will pick a particular stock. The theory says that, given his record elsewhere, Chris Davis’s best five ideas are probably pretty dang good.

Which is probably correct.

Any reason to hesitate? Two things occur to me. One, it’s possible that some of the success of these managers is driven by their ability to construct the whole portfolio rather than just their ability to pick a few stocks. For example, Selected American might benefit from overweighting a particular sector rather than just from having the "right" stock. The phrase for such a portfolio "the whole is greater than the sum of its parts." Here, that opportunity is lost.

Two, this fund isn’t necessarily at the top of the various managers’ to-do list. One might well imagine that if there’s a crisis or a particularly crafty opportunity, Messrs. Blum and Burlingame might focus their attention first-and-foremost on TCW Select and, later, on the Masters’ funds.

Bottom Line: The general combination of great managers and reasonable expenses is surely attractive. This fund is unlikely to be a world-beater, but has the prospect of being a very solid citizen in a portfolio’s large-cap niche.

Fund website: Masters Select Focused Opportunities

August 1, 2006