Clear communication with advisors on how a fund company will address a fund's size is critical, says Jeff Daniher, a financial advisor in Cincinnati.

If a fund has done very well, and some of the small-cap stocks it holds have become mid-caps, the fund can continue to hold them as long as it is extremely clear about what is happening, he said.

At one point, Daniher held a Franklin Templeton small-cap fund, which bought good stocks that became mid-caps. Instead of liquidating its position, Franklin closed the fund and opened a new small-cap fund. "Some managers would have said, OK, we have to sell the mid-caps,'" said Daniher. "I didn't mind that Franklin held on to them, because they gave us information along the way. Their wholesalers did a good job of communicating properly and so we were able to make good decisions about the fund."

But announcing a closing can be a tricky matter.

Janus recently has had to deal with that issue, according to Daniher. In one case, the firm gave a week's notice about a fund closing and over $1 billion dollars flowed into the fund in that week, he said. However, with another fund, the firm closed it immediately, and that led to a nightmare of disgruntled investors who wanted time to solidify their positions. "It's pretty much a no-win situation for the fund firm," said Daniher, "but my preference is for them to just close the fund to ensure that it doesn't balloon."

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