Merrill to Offer Internet Stock Fund: Mutual Funds (Update1)
Merrill to Offer Internet Stock Fund: Mutual Funds (Update1)
(Adds first reference to Financial Research Corp. in 5th
paragraph.)
New York, Jan. 18 (Bloomberg) -- Merrill Lynch & Co., whose
mutual funds posted net withdrawals last year, filed with the
Securities and Exchange Commission to open a new fund focused on
Internet companies to tap the hottest-selling market segment.
The fund, to be called the Internet Strategies Fund, will be
run by a team led by Paul Meeks, manager of the firm's Global
Technology Fund, said spokeswoman Christine Walton. The new fund,
filed with the SEC on Friday, is likely to open in March.
Merrill's stock pickers will invest primarily in ''equity
securities of issuers that managers think will use the Internet as
part of their business strategy,'' said Walton.
The new fund marks the firm's latest effort to bolster its
offerings of growth stock funds. In recent months, Merrill hired
new managers for retail and institutional funds, spent millions to
build an index-fund unit and introduced new funds to shift the
investment focus to growth stocks to attract customers.
''An Internet Fund with the support of the Merrill Lynch
sales force should be a big success,'' Chris Brown, a Financial
Research Corp. analyst, said. ''I think the sales force will
probably be eager to have an exciting product like an Internet
fund to offer their clients, and they should garner some very
strong sales into that product right away.''
They could use the boost. Merrill Lynch Asset Management saw
$11.9 billion in net outflows from its stock and bond funds in
1999 through Nov. 30, according to Financial Research Corp., a
Boston-based mutual fund consultant. Merrill's 80 long-term funds
totaled $71.2 billion as of Nov. 30, according to the latest data
available from FRC.
Merrill's Internet fund hopes to grab a portion of the
explosive growth of Internet stock funds. Goldman Sachs Group Inc.
saw its Internet Tollkeeper fund -- opened Oct. 1 with $17.5
million -- attract $1 billion by mid-December.
Internet fund growth
U.S. domestic stock fund assets rose 19.4 percent last year
through Nov. 30, while Internet fund assets rose almost 1,700
percent, FRC data shows. Merrill Lynch had about 73 percent of its
domestic equity products in value, FRC said.
''And that's a big problem,'' Brown said. ''And that's sort
of across the board with a lot of the brokerage firms. Their
product lines are mainly structured toward value.''
Firms like Merrill tend to have more conservative clients,
who typically have a higher net worth and are more concerned about
preserving assets than direct investors, he said. Such firms, with
their concentration on value stocks and fixed income, haven't been
able to keep pace with shops featuring growth and technology
products, like Janus Capital Corp., the analyst said.
''Janus certainly is a big one,'' Brown said. ''Vanguard on
the other hand has done fine because their index products have
really helped to carry them.''
Offshore fund
The success of an offshore fund started in November factored
in Merrill's decision to start the new fund, Walton said. The
offshore fund, called Internet Strategies Portfolio and managed by
Meeks' team, has seen assets top $1 billion. As of Dec. 31, the
portfolio was up 48.2 percent, Walton said.
''But more largely it's our view that we see the Internet as
more than just a short-term trading vehicle,'' the Merrill
spokeswoman said. ''It's a major sociological sea change in the
way the world works, and as such we see that it has a lot of long-
term investment potential.''
The offshore fund's top five holdings as of Nov. 30 were
Softbank Corp., America Online Inc., Yahoo Inc., Cisco Systems
Inc. and Qualcomm Inc. |
