Wireless sector mutual funds push specialization
By Christopher Noble
BOSTON, May 10 (Reuters) - Two mutual funds aimed at taking advantage of an expected explosion in wireless communications technology have opened in the past two months, pushing the trend toward specialisation in mutual funds to new lengths.
The funds won an enthusiastic welcome from investors despite the downturn in the markets that began in mid March and has continued in fits and starts ever since. The shakeout has been particularly severe in technology shares, which make up the bulk of the holdings in both funds.
Investec Guinness Flight Wireless World fund was first out of the gate on February 28 and attracted $6 million in new money in the first two days. Since then the 37-stock portfolio has grown to about $36 million in what Investec says is its fastest-ever U.S. fund launch.
Value Trend Capital Management followed on April 3 with its Wireless fund, which has pulled in some $11 million in the month since, according to fund manager Jeff Provence.
Both funds are down since inception, with Wireless World losing 13.6 percent and Wireless off 10 percent.
The companies say the funds offer retail investors a chance to get in on the ground floor of a technological revolution that will rival the scope of the Internet boom.
``There was no question that the push into wireless was going to be even stronger going forward,'' Provence said. ``It was very clear to us that the wireless revolution was here to stay and the world is going wireless.''
But some analysts question the need for such specific investment objectives, saying mutual funds -- theoretically designed for long-term investors -- may not be the place for an investor looking to profit in the volatile world of cutting-edge wireless firms.
They said that such a fund should represent only a small part of any investor's portfolio and that it was probably only appropriate for someone with an extended time horizon.
Specialised funds run the range from the more common sector funds devoted to technology or real estate to highly specialised funds restricted to industry sub sectors such as Internet or dot-com companies.
``These products are clearly designed to be small components of well-diversified portfolios,'' said Lehman Brothers analyst Mark Constant, who warned against using strong growth in some wireless firms over the past year as a guide to the future.
While both funds are sprinkled with big, established names like Nokia Ab Oy (NYSE:NOK - news), Alcatel and Cisco Systems Inc. (NasdaqNM:CSCO - news), they carry many smaller, more speculative names like cellular positioning software maker Cellpoint Inc. (OTC BB:CLPT.OB - news) and chip maker TriQuint Semiconductor Inc. (NasdaqNM:TQNT - news).
``There is nothing wrong with giving investors choices but you do want to give them good choices,'' said Christopher Traulsen, analyst with fund information firm Morningstar.
He said it would make more sense to put money in an aggressive growth fund or a telecommunications fund since investment choices would not be as limited.
``Essentially what you're doing (with a wireless fund) is putting a straitjacket on the manager and telling him he can only invest in wireless, and the question is what happens when wireless slows down,'' he said.
Nigel Dutson, part of the team managing Guinness Flight's Wireless World portfolio, said studies indicate there is no danger of a slowdown. By 2005 1.5 billion people will have mobile telephones, he said, and a third of them will use their handsets for commerce.
``Over the next 18 months to two years, and it is going to be a fast transition, you are going to be able to use your mobile phone for everything you do now on your desktop (computer),'' he said.
Provence said he agreed, noting that only a long-term investor would be around long enough to wait out the current correction and reap the benefits of the technological change wireless was bringing.
``It's actually worked out pretty well even though it looks ugly, because a lot of these companies are inexpensive now,'' he said. "Even if the (Nasdaq) market goes back to 3000 or 2500 there's no question that there is a lot of potential for long-term growth. |
