>NEW YORK, June 8 (Reuters) -- Internet stocks have been
hammered and a number of prominent funds focused on the
fledgling Web sector are closing down. But Wall Street
investment bank Goldman Sachs Group Inc. says it's
committed to keeping its Internet fund alive.
"We've certainly taken it on the chin," said David Shell,
senior portfolio manager of the roughly $2 billion Goldman
Sachs Internet Tollkeeper Fund, the second biggest Internet
fund in the United States. While the Tollkeeper Fund is
actually up a bit since its 1999 launch, it has lost 41 percent
over the past 12 months after rocketing 92.5 percent in the
fourth quarter of 1999.
"I don't like being down, but the most important thing is
to do what you told your clients you are going to do," he said.
For Shell and co-manager Scott Kolar, that has meant
selecting companies expected to benefit from Internet
technology -- not just so-called "dot-com" stocks. The fund's
relatively conservative portfolio, which includes big bets on
tech giants such as AOL Time Warner Inc. and Microsoft
Corp. , has helped shield it from the devastation that
has struck other niche Internet funds.
The fund holds only a handful of full-fledged Internet
stocks, such as Web portal Yahoo! Inc. and online ad
firm DoubleClick Inc. . It also invests in companies
such as discount brokerage Charles Schwab Corp. and
broadcast media company Westwood One Inc. . These firms
fit the fund's mission because they are using the Web to boost
their rates of growth, Shell said.
"We don't believe there are any Internet companies," he
said. "In the end, the underlying fundamentals of a business
are going to shine through, not the conduit through which it
delivers its service."
Internet Tollkeeper is the biggest Internet fund after the
Munder NetNet Fund, according to Morningstar. The NetNet fund
recently reopened to new investors after its assets plunged to
about $2.4 billion from as high as $12 billion.
Despite the turmoil in the tech sector, Tollkeeper is up
about 6.7 percent since its inception on Oct. 1, 1999 through
Wednesday, based on the performance of the fund's "A" shares,
the fund's biggest share class, Goldman Sachs said. That's
compared with a nearly 1 percent decline in the Standard &
Poor's 500 Index <.SPX> during the same period and a 37.4
percent drop in the American Stock Exchange's Internet index
<.IIX>.
But that's little consolation for investors who lost money
after buying in at the Nasdaq's peak early last year. The
fund's assets are down as much as 60 percent from a high of
about $5 billion. The fund was off 10.8 percent year-to-date
through Thursday, although that's better than 75 percent of its
peers during the same period, according to fund researcher
Morningstar Inc., which tracks about 33 U.S. Internet funds.
"What they did was try to take a more conservative tack
than some other Internet funds," said Christopher Traulsen, a
Morningstar analyst. The Tollkeeper fund has "lost a lot of
money for people -- there's no question about that. But it's
lost a lot less than other Internet funds in 2000."
The fund has benefited from its stakes in AOL Time Warner,
a stock that has risen 49 percent year-to-date, and Microsoft,
up 70 percent. Other top holdings include media conglomerate
Viacom Inc. , computerized travel reservation firm Sabre
Holdings Corp. and Crown Castle International Corp.
, a wireless equipment infrastructure maker.
INTERNET FUNDS DISAPPEARING
As tech stocks soared in the late 1990s, fund companies
rushed to introduce Internet mutual funds. While the sector
produced spectacular gains in 1999, the dot-com collapse has
led five Internet mutual funds to shut down or merge. Several
others have changed their strategies.
Merrill Lynch and Co. Inc. raised a hefty $1
billion for its Internet Strategies Fund before it opened early
last year. But after losing more than 65 percent since
inception, the fund will be folded into Merrill's broader
Global Technology Fund. Strong Capital Management also has
similar plans for its Internet fund.
Three funds -- the Zero Gravity Internet Fund, the de Leon
Internet 100 and the Internet Index Fund -- have liquidated.
Others have tried to revamp by changing their names. The
Westcott Nothing But Net Fund is now Westcott Technology, which
still is down 16 percent year-to-date and off 57.6 percent over
the past 12 months.
The Tollkeeper fund is managed by a team of managers and
analysts based in Tampa, Florida who formerly were part of
Liberty Investment Management, which Goldman Sachs bought in
1997. The group manages about $20 billion in total assets.
Shell, 38, joined Liberty's predecessor firm, Eagle Asset
Management, in June 1987 after graduating from the University
of South Florida.
Unlike some of its rivals, the Tollkeeper fund steered
clear of many young dot-com companies from the start. The fund
avoided No. 1 Web retailer Amazon.com Inc. , because
it's unclear whether the firm has a proven franchise, Shell
said.
But Shell and his team did invest in the initial public
offering of E-Stamp Corp. , which has gotten out of the
online postage business and now sells shipping products. The
fund shed its stake in the stock about a year ago. E-Stamp is
now trading at about 18 cents per share, down from an offering
price of $17 in October 1999.
"The characteristics were there," of strong growth
prospects, Shell said of E-Stamp. But in hindsight, "we made a
mistake." |
