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Strategies & Market Trends : Stock Mania ! - Mutual Funds that can short. -- Ignore unavailable to you. Want to Upgrade?

To: kahunabear who wrote (4)	4/30/1998 7:55:00 AM
From: peter n matzke	Read Replies (1) \| Respond to of 129

i couldn't pull up your chart but i know they look ugly. But past performance does not always correlate with future performance.

To: kahunabear who wrote (4)	4/30/1998 10:56:00 PM
From: Knighty Tin	Respond to of 129

WS, As an old fund manager who was one of the first to use options and futures in both equity and fixed-income funds, I don't think the mutual fund is the right vehicle for hedging. There are lots of reasons, which I will cover in this and other notes. 1. The open end fund is too vulnerable to redemptions. This is true for everyone in the fund business, but for a hedge operation, it is a much more serious problem than for a straight buy stock fund. Hedged positions can be difficult and expensive to put on or take off in a hurry. But with the shareholder able to jump in or leave with a phone call, you can't really swing for the fences in a mutual fund. 2. Most either use a toe in the water form of shorting stocks or buying puts, or a brain dead index style. Funds like Kaufman and T. Rowe Science either short or buy puts, but it is such a small part of the portfolio that it usually has little impact. I remember one quarterly report from TROW when McInally was still running Science. He mentioned that his best performing holding that quarter was a put option. But Science still barely outperformed those who didn't have puts. And the return was negative. The index funds are ok, but not my cup of tea and kind of useless for an active manager. Continued.