Money-Fund Assets Declined $2.81 Billion In Week
Money-market mutual-fund assets fell $2.81 billion to $1.448 trillion for the
week ended Wednesday from a revised $1.451 trillion, the Investment
Company Institute said.
Assets of the 925 retail-class shares increased $1.06 billion to $858.04
billion, the trade group said. Among retail-class shares, assets of the 573
taxable shares rose $1.48 billion to $712.24 billion, while assets of the 352
tax-exempt shares decreased $421.8 million to $145.8 billion.
Assets of the 791 institutional-class shares decreased $3.88 billion to
$590.45 billion. Among institutional-class shares, assets of the 619 taxable
shares fell $4.09 billion to $541.25 billion, while assets of the 172
tax-exempt shares rose $213.7 million to $49.2 billion.
[ according to the WSJ]
How popular have Internet funds been? In April, two Web-oriented mutual
funds landed on the month's list of 25 best-selling mutual funds. Munder
Capital Management's NetNet Fund grabbed honors as April's fourth
best-seller, raking in $850 million in net new cash to help bring assets to
$2.45 billion, according to Financial Research Corp. A big attraction: the
fund's 54% first-quarter gain.
Kinetics Asset Management's Internet Fund, whose 343.21% gain in the 12
months ended March 31 gave it the best one-year performance of any
mutual fund, drew $359 million in April. That intake helped bring assets
under management to $748 million. Internet Fund was the 23rd best-selling
fund in April.
And even as technology experts warned that Internet stocks remained
dangerously inflated, investors were continuing to pile into Internet funds this
month, too. According to AMG Data, Internet funds collectively were
attracting more than $100 million a week as late as May 19. While down
from the mid-April high of $470 million, it is substantially more than the $26
million that the group averaged at the end of 1998. AMG's figures include
eight funds, the biggest of which is Munder NetNet.
The roller-coaster ride of Internet mutual funds illustrates the longstanding
dangers of diving headfirst into sector funds. Because such funds typically
invest in just one area of the stock market, they aren't diversified and are
more volatile than funds that can spread their risks across many different
sectors. These hazards are doubled for Internet funds, since Internet stocks
swing up and down even more wildly than most other stocks.
"The history of sector funds is not a noble history," cautions John
Rekenthaler, research director at Chicago fund-tracker Morningstar Inc.
"And Internet funds are the sector funds to top all sector funds -- they don't
get any more volatile and dangerous than that."
Adds John Scarborough, a financial planner in San Francisco, "We rarely
recommend that clients buy into sector funds (especially Internet funds)
because the funds just have too narrow a focus." At most, no more than 5%
of a portfolio should be invested in sector funds, he says.
But mutual-fund buyers have been so eager to get into the Internet sector
that Internet Fund briefly closed its doors to new investors in March;
struggling to keep up with the deluge, it had to seek shareholder approval to
expand the portfolio. Other fund companies, observing the frenzy, are
rushing to launch similar products. Just last month, two new Internet funds
run by small firms joined the lineup.
But some larger mutual-fund firms remain cool to the idea of Internet-only
funds. At a mutual-fund industry conference recently, Robert Pozen,
president of Fidelity Management & Research Co., said Fidelity
Investments wasn't going to launch an Internet-only fund soon.
"If I started that fund, we could get $3 billion in the first month, but the
question is, would that be good in the long term for our investors? I really
don't think so," Mr. Pozen declared.
So what now for investors in Internet funds? Even the managers of several
of the funds admit to feeling a little bruised by the latest market volatility. "I
feel like a pinata" that is being beaten around, laments Ryan Jacob, fund
manager of Internet Fund. And Paul Cook, senior portfolio manager of
Munder NetNet Fund, marvels that "you can get a complete market cycle
all in one day on Internet time."
But Alex Cheung, fund manager of $45 million-in-assets Monument Internet
Fund, is treating the current correction as an opportunity to load up on
certain stocks. Over the past four days, he has added to some of his top
holdings, such as America Online Inc., DoubleClick Inc. and CNET Inc.
The fund's cash level stood at about 7% at the start of this month, and
remains there.
"Internet stocks ran up so much in the first quarter that it's not untoward to
see profit-taking now," Mr. Cheung says. "No matter what the market does
in the short term, the Internet economy is growing dramatically."
At Munder NetNet Fund, Mr. Cook is adding to his positions in AOL as
well as Amazon.com. And Internet Fund's Mr. Jacob, noting that "valuations
now look compelling," also has beefed up some holdings.
But Bill Keithler, fund manager of the $1.7 billion-in-assets Invesco
Technology Fund, which invests in technology stocks apart from just the
Internet ones, figures that Internet stocks got so ahead of themselves in the
first quarter that they still will drift a little further down in price. "The recent
selling of Internet stocks really gives you pause," he says. "I think it'll take a
little while for their momentum to pick up again." |
