Fund Openings, Closings, Manager Moves: Rydex Adds Net, Utilities Funds

Mutual fund market timers finally have a quick way into and out of the Internet sector. Rydex launched a quasi-index Internet fund Thursday, as well as a utilities fund earlier in the week.

Rydex, of Rockville, Md., is one of a handful of fund companies that's friendly to market timers, even as others have declared war on the active investor. Its funds, which mainly appeal to professional money managers, are used to moving into and out of markets as business cycles change.

The firm doesn't charge transaction fees to move between funds and doesn't place restrictions on trading. But retail investors must come up with a hefty $25,000 minimum.

Even though investors have been intoxicated by anything Internet for more than a year, it has taken the Rockville, Md.-based company a while to launch its Net fund. It's about three months behind competitors at Potomac, a nearby fund family also known as a haven for timers. Potomac launched its Internet Plus fund in December, which tracks the Dow Jones Internet Index.

The Rydex Internet fund plans to focus on six areas of the cyberspace: content, commerce, service providers, support, software and investments. Within each of those areas it has developed an index.

Utilities, on the other hand, is likely to be a more muted offering, concentrating on telephone, electric utilities and gas distribution. Three quarters of its holdings will be in natural gas and electric utilities and the remainder in telephone.

Both funds will charge an expense ratio of 1.6%, just under the 1.68% for the average tech fund, according to Morningstar. The funds launched after a subscription period, which raised $5 million for Internet and $7 million for Utilities.

Janus Bond Fund Adds Fee

How often do you hear about one of Janus' bond funds?

Looks as if the Denver growth fund specialist is tired of market-timers hopping into and out of its (JAHYX)High Yield fund.

On June 6, Janus will start charging a 1% fee on shares redeemed within 90 days of purchase, according to paperwork filed with the Securities and Exchange Commission Friday.

Market-timers typically shift money between sector-specific funds, trying to time (and profit from) broad market moves. Unfortunately, timers can boost a fund's brokerage and transaction expenses, raising annual fees for long-term investors.

As is often the case, the redemption fees will be paid directly into the fund, not to the fund company, to cover short-term trader expenses. Janus is just the latest fund shop to add a redemption fee.

More Redemption Fees

And speaking of redemption fees, Warburg Pincus plans to up the short-timer toll on its (WPJPX)Japan Small Company fund and add one to its (WPJGX)Japan Growth fund. Both funds posted triple-digit returns last year, but have sagged since Jan. 1.

On May 30 both funds will charge a 2% redemption fee on shares sold within six months of purchase. Today the small-cap fund charges 1% and Japan Growth doesn't have a redemption fee. As usual, the fees will be added to the fund's assets, not paid to the fund company.

The fees make sense since timers often focus on Japan sector funds, hoping to time its bursts of performance just right. Lately the funds have been illustrating the market's extreme volatility. Last year Japan Small Company and Japan Growth posted eye-popping 329% and 266% returns, respectively. But since Jan. 1 both funds have lost more than 26%, ranking near the bottom of the Japan stock category, according to Morningstar.

Guinness Liquidates Two Funds

Guiness Flight liquidated two of its less popular funds, New Europe and Global Government Bond, last week due to investor disinterest.

New Europe, which had about $1 million in assets, actually had a solid performance for the last 12 months, up 46.95% through Mar. 31, the day it closed.

The problem, says James Atkinson, director of U.S. operations for the London-based firm, is that investors didn't understand how the funds were different from others in their category.

New Europe, which by the end of its run was investing mainly in wireless technologies on the Continent, didn't stand out in the Europe crowd. And the bond fund was hard to sell in a world where investors were increasingly interested in highflying Internet stocks.

See Thursday's Fund Openings, Closings, Manager Moves.

See Tuesday's Fund Openings, Closings, Manager Moves.

See Monday's Fund Openings, Closings, Manager Moves.

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