Merrill's McCall the Latest Casualty of Tech Collapse

One of tech's most devout worshippers is looking for work.

Jim McCall, manager of Merrill Lynch's MER sputtering MAFOXFocus Twenty and MAPGXPremier Growth funds, has stepped down, according to documents filed with regulators Tuesday. McCall is notable primarily because his so-called growth funds made titanic tech bets that have lost more money over the past 12 months than any of their peers.

Merrill hired McCall at the height of tech mania in hopes of jazzing up its sleepy fund lineup. His tech-stuffed funds were launched with much fanfare on March 3, 2000, just seven days before the Nasdaq Composite peaked. But his hiring now looks like a textbook case of jumping on a bandwagon just as its wheels fall off, highlighting the risks of betting on what's hot. Over the last year the funds have surrendered 80% and 67% of their value, respectively.

Plenty of Company

McCall is just the latest fallen growth star to be punching up his resume. Back in July American Skandia replaced Janus at the helm of two funds. Earlier this year, RS Investments replaced longtime manager Ron Elijah on two funds and Vanguard dismissed Lincoln Capital Management after two bad years for the Vanguard U.S. Growth fund. McCall will be replaced by associate portfolio manager Mike Hahn.

Falling Down Bubble pops on peak-era Merrill funds
	1-Year Return	Value of $10,000 Invested at Inception
MAFOXMerrill Lynch Focus Twenty	-80.4%	$1,860
MAPGXMerrill Lynch Premier Growth	-66.7	2,930
Source: Morningstar. Both funds were launched on March 3, 2000.

McCall was lured to Merrill from growth specialist PBHG Funds in 1999. His hiring, which involved a legal battle, was seen as a coup for the big brokerage, whose funds had a sleepy reputation. McCall had rung up big returns while running the PLCPXPBHG Large Cap 20 and PBCRXPBHG Core Growth funds, routinely stuffing up to half their assets in the then-surging tech sector.

McCall ran the Large Cap 20 fund from November 1996 through July 1999. In 1997, 1998 and 1999 the fund posted gains of 33%, 68% and 103%, respectively, beating more than 90% of its large-cap growth peers.

Heavy

Merrill launched the two funds essentially as clones of McCall's previous charges, but the tech-heavy approach that drove those gains led to eye-popping losses in his new job. McCall kept more than half of each fund's assets in tech, falling even harder than his ravaged peers as the economy and corporate demand for tech products took a nose-dive. To hear more about McCall's approach, check out this interview.

The Merrill Lynch Focus Twenty fund's 80% fall over the past 12 months trails the S&P 500 by nearly 60 percentage points and is worse than every other actively managed large-cap growth fund, according to Chicago fund tracker Morningstar. The fund turned up in our recent look at funds that had lost more than 80% of their value.

It's hard to believe the fund's racy style will change much -- Hahn came from PBHG with McCall and helped him manage the funds as they crashed. In a way, it might be best not to change the fund's approach, since it's far more justifiable at Nasdaq 1800 than it was at Nasdaq 5000, when the fund rolled off the assembly line.

Management changes often signal better days for a battered style. It's worth noting that value vets like Robert Sanborn lost their jobs in March 2000, just as that style's sails began billowing.

Shareholders' patience with these funds is probably exhausted, and it seems McCall's was too. A year ago we asked him what investors should do in this downturn. His response? "Buy a CD."