Ranks of Tech Funds Keep on Thinning

Seems like the list of vanishing bubble-born funds gets longer every day.

There's a steady and rising stream of funds conjured during the tech and IPO sectors' heady run in 1999 and early last year that are broadening their strategy or simply closing. According to regulatory paperwork filed at the end of last week, the JP Morgan H&Q IPO & Emerging Company fund has morphed into a tamer mid-cap growth stock-fund, leaving just one IPO fund out there. At the same time, the tiny and struggling Vintage Technology fund is asking shareholders to approve its liquidation next month, and John Hancock Funds has scrapped its plan to roll out the John Hancock Venture Technology fund.

The upshot for investors is that just as the pros were susceptible to the Nasdaq siren song, now the folks who preach the value of long-term thinking are sweeping short-sighted funds under the carpet.

Hambrecht & Quist launched its IPO fund prior to the brokerage's merger with Chase, in November 1999, when the new-issue market was sizzling. The fund closed to new investors after gobbling up more than $300 million in its first month. After gaining 14% in the first quarter of last year, its too-narrow focus left the fund and its shareholders in the cross hairs of the Nasdaq's collapse. It's down 32% over the past year, trailing the S&P 500 by 20 percentage points and lagging 77% of its peers, according to Chicago research house Morningstar.

The fund's old manager, Ross Sakamoto of San Francisco-based Symphony Asset Management, has been replaced by Christopher Jones, who also runs the six-month-old JP Morgan Small Cap Growth fund.

IPOs might have seemed like a great idea, to performance-chasing investors and cagey fund marketers at least, but they haven't aged well. In August, Metamarkets.com folded, taking its young and foundering IPO & New Era fund with it. Now there's just the graybeard (IPOSX - Cramer's Take - Stockpickr)IPO Plus Aftermarket fund, run by IPO specialist Renaissance Capital since 1997. The fund is averaging a 12.7% annual loss over the past three years, trailing the S&P 500 and just about every mid-cap growth fund out there.

As we've noted, things haven't been much rosier for tech funds, which are vanishing left and right after their ranks tripled in 1999 and 2000. After some 20 merged away this year, we sifted the category for merger or liquidation candidates. One of the funds on our list was the oddly named Vintage Technology fund, which will cash out shareholders on Jan. 17 if they approve.

The fund has fallen 57% over the past 12 months, trailing 84% of its peers. The industry rule of thumb is that a fund company breaks even on a fund once it hits about $80 million in assets. Launched in October last year, the fund had assets of just $2.2 million on Sept. 30 and wasn't likely to grow, given its lousy early track record.

John Hancock Funds is quashing its Venture Technology fund, which was designed to split its investments between public and private tech companies, before it sees the light of day. The fund's paperwork, filed last June, was canceled last week by the Boston firm.

The firm already offers the (NTTFX - Cramer's Take - Stockpickr)John Hancock Technology fund, which trails its peers over the past one, three, five and 10 years. Given those returns, the firm appears to be taking a wait-and-see approach rather than rushing the fund to market.

There are plenty of firms that wish they'd done the same.