The first funds to open their portfolios to investors shut their doors Thursday, proving once more that economics trump ethics in the investing game.
The $9.9 million
(OPENX Quote - Cramer on OPENX - Stock Picks)OpenFund and its sibling $1.1 million
IPO & New Era fund, both hit hard by the
Nasdaq Composite's 45% plunge over the past year, closed Thursday. The aggressive and tech-heavy growth funds, run by a team of managers at San Francisco-based
MetaMarkets.com, will liquidate their positions and return shareholders' money, according to a posting on the firm's Web site. Co-founder Don Luskin said the firm was "basically done" selling its holdings by midday Thursday. MetaMarkets.com also hired investment bank Allen & Co. to seek a buyer for the firm.
The OpenFund, launched on Aug. 31, 1999, amid tech-sector froth, rang up an 89% gain in its first quarter, according to Chicago fund-tracker Morningstar. But the mercurial sector buckled, and the fund lost more than half its value over the past year. The IPO & New Era fund, launched Sept. 11, 2000, is down more than 56% since its inception. Still, the OpenFund's 7% loss since its inception isn't as bad as the Nasdaq Composite's 25% fall over the same period.
Different Breed?
In an industry where portfolio holdings are often grudgingly disclosed, the funds' managers took the bold step of listing their picks and purchase prices on their Web site. The firm even went so far as to mount a Web cam in its trading room, offering a literal window into their traders' moves. Whether they owned shares of the funds or not, visitors could debate the funds' managers and traders. They could also read columns posted by members of the management team like Don Luskin and guest commentators like Nicolas Negroponte, founder of the MIT Media Lab. The firm will continue to post columns from Luskin and other commentators. (Luskin previously wrote a
column for
TheStreet.com.)
While
pressuring peers to be more forthcoming in portfolio disclosures, the firm saw its own holdings buckle. On Thursday, the OpenFund's portfolio page listed 25 holdings, 13 of which were in the red. In the end, the upstart funds succumbed to the industry's oldest rule: Without a big or growing asset base, funds can't generate enough income to stay in business. While opinions vary, the rule of thumb is that a fund needs $100 million in assets to break even.
Ian McDonald
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