Ima Winner/Ima Loser Tech Funds

Just about every tech fund is down, but if you're a tech believer we've found one that deserves your money.

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Let's face it, the tech sector's prolonged funk has been brutal. The average tech fund is down more than 52% over the past year, according to Chicago fund tracker Morningstar. But until very recently, the category was a cash machine, finishing each year in the black from 1985 through 1999, when the average tech fund rang up a stunning 136% gain. Many battered investors are yanking their money out of tech funds this year. But if you're a tech believer with at least a five-year time frame, you're probably trying to find a fund that won't blow up, but also won't just be a closet Nasdaq 100 index fund.

We suggest you take a look at the latest entrant to our Ima Winner Fund Club, the $400 million (DRGTX)Dresdner RCM Global Technology fund. On the flip side, we urge you to think long and hard before you write a check to the $7.2 billion (PRSCX)T. Rowe Price Science & Technology fund, one of the nation's largest tech funds and the newest member of our Ima Loser Fund Club.

The Winner

Few tech funds have managed to string together consistently solid returns vs. their peers, and even fewer have tenured managers. The no-load Dresdner RCM Global Technology fund has both.

Co-managers Walter Price and Huachen Chen have run tech portfolios for institutional investors for more than a decade. They started running this fund for that audience in 1995 and offered a (DGTNX)retail share class at the start of 1999. Unlike many tech managers who either stick with blue-chips or swing for the fences, this pair divides the portfolio into three sleeves: Blue-chips like Microsoft, more speculative stocks like Sonus Networks and value plays like Tyco International.

"A lot of newish tech funds have come out and don't have much experience or research, but this fund has a more institutional background and that inspires confidence," says Russ Kinnel, director of fund research at Morningstar. "I think what most people want from a tech fund is not necessarily the mega-cap tech or the tiny funky stuff. This is a play on young tech and other things and that works pretty well."

Make no mistake, the fund has taken its lumps along with its peers over the past year, but it has also beaten at least 60% of its competitors in each of the past five years. Over the past five years the fund averages a 29.4% annual gain, compared to 15.5% for the category average.

Ima Winner Near-term blues aside, this fund has lapped its peers

Source: Morningstar. Returns through Aug. 1.

And even though it's had a knack for beating the pack, it hasn't been any more volatile than its average peer over the past three years, according to Morningstar.

The Sinner

The T. Rowe Price Science & Technology fund might not be a complete flop, but its bumbling shouldn't spur you to add to its heaping mound of cash.

Manager Chip Morris has held the reins since 1991, aiming for diversified exposure to the tech sector and beating his average peer in 1992, 1994 and 1995. Problem is, he's trailed the category every year since.

It seems that as the fund's popularity and asset base grew -- it had $3 billion in its coffers back in 1995 -- Morris and his colleagues have struggled to keep up with peers in good or bad times. The fund trails more than 80% of its peers over the past five and 10 years.

Ima Loser Imagine the big Elvis trying to sprint

Source: Morningstar. Returns through Aug. 1.

"After a while you want to see some good performance and it hasn't happened," says Kinnel. "I wouldn't call it an awful fund, but it's pretty disappointing. If I was going to buy a tech fund today it wouldn't be that one. Ten years is a long time to judge it and it just hasn't done well."

In fairness, Morris is renowned as a manager who knows his companies well, and the fund's 48% fall over the past 12 months isn't as bad as his average peer's 52% tumble. But given the massive fund's taste for more solid big-cap stocks, where 65% of the fund was invested on March 31, you'd probably expect a bit less downside.

Clearly there are worse tech funds out there, like the tiny and horrendous $2 million (MNWTX)Monterey Murphy New World Technology fund. Manager and pundit Michael Murphy has lagged at least three-quarters of his peers every single year since the fund launched in 1993.

That fund is awful, but few investors own it. The same can't be said for the T. Rowe Price fund, which is much more widely owned. A $10,000 investment in the fund at the start of 1995 would have been worth $24,733 at the end of June, compared to $40,315 in the Dresdner fund, according to Morningstar. Even more damning: If you'd invested that money at the start of 1999, when both funds posted triple-digit gains, the T. Rowe investment would be under water by about $335, compared to a $5,700 profit with the Dresdner fund.

The T. Rowe fund is in a lot of portfolios. If it's in yours, you might want to start asking why.

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