Jacob Net Fund Finally Cleared to Launch

Jacob Internet fund, the new offering of former (WWWFX Quote)Internet fund manager Ryan Jacob, will finally launch Dec. 13 following a two-week subscription period that begins today.

But months of delays in getting the Securities and Exchange Commission to OK the launch, originally scheduled for September, has let others gain a toehold in a field that Jacob used to have virtually to himself.

When Jacob left the Internet fund at the end of June, there were only a handful of Internet mutual funds available to the public. Now there are 13, and 16 more are in registration, according to fund-tracker Wiesenberger Thomson Financial.

What's more, these funds have prospered from a strong Internet market while Jacob was sitting on the sidelines. The average technology fund is up 38.4% since the end of August, according to Lipper.

"I think the delay has hurt him, because this is a period where the Internet stocks have continued to perform well," says Burt Greenwald, a mutual fund consultant in Philadelphia. "He's missed out for perhaps 60 days when he could have been actively selling during a good market."

There's no better example of this than Jacob's old fund. During the two months immediately after Jacob left, the Internet fund was the worst-performing technology-focused fund, with a negative return of 16.8%. But since the end of August, the fund is up 39.6%.

With most Internet funds sporting strong recent performance numbers, and Jacob Internet yet to rack up any track record, the new fund may not garner the assets it once was expected to.

"He will get a burst of interest on the basis of the record that he had at the Internet fund," Greenwald says. "But I don't think he's just going to hold out a basket and have dollars flying in. His performance in the new fund will be critical."

While the fund was originally expected to launch in early September, Jacob says it was held up because the SEC closely scrutinized his claim that he posted a 517% gain over an 18-month period while managing the Internet fund.

"When you're talking about the numbers that we had, everybody wanted their higher-ups to sign off on it," Jacob says. "Eventually, it went pretty high up on the food chain."

Citing policy, an SEC spokesman said the commission doesn't comment on specific filings.

Jacob says he doesn't have any regrets in holding up the launch of his fund to maintain his three-digit performance legacy.

"Look, it's easy to play Monday morning quarterback," Jacob says. "But I did think it was important for us to have the performance numbers in there. And we're not looking at one quarter vs. the next. We're taking a long-term approach."

As for the increased competition, Jacob says it can only help.

"Competition just heightens the awareness of investing in Internet-only funds to begin with," Jacob says.

Some investors, though, have been impatient about the fund's delays.

On a discussion board on Morningstar's Web site, an investor with the handle "Zapped" impatiently urged Jacob to get going in a posting titled, "Yes, Ryan, when?"

"I've been waiting and waiting," Zapped wrote. "Please post the prospectus and application on your Web site as soon as you're ready."

Now that his fund is ready, though, Jacob won't actually put any money to work until Dec. 13, when the subscription period ends. Jacob says he decided on a pre-launch subscription period to allow all investors to have a fair chance of getting in on the ground floor at the fund. But that also lets him avoid risking more than the $100,000 of his own money required to launch a mutual fund.

Jacob says he'll focus the fund on four sub-sectors of the Internet: media and content companies, e-commerce stocks, infrastructure plays and communications businesses. While he declined to name specific companies, he said that they won't necessarily be the "traditional" or established Internet companies. Rather, he's concentrating more on small- and mid-cap names, he says.

Frank Alexander, who managed the Internet fund before Jacob, will be a co-manager of Jacob Internet fund. Alexander is also associated with Lepercq de Neuflize, the asset management firm that tried to buy the Internet fund from Kinetics Asset Management earlier this year. That deal's failure ultimately led to Jacob leaving the Internet fund.

The Jacob Internet fund, like the Internet fund when he ran it, will have a concentrated portfolio of 25 to 30 names, Jacob says. It is a no-load fund and has an investment minimum of $2,500. Its expense ratio will be capped at 2% through Aug. 31, 2000. More information can be found at the fund's Web site.