Dear Dagen: Newest Batch of Internet Funds -- A Roster

How can you find out about Internet funds that are in registration -- the ones that will be coming out sometime in the near future? I've invested in the Jacob Internet fund, but I'm not sure that that's necessarily the best choice.

-- Peter Breznay

Peter,

Internet funds aren't a scarce commodity anymore. (That's a good thing for investors today with the AOL (AOL Quote)/Time Warner (TWX Quote) announcement.)

You can keep yourself plenty busy investigating the current offerings rather than worrying about the funds that have yet to appear.

Share your investing and mutual fund questions on the Dear Dagen board At the end of last June, there were only a handful of Internet funds, namely the (WWWFX Quote)Internet fund, (WWIFX Quote)WWW Internet, (MNNAX Quote)Munder NetNet and (MFITX Quote)Monument Internet.

Now, about two dozen funds are available to the public. And both Barclays Global Investors and State Street Bank & Trust are planning to launch exchange-traded Internet index funds this year.

The Latest Batch
	Inception date	Expense ratio
Firsthand e-Commerce	Sept. 30, 1999	1.95%
E*Trade E-Commerce Index	October 22, 1999	0.95%
LCM Internet Growth(FND Quote)*	Oct. 26, 1999	Maximum 2.5%
StockJungle .com Pure Play Internet	Nov. 17, 1999	1%
Investors Capital Internet	Nov. 18, 1999	3% (A shares)
RS Internet Age	Dec. 1, 1999	1.88%
Jacob Internet	Dec. 13, 1999	Maximum 2%
Strong Internet	Dec. 31, 1999	1.78%
Internet Infrastructure	Dec. 31, 1999	2%
Internet Emerging Growth	Dec. 31, 1999	2%
Internet Global Growth	Dec. 31, 1999	2%
Internet New Paradigm	Dec. 31, 1999	2%
Potomac Internet Plus**	Dec. 1, 1999	1.5%
Potomac Internet Short***	Dec. 20, 1999	1.65%
Baron iOpportunity	March 1	Maximum 1.5%
*Closed-end fund. **Enhanced-index fund. ***Short fund.

Alas, it's not easy making an educated guess about these funds.

Some are run by unknown managers who lack any kind of long-range track record. With others, the money-management firms are unfamiliar names.

The rapidly evolving Internet sector makes it difficult to know what type of investment strategy will be successful six months from now.

Too, the Internet space is so broadly defined that some managers could argue that Gap (GPS Quote) or Wal-Mart (WMT Quote), as online retailers, belong in their portfolios.

So it takes effort to make sure your manager is making a bet on connectivity rather than khakis.

The following guidelines can help you find the more appealing portfolios.

Net Vets

First, more experienced money managers are moving into the Internet space. Among the dozen or more Internet funds that have debuted since the end of the third quarter, a few are guided by pros with a record in picking tech stocks.

Jim Callinan, manager of the vaunted (RSEGX Quote)RS Emerging Growth fund, is co-managing the RS Internet Age fund.

Callinan was just named Morningstar's Domestic Stock Fund Manager of the Year for 1999, a year in which his Emerging Growth fund returned 183%.

That coveted title may or may not make you throw your dollars at Callinan. But he has had some practice picking Internet stocks for Emerging Growth, which he's been running since mid-1996.

According to Morningstar, Callinan made a very profitable bet on Internet stocks during the second half of 1997. Last year, he wisely moved his money into business-to-business Internet. Emerging Growth's top 10 at the end of the third quarter was full of Net names, including Network Solutions (NSOL Quote) and RealNetworks (RNWK Quote).

Kevin Landis, another lauded manager, is also running the new Firsthand e-Commerce fund as a member of its management team. Landis earned his reputation managing his firm's flagship (TVFQX Quote)Firsthand Technology Value fund since its May 1994 inception. As of Dec. 31, 1999, Landis owned the best five-year record for any mutual fund manager with the Technology Value's 58.2% annualized return, according to Morningstar.

The Firsthand e-Commerce fund invests in enablers and beneficiaries of electronic commerce, such as software development tools, database providers and hardware manufacturers. The fund's biggest holding at the end of November was IBM (IBM Quote).

Unfortunately, many of these new funds are not run by veteran managers. What next?

Cost of Doing Business

When picking any fund, you should always pay attention to the expenses. With Net funds, that still applies here. "The fees are going to be there year after year whether the performance is there are not," says Bryan Olson, director of research at Charles Schwab's Center for Investment Research.

The Investors Capital Internet fund, for example, not only comes with a sales load, but its expense ratio is 3%, well above those for other new Internet funds.

The fund's pricing is particularly steep considering that it only invests in 20 technology bellwethers like Gateway (GTW Quote), Yahoo! (YHOO Quote) and Cisco (CSCO Quote).

Size of Shop, Style of Shop

Some pros maintain that you're better off investing with an established fund company. It's true that bigger firms often have greater resources and can more easily fill a vacancy when a manager leaves.

But if you followed that rule too closely, you would have missed out on a manager like Kevin Landis.

More important, you should focus on where and how that manager is investing your money.

The Internet space makes this task more difficult but not totally impossible.

I asked David Alger, manager of the (EIFAX Quote)Enterprise Internet fund, how he carves up the Internet space. He offered the following.

You've got business-to-consumer e-tailers (books, music, toys, travel, etc.), business-to-business companies, even consumer-to-consumer businesses like eBay (EBAY Quote). You'll also find companies specializing in communities (theglobe.com (TGLO Quote)); recruiting; Internet finance (online brokers, banks, etc.); Internet advertising; portals; vertical content (iVillage (IVIL Quote)); Internet service providers; infrastructure (Web hosting and content services); software and middleware; direct marketing; and domain name registration.

Regardless of how a fund is categorized, the most important thing is to look at the investment mandate of a fund, the stocks that are being bought and how much it's going to cost you.