Underfunded StockJungle.com Fund Dies Young

Last Saturday TSC reported that online fund shop StockJungle.com was having a hard time selling shares of its no-fee S&P 500 index fund. Now it looks like StockJungle.com has given up.

The index fund, which gathered only about $800,000 in assets since its Nov. 19, 1999 launch, will be liquidated as of April 7. StockJungle.com says it has notified shareholders of the fund's imminent demise, and the company is no longer accepting new money for it.

``The people we were targeting online are probably more aggressive investors,'' says StockJungle.com chief executive officer Michael Witz. ``And this is a passively managed investment.''

Not only that, the fund was just too small to work. It didn't have enough money to buy all 500 stocks in the index. Instead, it has invested in Standard & Poor's Depository Receipts(SPY). The receipts, called Spiders, are exchange-traded funds that track the S&P 500 index. Their annual expenses are 0.12%, a fee that shareholders of the supposedly no-fee index fund ended up paying.

``Our ultimate objective was to replicate the index, and we needed significantly higher assets to do that,'' says Witz.

The Culver City, Calif.-based firm launched the fund to draw investors to the site, where they'd also find the firm's Pure Play Internet and large-cap growth Market Leaders funds. The firm also offers the unique Community Intelligence fund, which invests in stocks pitched by amateur analysts on the site's community section.

Witz says he's surprised the index fund couldn't attract additional assets. Even with a 0.12% annual fee, it was still a lot cheaper than many competitors, including the (VFINX)Vanguard 500 Index fund, which charges 0.18% in expenses.

StockJungle.com's other funds haven't racked up much in assets either. Witz says more than half of the $6 million fund company's assets are in the Community Intelligence portfolio, which charges expenses of 1%. Mutual fund industry veterans say most funds break even at about $100 million in assets. For a low-cost index fund, that figure is much higher. The average domestic stock fund has about $600 million, according to Morningstar.

Witz says the company still has a number of new ideas up its sleeve. Those, however, will leverage the community concept.

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