Fund Openings, Closings, Manager Moves: StockJungle To Increase Workload of Amateur Pickers

Legitimate innovation or gimmick? You decide.

StockJungle.com, which found some success using stock picks from amateurs in its Community Intelligence fund, wants to do the same in its Pure Play Internet and large-cap growth Market Leaders funds.

The company filed an amendment to the prospectuses of those funds on Friday, which would allow managers Michael Petrino and Gordon Gustafson to cull investment ideas from the stock picks of the roughly 5,000 amateurs who currently post on the company's Web site. These would-be portfolio managers build hypothetical portfolios online and compete for cash prizes.

"We wanted to disclose that our managers would be using our community as a resource in managing those funds," says Mike Witz, StockJungle's chief executive.

So far, the unorthodox setup has led to decent performance for the Community Intelligence fund. With almost nine out of 10 stock funds underwater so far this year, Community Intelligence was up 16.6% since Jan. 1.

In a humbling twist for the managers, that beats their other two funds, which are down 39.5% and 4.5%, respectively, for the year.

But the policy also begs a few questions.

Optimists might say the move, like the firm's policy of disclosing each fund's current holdings online daily, is a breath of fresh air because investors often have little idea where their money is actually invested.

But pessimists would counter that it's simply meant to draw more attention to the funds in hopes of boosting their assets and profitability.

Because the Market Leaders fund holds some of the most vigorously scrutinized public companies in the U.S., like General Electric (GE), Microsoft(MSFT) and Walt Disney(DIS), why does a manager need to read a wannabe's thoughts on these companies?

The managers can use the amateurs' picks as little or as much as they wish, but if they use their picks extensively, doesn't that undercut the point of paying a 1% fee, part of which goes to the managers for their stock selection?

So far, investors haven't been wowed by StockJungle's new concepts. At the end of March, the firm liquidated its no-fee S&P 500 index fund, which attracted less than $1 million in assets.

StockJungle's three remaining funds have about $7 million total assets, say Witz. The average domestic stock fund has about $990 million, according to Morningstar. Community Intelligence is the firm's behemoth, with just $3 million. Industry veterans often say a domestic stock fund breaks even at around $100 million.

>To order reprints of this article, click here: Reprints