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As IPO Market Cools, a Fund That Buys Them Reopens to Investors

The H&Q IPO fund cites buying opportunities and decides to take in more cash.

Humbled by investors' sudden aversion to risky tech stocks, the

H&Q IPO & Emerging Company

fund will reopen to new investors tomorrow.

Once as hot as the IPO shares it primarily buys, the fund's net asset value is down almost 40% over the past month as the once-sizzling IPO market has


The combination of a shrinking asset base and a rise in stocks selling at more attractive valuations may convince a number of closed funds to throw open their doors soon. "If I were a tech fund manager I'd love to get some cash right now," said


analyst Russ Kinnel.

The H&Q fund closed to new investors on Dec. 30 with more than $500 million in assets just a month after it opened. Now it has $489 million.

The fund has been suffering from a paucity of new issues this year and the absence of those King Kong first-day 1,000% run-ups that made IPOs so popular last year. Last

week only six companies went public and they averaged just a 9.6% first-day gain. As recently as

February, more than 20 companies went public in some weeks.

The fund has to invest at least 65% of its assets in companies that are less than 18 months old. At the end of last month more than 75% of the fund's assets were invested in tech stocks, according to Morningstar. But its top holding on March 31 was

Goldman Sachs

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, which went public last year.

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Sub-advised by San Francisco-based

Symphony Asset Management

, the fund is one of only two explicitly IPO-focused funds. The other,


IPO Plus Aftermarket, has a longer track record, having been run by

Renaissance Capital

since the end of 1997. Since Jan. 1 IPO Plus Aftermarket is down 15.6%, beating H&Q's fund by about 5 percentage points. Over the past year it's up 49.5%.

An H&Q press release says its IPO fund is reopening to take advantage of buying opportunities that have cropped up since the

Nasdaq Composite

-- where many new tech issues trade -- began tumbling on March 10.

Last week, Putnam cited the same motivation in

reopening three hard-hit growth funds,

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New Opportunities,

(PCAPX) - Get Principal Capital Appreciation R4 Report

Capital Appreciation and


New Century Growth. While it's true that managers of these funds might need new cash to buy stocks they like at lower prices, these firm's marketing groups also might see a sales opportunity that plays on a "buy-on-the-dip" theme.

And that's just what some investors are doing. More than $10.7 billion flowed into U.S. stock funds last week, with about half of that going to aggressive growth funds, according to liquidity tracker

. Even though the market was closed on Friday, that sum beat the average weekly inflow for 1998 and 1999.

"I think you're going to continue to see a lot of closed funds reopen. Putnam and some others may sense a marketing opportunity here," says Burt Greenwald, a Philadelphia-based fund consultant.

Of course, not all closed funds open for a shameless marketing push. There are good investment reasons for reopening as well, such as the ability to buy favorite stocks cheaply. Without speculating on their motivation, what are some other candidates?

Kinnel says he wonders whether


PBHG New Opportunities might reopen. The fund, which closed last fall, is still up 346% over the past year, but has fallen 40% over the past month.

Given the fund's short history, hard fall and the recent departure of managerr Frank "Quint" Slattery, Kinnel says the funds want more cash to offset redemptions.

Also keep your eye on

(RSEGX) - Get Victory RS Small Cap Growth A Report

RS Emerging Growth. The fund is set to close to new investors on April 28, but because it is down 34% over the past month, reigning Morningstar Manager of the Year Jim Callinan might want to open the doors again later this year.