The volatility in biotech of the last couple of weeks seems to have rattled
more than some of the stocks in the sector.
The Boston-based fund family says it's going to slap a 1% redemption fee on its $184 million
Worldwide Health Sciences fund to "deter hot money coming in and out," says a spokeswoman. The fee will be imposed on investors who stay for less than three months.
That fee comes on top of an already hefty 1.69% annual expense ratio for the broker-sold offering. The average domestic stock fund charges expenses of just 1.44%, according to
Though Eaton Vance insists redemptions are not a problem, the move takes place amind a precipitous, 26% decline of the
Amex Biotech Index
since the beginning of the month. And given portfolio manager Samuel Isaly's penchant for small foreign health care stocks -- particularly in the biotech field -- it's not hard to see why he would want a stable asset base.
Isaly's style focuses on small players in the global biotech market. He's still got a small portion of the portfolio in the
American Home Products
of health care, but returns have come largely from some of Isaly's more obscure holdings, such as
That was a good move in the fourth quarter of last year when biotechs were on a tear. As a result, the fund gained almost 19% in that last three months of the year. It has followed up that feat with an almost 40% return so far this year.
Despite the recent returns, Isaly's strategy has produced some big performance swings. In the first quarter of 1999, the fund was down 5.7% and only eked out a 0.6% return the following quarter before tacking on more than 20 percentage points in the latter part of the year to dig itself out of the red.
Merrill Internet Fund Begins With $1.1 Billion
The Internet was supposed to spell the end of brokers, but they are alive and well and learning how to profit from a wired world.
Case in point:
announced Monday that its brokers raised a whopping $1.1 billion for its new
fund during a two-week subscription period that ended Friday.
The fund appears to have instantly become the third-largest Internet fund behind the $11.5 billion, broker-sold
Munder NetNet fund and the $1.5 billion,
Kinetics Internet fund.
In a subscription launch, you can reserve launch-day shares at a set price. At the end of the subscription, assets are collected and used to build the fund's portfolio.
The Merrill Lynch Internet fund is temporarily closed to new investors as manager Paul Meeks puts the mountain of cash to work. In an interesting and non-coincidental twist, it could open up just as Munder NetNet
closes to new investors on April 17.
Like many recently launched Net funds, this one will take a broad view, investing in "pure play" Internet stocks and real-world companies expanding their distribution to the Net. Translation: The fund could hold both
, or Merrill, for that matter.
Meeks is the fund's lead manager, with Robert Zidar and Dawn Simon on the team. Meeks has been slightly less likely than his peers to pay steep prices while managing Merrill's
Global Technology fund since its June 1998 inception. Over the past year the fund is up 162%, which amazingly
the average tech fund's return.
Merrill's Internet fund is currently only available through Merrill brokers, but could be available through other firms down the road. The maximum front-end sales charge on class A and D shares is 5.25%. The maximum back-end sales charge is 4% on class B shares and 1% on class C shares.
Among the four share classes, annual expenses range from 1.27% for class A to 2.27% for class B or C. The average tech fund's expense ratio is 1.77%, according to
Kinetics Launches Middle East, Small Cap Funds
The pope isn't the only one with Israel on his mind.
Kinetics, the asset management company that brought you the Internet fund, rolled out a couple of new funds this month. One,
Small Cap Opportunities
, looks fairly standard, but the other,
Middle East Growth
, is a bit different.
It focuses on technology and biotech companies in the Middle East, primarily Israel and Egypt. The fund will be co-managed by Kinetics Chief Investment Strategist Peter Doyle and Steven Bregman, president of
Horizon Asset Management
, which provides research to Kinetics. Doyle has co-managed the Internet fund since last October and Bregman managed private money at
, with no apparent retail fund management experience.
The small-cap growth fund, which launched last week, could be a bit of a departure for tech-heavy Kinetics. Co-managers Fred Froewiss and Muray Stahl will focus on obscure small-caps and new public companies without much institutional ownership or Wall Street analyst coverage, according to preliminary paperwork on file with the
Securities and Exchange Commission
. The filings indicate the fund might focus on retailers, media companies and financial services stocks.
Froewiss was formerly a portfolio manager with
, but doesn't appear to have any previous retail fund management experience. Stahl was formerly a portfolio manager with Bankers Trust, but mainly ran institutional funds there, according to the filing. He's also chairman and co-founder of Horizon Asset Management.
Both the Middle East and small cap funds are non-diversified, meaning they can invest up to half the fund in two stocks. Neither levies any sales charges, but both have pretty high annual expenses. The small-cap fund's expense ratio is 2%, compared to 1.7% for its average peer, according to Morningstar. The Middle East fund will charge 2.25% annually, compared to 1.7% for the average foreign stock fund.
Berger Small Cap Value to Close
Berger Small Cap Value, a solid small-cap value fund, will close its doors to new investors on Friday -- a rare move lately for a value fund. Current shareholders will still be able to buy shares after that.
Although the retail fund started in 1997, manager Bob Perkins has run an institutional
clone for the past 15 years, beating his average small-cap value peer over the past one-, three-, five- and 10-year periods, according to Morningstar. Over the past year the fund is up 24.6%
Perkins hasn't changed his value stripes to get that kind of performance. He typically scoops up stocks trading at or around their all-time lows, looking for those with low debt levels and a catalyst for growth. Most recently, that's led to a big bet on financials and an underweighting in technology.
Although investors aren't exactly clamoring for value funds these days, Perkins now manages just over $1 billion -- a common asset ceiling for small-cap funds. That's because larger funds can have a difficult time moving nimbly among thinly traded small-cap stocks without moving the stocks' prices and reducing returns.
The Berger fund's 1.37% expense ratio is below its average peers' 1.53%, according to Morningstar.
Vanguard Beefs Up Explorer Team
Vanguard has added
Grantham, Mayo, Van Otterloo
to the multimanager lineup on the $4.4 billion
Explorer fund, the firm's struggling small-cap growth portfolio. The firm will use computer models to identify promising small caps.
Earlier this month Vanguard
hired the Boston-based shop to run its new
Explorer shareholders will soon get a letter informing them of the move. The Explorer fund trails its small-cap peers over every time period spanning the past 10 years, according to Morningstar. Over the past year, the fund is up a solid 87.6%, but still trails 69% of its peers. That might be the result of a cautious approach, illustrated by an average price-to-earnings ratio of 29.7 -- below that of the
index, according to Morningstar.
The fund's assets are currently divided among four managers:
Granahan Investment Management
Chartwell Investment Partners
Vanguard Core Management Group
Rather than triggering a capital gains distribution by taking money from each manager's allocation, new money and a portion of the fund's cash will go to the new shop. Vanguard hasn't announced how much of the fund will eventually be entrusted to Grantham, Mayo, Van Otterloo. The more the firm boosts performance, the more it'll probably get.
As you might expect from a Vanguard fund, its 0.74% expense ratio is less than half its average peer's.