In a few months, your children might be able to stop having those gripping nightmares in which a snaggle-toothed Uncle Sam looms at the foot of their beds, waving a fat capital-gains tax bill.
plans to launch a
Tax-Managed Young Shareholder
fund, according to paperwork filed with the
Securities and Exchange Commission
. It could be available sometime this summer.
The fund will take a low-turnover approach, investing primarily in low-yielding growth stocks of all sizes and holding them for a long time, according to the fund's filing. It's designed to curb taxable distributions by avoiding dividends and selling shares that are in the red to offset sales of winning shares. The prospectus also notes the fund has an "educational objective" to teach youngsters about the stock market and investing, but no details are included.
Arieh Coll will run the fund. He joined the firm in January from
, where he ran the
Trend fund from January 1997 through October 1998. In those two calendar years, the fund posted gains of 8.6% and 2.9%, respectively, trailing the
index by more than 24 percentage points and ranking in the 99th percentile among its large-cap-blend peers, according to
Eaton Vance's handful of other tax-managed stock funds have solid performance and tax-efficiency records. Clearly the kid element banks on the success that firms like
have had with this angle. Its no-load, large-cap blend
Young Investor fund, for instance, has gathered more than $1 billion in assets its first five years.
Your kids won't find this to be the cheapest fund around, though. Class A shares come with a maximum 5.75% front-end sales charge, in addition to an estimated 1.4% annual expense ratio. Class B and C shares carry a maximum back-end sales charges of 5% and 1%, respectively, in addition to a 2.15% annual expense ratio.
The average growth fund's expense ratio is 1.42%, according to Morningstar.
Tech-Fund Pipeline Still Producing
Since the tech-heavy
index peaked on March 10, it's down 35.2%, and
TheStreet.com's Internet Sector
index is down more than 40%. Anybody want a high-octane tech fund?
is rolling out the broker-sold
fund through a subscription offering that begins today and runs through June 23.
During the offering period, investors can reserve launch-day shares. At the close of business June 23, the firm will collect the pledged dollars and the fund will commence operations on June 26. During the subscription period, the fund's minimum investment is $10,000. You'll be able to get in for less in an IRA or systematic investment plan later on. The fund intends to close to new investors at around $1 billion, but that might be an aggressive asset goal in the current market.
The fund looks like it will be more aggressive than most of its peers. It will hold just 30 to 40 small- and mid-cap stocks in "emerging" tech sectors like Internet, e-commerce, software and semiconductors. Also, the fund can invest up to a quarter of its assets overseas and up to 10% in venture capital funds.
One thing in the fund's favor is its manager, Mark Herskovitz. He's posted a solid record running the large-cap and more conservative
Dreyfus Premier Technology Growth fund, where he's stayed well ahead of his average tech peer since the fund's October 1997 inception. Last year, the fund posted a 158% return. It's down 25.3% over the past three months, which actually beats three-quarters of the fund's peers, according to Morningstar.
Another strike against the fund is that it isn't cheap. Class A and class T shares carry a maximum front-end sales charges of 5.75% and 4.5%, respectively. Class B and class C shares have maximum back-end sales charges of 4% and 1%, respectively.
The fund's estimated annual expenses range from 2% to 2.75% in its first year, but could rise or fall as the fund adopts a performance-based sliding scale for its 1.5% management fee later on. If the fund outperforms the Nasdaq Composite by 8 percentage points or more, that fee rises to 2.5%, but if it underperforms the Composite by 8 percentage points or more, the fee drops to 0.5%.
The average tech fund's expense ratio is 1.77%, according to Morningstar.
Sit Funds to Merge
When it comes to investing in their back yards, shareholders aren't interested unless the back yard is full of spicy growth stocks,
The small Minneapolis fund family is proposing to merge its $7 million
fund into the much larger
Large Cap Growth fund because it couldn't increase the shareholder base, says compliance officer Kelly Orning. "It wasn't economically viable when you compare them to the larger funds at Sit,'' she says.
The Sit fund's fate is similar to that of other regional funds. Last year, the
closed down its
Washington Regional Growth
fund and morphed it into a
fund. The company concluded that investing inside the Beltway wasn't such a good idea.
Shareholders will vote on the change at a special meeting of the fund on June 15.
Fund Openings, Closings, Manager Moves.