Amerindo Technology, the highflying, tech-turned-Internet mutual fund, is finally getting the recognition it thinks it deserves. But that shouldn't take the edge off its risky investment style in investors' eyes.
, the Chicago-based fund tracker, has assigned the 3-year-old fund its highest, five-star ranking. But even Morningstar says that rating doesn't take into account the full amount of risk in the fund, even though its star ratings are based on a risk-adjusted performance.
"One of the problems with the star ratings is when a fund's particular investment style is in favor, it looks less risky than it really is," says Scott Cooley, a Morningstar analyst who follows the fund. "Sector funds by their very nature are pretty volatile over time, and this fund is devoted to a subset of a fairly risky sector."
Amerindo likes to make huge bets in that subset, as well. Last year, it rode a position in
until the stock accounted for
43% of assets. More recently, the fund put at least 30% of its assets in cash equivalents this summer during the selloff in technology and Internet stocks, according to securities filings.
"There are certain styles that don't look risky in the short term, but common sense tells you they are risky. Common sense tells you that a fund with more than a 50% tech weighting and an average
price-to-earnings ratio of 60 is pretty risky," Cooley says.
In a press release, portfolio manager Alberto Vilar called the five-star rating a "major affirmation of the quality of our investment style, philosophy and, most of all, our performance."
But Cooley's praise is clearly hedged. "I think it's a good investment over the long haul; I just hope no one buys it believing it's a low-risk investment," he says.
The fund's 267% one-year return and 51.6% three-year annualized return hid some fairly recent blemishes. In 1997, for instance, Amerindo Technology lost 18.1%.
A spokesman for the fund didn't return a phone call for this story. In the past, Vilar has been sensitive to criticism of his big-bet investment style. At least, he doesn't seem to like talking to
about it. But if he's ever ready to open up his life and times as a highflying, opera-loving investor, we're ready to listen.
-- Joe Bousquin
MFS Keeping Winners Up Its Sleeve
is dangling three top-performing funds just beyond investors' reach.
Back in September,
reported that the $112 billion MFS was developing three funds designed to perform like aggressive hedge funds. So far, the funds are trouncing the market, and two top their respective
But they're still "incubated" -- filed as funds for the world to see, yet only available to MFS employees. That's not going to change this year, and an MFS spokesman declined to speculate on when the funds would open to the public.
Why would a fund company keep top-ranked funds like these in the bullpen? Individual investors might be intrigued by the idea of hedge-like mutual funds with a $1,000 minimum.
Ironically, the funds' gaudy performance might be the very thing keeping MFS from launching them, suggests Jim Folwell, an analyst at Boston fund-researcher
and a former MFS employee.
The funds' risky bent clashes with the firm's reputation as a reliable core-growth manager. In fact, the "Vertex" subname these funds carry may be designed to distance the MFS brand from these funds if they head south.
MFS, which sells mainly through brokers and charges a 5.75% commission, has earned a loyal following among finicky brokers. If these funds fell as fast as they've risen, MFS' other funds could drop off brokers' radar screens.
And they have that potential.
can invest up to all their assets in emerging markets. All three Vertex funds can invest 100% of their assets in derivatives, cash and/or short sales. The funds are nondiversified (allowed to build large positions in few securities), can leverage investments by borrowing up to 50% of the fund's assets and can invest 15% of their assets in unregistered or illiquid securities.
Still, it might not be easy to keep the funds under wraps much longer since they're already starting to pop up in top-10 scorecards and financial magazines. Even an established core-growth giant like MFS might not be able to ignore an adoring audience with checkbooks in hand.
-- Ian McDonald
Mum's No Longer the Word
A trio of Fidelity's tight-lipped mutual fund managers will be exposed to the wilds of the Web next week during the firm's first live Webcast.
Equity-Income II manager Bettina Doulton,
Select Technology manager Andrew Kaplan and
Capital Appreciation manager Harry Lange will take part in an hourlong Webcast, Nov. 16 at 9 p.m. EST. Click
here to register.
The event will be moderated by
, formerly of
fame, now chairman of
While interactive chats with everyone from your veterinarian to your portfolio manager are common these days, the Webcast is significant for Fidelity, which is notorious for keeping its managers mum about the stocks they own. A company release says the Webcast will be "interactive." But, as with all things at Fidelity, the interactivity will be controlled.
"I think you know the policy," says Fidelity spokesman Jim Griffin. "Our managers can talk about individual stocks on a backward basis if they've been in their funds, but not on an ongoing or future basis."
Fidelity's policy of not commenting on its holdings grew out of an embarrassing gaff made by former
Magellan manager Jeff Vinik in 1995. Vinik allegedly talked up a pair of names he was selling out of the portfolio at the time.
But Fidelity has loosened its policy over the last year, and managers have begun to talk -- albeit
cautiously -- about their stocks.
It'll be interesting to see how the investing giant reacts if investors are persistent with questions about what Fidelity's buying and selling.
-- Joe Bousquin
Capital-Gains Filing Relief
If you have capital gains from your mutual funds, you might be excused this year from filing that pesky
-- Capital Gains and Losses
This is good news considering last year's disaster.
If you had capital gains from your mutual fund holdings in 1998, you had to slog through that tangled, two-page document to determine how much of the gain was long-term or short-term -- even though the long-term number already was reported in Box 2a of the
Form 1099 that fund companies sent to you and to the
Internal Revenue Service
Fortunately, the "kinder, gentler" IRS realized this was a bit redundant.
Now, for 1999, if the
capital gains you have are distributions from your mutual funds or real estate investment trusts (REITs), you won't have to bother with Schedule D.
Don't get too excited. You still have to crunch through a capital-gains tax worksheet on page 32 of the
Form 1040 instructions. But at least the worksheet is shorter than Schedule D.
Then, assuming you qualify for this Schedule D dismissal, the only extra thing you'll have to do is check a newly added box on line 13 of your 1040. The box just lets the IRS know that you are not required to file Schedule D.
Be sure to check out the 1040 instructions for all the juicy details.
-- Tracy Byrnes