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Funds Notebook: Big Distribution Tempers Amerindo's Gains

Also, H&Q's IPO fund launches and Fidelity merges two metals funds.


Amerindo Technology fund's eye-popping 146.7% year-to-date return looks like everything an investor could want. Except for a nagging little tax blemish.

Friday, the $213 million Internet-focused fund announced a capital-gains distribution equal to 30% of its net asset value. That drags down the aftertax return to a mere 122.9% (assuming an investor falls into the highest 39.6% tax bracket), according to financial planner Lou Stanasolovich of

Legend Financial Advisors

in Pittsburgh.

On a one-year basis, Amerindo's total return is 270%, or 234% on an after-tax basis,according to Chicago-based fund-tracker



"My response to that is, who cares?" Stanasolovich says. "So I paid some taxes. People get bent out of shape for no reason with this stuff."

The aftertax return still looks pretty good in a year in which the

S&P 500

is up 10.9% and the

Nasdaq Composite Index

is up 35.3%.

But that's for an investor who has held the fund since the beginning of the year.

A majority of money, however, flowed into the fund this year after April, when Amerindo took big profits on highfliers such as

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. April, of course, was when every investor's favorite game, Internet Hypo-mania, was in full swing. And during the previous month, Amerindo slashed its minimum investment to $2,500 from $10,000 for A shares and $150,000 for D shares.

Of the $84.1 million of new money that has flowed into the fund this year, 83% arrived after April 30, according to

Financial Research

, a consulting firm in Boston. Investors added a whopping $19.3 million during September, just in time to be met at the door with that capital-gains whack.

A spokesman says the lowered minimum investment was part of a broader strategic initiative conceived in January and implemented in April because that was the halfway point of the fund's fiscal year. Portfolio manager Alberto Vilar couldn't have known the lowered minimum would coincide with the peak of Internet stock prices. "Alberto is prescient, but he's not that prescient," says the spokesman, who asked not to be named.

For the latecomers, the aftertax return will be considerably less than triple digits. The fund's return since April through the end of October has been a comparatively meager 22.4%, according to


. January through April were the gravy months, when the fund returned 101.6%.

Oh well, can't say you weren't warned.


announced in June that the fund was holding realized gains then equal to 55% of its assets as of April 30. But Vilar managed to pare that gain, presumably by locking in some losses.

-- Joe Bousquin

Schwab Fuels Big Launch for H&Q Fund

Last month,

examined the marketing behind

Hambrecht & Quist's



IPO and Emerging Company

fund and saw a potential conflict of interest. Investors looked at the same fund and saw an opportunity.

The fund drew an impressive $184 million in investments during its five-week subscription period, which ended with its Oct. 29 launch. To put that success in perspective, consider that the only other mutual fund that focuses on initial public offerings, the


IPO Plus Aftermarket fund, has posted an excellent track record since its 1997 inception, but only has $15 million in assets.

"This was far and away our most successful subscription offering to date," says Greg Gable, spokesman for

Charles Schwab


, which agreed to promote the fund through its


fund supermarket and through other avenues in exchange for a payment from Hambrecht & Quist.

Subscription mutual fund offerings are fairly uncommon, but Schwab participates in three to four per year. During the IPO fund's subscription period, Sept. 23 through Oct. 29, investors could reserve shares at $10 each either through full-commission H&Q brokers or Schwab's no-load OneSource.

The vast majority -- $158 million -- of the fund's assets was raised through Schwab. According to disclosures in the fund's prospectus, H&Q paid Schwab a fee of more than $300,000 based on the amount of money the online broker raised.

Critics said the agreement could compromise Schwab's reputation for objectivity. But if investors saw a conflict of interest, it doesn't look like it scared them away.

Schwab's Gable says the outsized gains of several recent stock IPOs, combined with a paucity of pure IPO funds, fueled the launch's success. But Schwab's marketing muscle might have a lot more to do with it.

H&Q's fund was the only non-Schwab fund promoted on Schwab's

home page. Schwab also highlighted the fund in emails to advisers and clients.

"We're very pleased," says Dave Krimm, H&Q's top marketing officer, adding that more H&Q funds may follow in the IPO fund's footsteps.

-- Ian McDonald

Metal Merger at Fidelity

If you bought into the


Fidelity Select Precious Metals and Minerals fund to catch gold's recent rise, get ready for a relocation: Fidelity is proposing to merge the fund into its

(FSAGX) - Get Fidelity Select Gold Portfolio Report

Select Gold portfolio.

The Precious Metals and Minerals fund, which launched in 1981, is four years older than the gold fund, but has only $193 million in assets, compared with $257 million for the gold fund. Both are managed by George Domolky, and they have similar returns: 7.5% year to date for Precious Metals and Minerals, 8.9% for Gold.

In securities filings, Fidelity says the merger will allow the company to maintain coverage of the gold and precious metals sectors while simplifying its offerings into just one fund.

If the merger is approved by shareholders on Feb. 16, 2000, Fidelity guarantees that the combined fund's expenses will be capped at 1.54% annually until Feb. 28, 2001. The current annual expense ratio for Precious Metals and Minerals is 1.74%.

Fidelity will close Precious Metals and Minerals to new investment on Dec. 20.

-- Joe Bousquin