Funds Notebook: Goldman Sachs Throws Its Weight Behind an Internet Fund

Also, Amerindo Technology will review its concentrated holdings and two new funds are launched from USAA and Aeltus.
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Fidelity

has scoffed at the idea.

Vanguard

won't even consider it. But button-down Wall Street investment firm

Goldman Sachs

(GS) - Get Report

is putting its name behind an Internet mutual fund.

The

Goldman Sachs Internet Tollkeeper

fund (hey, it chose the name) plans to invest in companies that will profit by increased Internet activity.

"Like a toll collector for a highway or bridge, these tollkeeper companies may grow revenue by increasing 'traffic,' or customers and sales, and raising 'tolls,' or prices," the fund's prospectus reads.

That concept suggests Goldman would be less likely to put its name or assets behind pure-play Internet start-ups like

priceline.com

(PCLN)

and

drkoop.com

(KOOP)

, and more inclined to invest in companies like

Cisco

(CSCO) - Get Report

or

Dell

(DELL) - Get Report

.

The prospectus says the fund also will look for companies that "will benefit from the growth of the Internet by providing access, infrastructure, content and services to Internet companies and customers."

The Tollkeeper fund will be available to investors for a minimum of $1,000 on its A shares, which carry a 5.5% load and have a capped expense ratio of 1.5%. B and C shares will be available with back-end loads of 5% and 1%, respectively. Shares should go on sale within the next two months, according to the prospectus.

While this may not be the reincarnation of the

(WWWFX) - Get Report

Internet fund, Goldman's venture into the space could lend a certain credibility to a sector that major fund companies have scorned.

"Obviously, they're very bullish on the Internet by introducing a fund," says Jim Folwell of mutual fund consultant

Cerulli Associates

. "There are a lot of great minds at Goldman Sachs. I have a hard time second-guessing their decisions."

He also notes that the Internet category "is one of the few that's attracting

positive net cash flows."

A Goldman spokeswoman did not return a call seeking comment. Folwell estimates Goldman could pull in as much as $100 million in assets in its first month with an Internet offering.

The rolling out of the fund goes against the tide of established fund companies, which have resisted introducing pure-play Internet funds. Most notable among them is Fidelity, which has estimated it could attract $3 billion in assets in the first month if it introduced an Internet fund.

Concentrating on Concentration at Amerindo

(ATCHX)

Amerindo Technology fund has never been one to take small bets.

Riding a giant surge in

Yahoo!

(YHOO)

late last year, the fund returned 84.7% in 1998. Meanwhile, the stock swelled to 43% of Amerindo Tech's assets,

threatening its tax status as a mutual fund. In a clever accounting side-step, Amerindo dodged that bullet by changing the date that its fiscal year ends.

Now the fund seems to be keeping a closer watch on the size of the positions it amasses.

"In instances where the value of an investment has risen above 25%, the

fund will evaluate the appropriateness of that level of investment," the fund's prospectus reads. That means it will take into account the "regulatory and tax implications" of such large positions, it states. Still, the prospectus doesn't say that the fund will necessarily sell out of those positions.

And that could be a good thing for shareholders, who already face a potentially hefty capital gains distribution. On April 30, Amerindo said it had

realized capital gains equal to 55% of its net asset value. Those gains are scheduled to be distributed to shareholders before Oct. 31, the end of the fund's fiscal year.

Amerindo declined to comment on the new filing. But at least it suggests the fund is keeping an eye on those pesky accounting details. The question is, are shareholders paying attention? Or are they blinded by Amerindo's returns, which continue to amaze? The fund is up 97.5% so far this year.

New Small-Cap Asset-Allocation Funds

Looking to get into small-caps as that sector takes off? Afraid the market might turn down and never come back? Well,

USAA Investment Management

and

Aeltus Investment Management

have got funds for you.

The

USAA Small Cap Stock

fund, which goes active today, will be managed by John Cabell and Eric Efron. The team also manages the

(USAUX) - Get Report

USAA Aggressive Growth fund, which has returned 24.6% year to date. The no-load fund requires a minimum investment of $3,000 and carries a 1.39% expense ratio.

The

Aetna Principal Protection I

fund is a little different from your plain-vanilla mutual. An asset-allocation fund, it can go 100% into equities or fixed income, or a combination of the two. But it also comes with a guarantee on investors' principal backed by insurer

MBIA

(MBI) - Get Report

.

The fund has a five-year guarantee period, meaning that if investors don't cash out before the end of that term, they are guaranteed to get back their investment, minus sales charges, even if the fund's returns amount to a loss. But the fund's offering period only runs for two months, Aug. 6 through Oct. 5, 1999, after which it closes to new investors.

"This fund is ideal for investors who want to participate in the stock and bond markets, while limiting the downside risk of investing," says Neil Kochen, the fund's manager, in a press release.

The catch, of course, is the fund's fee structure. A shares carry a 4.75% front-end load, and B shares have a 5% back-end load. Expense ratios are capped at 1.5% and 2.25% respectively.