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Funds Notebook: Hondros and NFS Finally Link Up

Also, Web hangouts for bears and Van Wagoner fans.

Looks like Paul Hondros will get the chance to run his own show after all. And he'll be doing it for

Nationwide Financial Services


, the Columbus, Ohio, company that balked last October at buying

PBHG Pilgrim Baxter

, Hondros' former employer.

NFS announced Wednesday that Hondros will head a new investment management company based in Philadelphia, not far from his old PBHG office in Wayne, Pa.

The new firm will combine NFS' existing financial services companies,

Nationwide Advisory Services


Morley Financial Services

. Together, they have about $20 billion in assets under management and 37 funds. The new company will be on the prowl to acquire other financial services firms.

"We would hope to be very aggressive" in acquisitions, says Joseph Gasper, president and chief operating officer of NFS. Nationwide has not named the new company yet.

NFS made a bid in October to purchase PBHG from

United Asset Management


, but balked at the $600 million price tag. There was speculation that Harold Baxter, PBHG's chief executive, quashed the deal because NFS wanted Hondros to head the company after an acquisition and push Baxter out.

While today's announcement supports NFS belief in Hondros, Gasper still maintains that the fallout last October was over just one thing: money.

"When we were talking to Pilgrim Baxter, we were having tremendous difficulty coming to an agreed upon price, and then there was a lot of

market gyration going on," Gaspers says. "So we mutually terminated discussions."

The failed deal prompted NFS' decision to build its own mutual fund company as a sum of its different parts, with Hondros at the helm.

"We weren't going to be able to buy our way into the industry," Gasper says, "and we didn't see prices coming down. So the idea of bringing someone like Paul into the organization, who has the experience, know-how and contacts," seemed the next logical step.

The new group's flagship fund will be the $2.4 billion

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Nationwide fund, managed by Charles S. Bath.

With a portfolio of 60 stocks, Bath says he will continue to manage the fund in the large-cap arena and has no plans to close it any time soon. The fund had a 30.4% return last year, outpacing the

S&P 500

. Over five and 10 years, the fund's returns trail the benchmark's slightly.

"I don't see why it can't be much larger," Bath says.

Meanwhile, Hondros says he'll be concentrating on widening the distribution of the company's funds through supermarkets, financial advisers and broker-dealers, as well as rounding out its product offerings through acquisitions of other management firms, particularly ones that have shown an ability to manage institutional money.

"We already have a very good, solid product. We're going to want to expand that and round it out" while taking advantage of the Nationwide brand name to sell the funds, Hondros says. He declined to say whether the fund group would be a load or no-load family, suggesting its funds could have different share classes with different fees.

Hangin' with the Bears


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Prudent Bear fund, which has nearly 70% of its assets invested in short positions, proclaims on its

Web site that it's

"The No. 1 ranked domestic mutual fund out of 4,641 funds for the Third Quarter of 1998, up 21.9%, as ranked by Morningstar."

Not surprisingly, there's no mention of the $120 million fund's complete U-turn one quarter later when it fell to the bottom of the very same pack, down 29.2%.

But all rose-colored posturing aside, Prudent Bear's site has other, less


features that offer a little distraction during this "un-bear-able" volatility.

There's "The Bear's Den" -- a sort of

Bear's Anonymous

support group that includes "The Bears' Chat," an interactive bulletin board welcoming bearish views; "The Bear Hunt," which offers a collection of bearish news articles; "Goldilocks vs. the Bears," a hypothetical point-counterpoint debate between today's bulls and bears; and even some bear market commentary from the "Big Bear" himself, David Tice, manager of the Prudent Bear fund.

Before logging on, be aware that Tice's fund has been more off than on during its brief life -- it's lost an average 19.3% per year since its December 1995 inception, according to



If you think you can do better than Tice, bone up with "Short-Selling 101" on the Prudent Bear site. Then take the "Short-Selling Challenge" -- a "paper-only" contest where you predict which stocks will be best sold short in the coming quarter. Popular nominees for the current quarter include Internet stocks

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. And as they say on the site, "May the best bear win!"

Van Wagoner Live!

Fallen mutual fund star Garrett Van Wagoner is the undisputed king of the comeback this year. After trailing the market for nearly two years, every one of his five funds now rank among the top 10 in their peer groups, according to Lipper.

One reason he's riding so high is a newfound love of the Internet, not only as an investment but as a means of reaching shareholders and potential investors. To find out more, ask him yourself. Next week, Van Wagoner will sit down for a live audio and video chat Feb. 18 at 8 p.m. EST, during which he'll give "instant responses about issues that interest you most," he promises. You can get more information and submit questions in advance at his

Web site.