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Funds Notebook: Skyline Opens Up to Stop the Bleeding

Plus, Gabelli and Kobrick load up and Washington's after-tax talk.
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Sometimes it helps to think about waning mutual funds as critically wounded patients. The first priority is to stop the bleeding.

That's what

Skyline Asset Management

is trying to do with its

(SKSEX) - Get AMG GW&K Small Cap Value N Report

Special Equities Portfolio. The fund company announced Thursday it is opening the small-cap value fund to new investors for the first time since 1996.

The fund bled $93 million in net redemptions this year through September, shrinking it to just $275 million in assets. That's still more than the $219 million it had at the end of 1996, a month before it closed to new investors. (The fund also closed in December 1992 and reopened in May 1996.) But it's a heck of a lot less than the $446 million that the fund had at the end of last year.

Investors might not want to write Skyline Asset off so quickly, though. Manager Bill Dutton has built up an impressive 10-year annualized return of 14%, putting him in the top 4% of small-cap value funds, according to


. But the last year and a half has been tough on Dutton, who lost 7.2% of his investors' money in 1998 and another 16.1% this year. That made him better than just half of his peers last year, and this year he's lagging 96% of the group.

Skyline spokeswoman Michele Brennan says reopening the fund now will help Dutton manage a more regular cash flow. "That's the reason for doing it -- to stabilize cash flows and hopefully increase assets under management to have cash to invest in current and new ideas," she says.

But opening the fund to new investors might not stop bleeding from the back end. That bleeding has forced Dutton to sell his holdings across the board to raise cash for redemptions, a fact that likely locked in losses for the portfolio.

-- Joe Bousquin

Gabelli and Kobrick Load Up Their Funds


Kobrick Funds


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Gabelli Asset Management

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are adding loaded share classes to sell their funds through brokers.

Kobrick's move has been expected since the $500 million, three-fund firm was sold to broker-sold

New England Funds

last June, and it's taken a standard route to changing its stripes. Starting Monday the funds will be sold via Class A, B and C shares, which are structured to pay a broker's commission.

Existing shareholders of the funds --


Kobrick Capital,


Kobrick Emerging Growth and


Kobrick Growth -- will still be able to invest on a no-load basis, but only institutional investors will be able to buy Kobrick fund shares no-load after Monday. According to the funds' prospectuses, adding loaded share classes didn't require a shareholder vote.

Gabelli took a more curious route, adding loaded shares, but leaving the no-load door open.

On Wednesday the $20 billion firm, led by high-profile manager Mario Gabelli, said shareholders of its four global funds voted to add class A, B and C shares. But the firm's no-load shares will be available to new investors as Class AAA shares.

The funds adding new shares are:

(GICPX) - Get Gabelli Global Growth AAA Report

Gabelli Global Growth (a.k.a. Interactive Couch Potato fund),

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Gabelli Global Telecommunications,

(GABOX) - Get Gabelli Intl Small Cap AAA Report

Gabelli Global Opportunity and

(GAGCX) - Get Gabelli Global Rising Inc & Div AAA Report

Gabelli Global Convertible Securities.

-- Ian McDonald

Beltway Chatter

With all the hubbub about funds'

after-tax returns lately, those crazy kids in Washington, D.C., decided to throw an after-tax-return bash Friday morning.

The host was

Paul Gillmor

, a Congressman from the great

Buckeye State who is also sponsoring the

Mutual Fund Tax Awareness Act

. On Friday, the

House Commerce Subcommittee on Finance and Hazardous Materials

(try saying that three times fast) held a hearing on that bill.

The act would ultimately cause mutual funds to report their after-tax returns, something that the folks at the ever-tax-conscious

Vanguard Group

are doing.

Witnesses at the hearing included execs from Vanguard,


and the

Investment Company Institute

, which is sometimes called the mutual fund lobby. The mutual fund lobby is sometimes credited as having written the

1940 Investment Company Act

and the 1940 Act is sometimes referred to as the regulatory statute that puts the fear of God in mutual fund executives. But only sometimes. Like when they have really crappy lawyers.

That probably won't change now. The gist of the current bill is not that Congress will require mutual fund companies to report after-tax returns, but that the

Securities and Exchange Commission

write rules requiring companies to report after-tax returns.

That's an important point, because when the SEC makes rules, the ICI loves to help. (Just look at the

saga of the role of independent mutual fund directors for an illustration.)

At the hearing, Vanguard and Fidelity both supported the spirit of the bill, as did the ICI. But the ICI's president, Matt Fink, made at least two


interesting points in prepared testimony. First was that the median income of mutual fund shareholders is only $55,000, and not $283,150. The second was that after-tax returns don't apply to everyone.

The salary point was notable because at $283,150, individuals fall into the highest, 39.6% tax bracket. That bracket takes the biggest bite out of returns if used to calculate after-tax performance. And when it comes to returns, the mutual fund industry generally likes to see them


, not smaller. So just remember that when thinking what rate should apply.

Fink also said 45% of all mutual fund assets -- other than money-market funds -- and 50% of all equity fund assets are held in tax-deferred accounts anyway. So maybe this is all really important, but only for half the people.

That's probably a point those vote-conscious congressional folks will keep in mind as the bill wends its way through Congress.

-- Joe Bousquin