Times are so tough for initial public offerings that David Smith, co-portfolio manager of the $67 million

(LAGRX)

Loomis Sayles Aggressive Growth fund, hasn't bought shares of a newly minted company in more than a month. A year ago, his fund was crawling with IPOs, and its 197% return for 1999 was achieved with significant help from his stash of new offerings.

"I haven't seen anything compelling," says the Boston-based portfolio manager. "A lot of investors have lost patience with companies that aren't expecting to be profitable in three to four years."

Smith isn't alone. Plenty of sizzling technology funds got enormous pops from IPOs during the early days of their public lives. But there haven't been many of those deals recently, and the arid IPO landscape offers few promising ventures on the horizon. Portfolio managers who rode the IPO wave last year and saw their funds post eye-popping returns, are no doubt wondering: "Where will the performance come from now?"

The IPO market certainly looks bleak. In 1999, more than 400 stocks made their debuts. The average IPO in 1999 went up more than 200% from its offering price and rose more than 80% from its first-day closing price through the end of 1999, according to

Renaissance Capital

, which manages the

(IPOSX)

IPO Plus Aftermarket fund.

So far this year, there have been 170 deals, and about half are trading below their offering prices. After a peak of 60 deals in March, April saw just 33, and halfway through May there have been just eight new offerings, Renaissance says.

"Late last year, with the rising tide, we could just choose any of them, and because of the momentum investors, make astronomical performance numbers," says Ross Sakamoto, portfolio manager of the

(HIPOX)

H&Q IPO and Emerging Company fund, which started trading late last year at the height of the public offering frenzy. The H&Q portfolio has about 80% of its holdings in young companies no more than 18 months out of the chute. As a result, it has suffered more than most during the

Nasdaq

rout and is down 22.6% year to date. The Renaissance IPO Plus Aftermarket fund is off 11.7%.

Since H&Q launched its portfolio in November 1999, times have changed. Sakamoto has to be more selective, and has even added positions in older companies like

3Com

(COMS)

and circuit board manufacturer

Merix

(MERX)

. His fund's prospectus allows him to buy these companies as long as they maintain some sort of "new economy characteristics."

"We're also looking at companies that are older than six months and picking them up off the lock-up and adding to our position," he says about his increased positions in such stocks as

Goldman Sachs

(GS) - Get Report

and

GlobeSpan

(GSPN)

.

Funds that shot the lights out on performance in 1999 owed a large part of their success to their holdings of new offerings. This was particularly true for small, young funds because just one winning IPO could tack on several percentage points of performance.

The potential pop from IPOs is enough to prompt the

Securities and Exchange Commission

to crack down on funds that don't make investors aware of their potential impact. Just last week it fined

Dreyfus

for failing to disclose in its advertisements that its

(DGVAX)

Aggressive Growth got a steady allocation of new deals, which were primarily responsible for the fund's early stellar performance.

Van Kampen

ran into similar troubles last fall with its

(VGRAX) - Get Report

Growth fund.

Not surprisingly, of the 15 funds with the biggest portion of their holdings in stocks of companies less than a year old, all are down for the year, according to

Morningstar

. Many of the funds with a track record showed triple-digit returns in 1999.

Take the example of the $230 million

(NEVIX)

Nevis fund, which rose 287% in 1999, largely through investments in emerging mid-cap growth companies. After posting a year-to-date return of more than 60% in mid-March, it is now down about 3% for the year.

Portfolio manager David Wilmerdang downplays the role of IPOs in his fund. But as of its last annual report, 12 of the mid-cap fund's 27 holdings were companies that went public within the last 18 months, including top holdings

Primus Knowledge Solutions

(PKSI)

and

Radio One

(ROIA)

. Even though he still has conviction in many of the young names in his portfolio, Wilmerdang is cautious about IPOs in general.

For one, the Nasdaq has not fully recovered from its drastic slide of March and April. That doesn't bode well for smaller companies that will most likely have to trade there.

"The concept of free money has disappeared," says Wilmerdang.

Even so, the pipeline of companies that have already filed for a debut remains bloated, though a number have pulled the plug on their offerings or postponed them. There are about 300 newcomers waiting in the IPO queue. In all of 1998, just 247 companies had offerings. With so many new companies and the technology market still weak, these companies can only expect to receive a lukewarm welcome.

"I don't see the volatility subsiding, which it will have to for the IPO market to recover," says Smith of Loomis Sayles.