James Potkul wants his fundholders to get back to the "bread and butter" of investing. And judging from the string of conservative new mutual funds being rolled out, he's not alone.Potkul's contrarian/value
According to fund-tracker Lipper, life-cycle funds comprise the largest percentage of new funds introduced so far this year, making up 20% of the 55 newly introduced funds (not counting multiple share classes). Life-cycle funds have grown to be a popular alternative for retirement-minded investors since they offer instant diversification as well as timely rebalancing, two basic investing elements often forgotten during the Internet bubble. Next up on the list of newly introduced funds according to Lipper is large-cap core funds, another conservative area woefully ignored -- or even chastised -- during the boom times. "The new funds being introduced suggest that people are afraid of blowups," says Lipper analyst Tom Roseen. "The rash of life-cycle funds is a clear indication that investors want to learn from past mistakes and would rather not do it themselves anymore." Morningstar's director of fund research, Russell Kinnell, agrees that the major fund families have been trending on the side of conservatism. "Fund families are being restrained with their new offerings because some of them burned investors with trendy launches not too long ago," says Kinnell. The fund families are not altogether abandoning the idea of catering to hot money, as new energy and international stock funds are still hitting the shelves. However, the overwhelming trend in new funds is toward caution, says Kinnell, who adds that "any slack in meeting that need is being picked up by exchange-traded fund providers who are eager to fill popular niches with silver, gold, oil and other such funds." "It's easy for the big fund companies to pound out 'hot' funds in just a couple of months because they have the legal resources," says Potkul. "But those follow-on funds inevitably go down and people get hurt."
That, of course, depends on which side of your bread is buttered.