Page 2B

Bear kills some mutual funds Closings on rise,
including among big-name firms
By Sandra Block
USA TODAY

LINK

The bear market has savaged many investors' portfolios, but most seem determined to ride it out. The same can't be said for a growing number of mutual funds.

In the first quarter, 40 mutual funds were shut down, 15% more than in the same period in 2000, Wiesenberger, a fund-tracking firm, reported Monday.

The increase comes on top of a record 225 closings in 2000, says Ramy Shaalan, senior analyst for Wiesenberger.

Fund closings typically lag bear markets by several months, so more shutdowns triggered by this year's bear market are likely, says Geoff Bobroff, a fund consultant.

The bear market also has slowed the introduction of funds. During the first quarter, only 57 funds were added to fund-tracker Morningstar's database vs. 253 during the same period in 2000, Morningstar says.

While many of the closings involved new funds that failed to catch investors' interest, the closings haven't been limited to small fund companies.

Last week, Vanguard, the USA's second-largest fund group, shut down two funds, Vanguard Preferred Stock and Vanguard Global Asset Allocation.

When a fund liquidates, shareholders usually get cash for their shares, based on their value when the fund went out of business. Reasons for fund closings:

* All the news is bad. Technology and Internet funds launched at the peak of the dot-com bonanza have nothing but losses to show for their efforts. For example, Zero Gravity Internet fund, shut down March 19, fell 40% since inception.

You can't get new investors with that kind of performance, says Russ Kinnel, analyst for Morningstar. From a fund company's perspective, ''You're either going to have to accept years of losing money in hopes of turning it around, or you can liquidate.''

* Dwindling assets. Fund analysts estimate that mutual funds need $25 million to $50 million in assets to make a profit for the fund company. Many of the shuttered funds attracted just a fraction of that. Undiscovered Managers Behavioral Long/Short fund, shut down March 2, had less than $3 million in assets.

* Lack of a niche. Some closed funds never found a place in investors' portfolios. Vanguard's Global Asset Allocation fund invested in a mix of stocks and bonds, and could invest anywhere in the world.

But the fund's broad mandate made it difficult for investors to figure out where it fit in their portfolios.

Fair use for educational/research purposes only!

-- Anonymous, April 11, 2001