| BUSINESSWEEK ONLINE : OCTOBER 18, 1999 ISSUE | ||||||||
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| BUSINESSWEEK INVESTOR
Minifunds, Maxi Gains Soon, you'll be able to track tiny outperformers When it comes to mutual-fund performance, Jonas Ferris thinks size matters--small size. Ferris, a former securities analyst and fund marketer, observes that many funds with assets under $25 million beat multibillion-dollar competitors. That's because they tend to be nimbler. Unlike Magellan-size rivals, they can easily take positions in promising small companies without driving their stocks through the roof. If successful, the investments can give the funds' small portfolios a huge boost. A recent study by Boston-based Financial Research Corp. of 766 funds with 10-year track records found that small, generally young funds on average delivered returns of 80 basis points a year over their category averages. But the problem with minifunds is that it's hard to find information about them--even highfliers. Nasdaq doesn't list funds on its ticker until they gain $25 million in assets or 1,000 investors. Since Nasdaq supplies the fund data used by newspapers and many investment Web sites, you wouldn't have found such hot minifunds as Firsthand Technology Innovators, whose assets were only $14 million in June. Now with $142 million in assets, its performance is up more than 101% in the year ended Sept. 30. You can find monthly updates on many unlisted funds at Business Week Online (visit www.businessweek.com/investor/ or America Online, keyword: BW). But even there, you won't find daily updates. ''It's a Catch-22 for puny funds,'' says Morningstar Inc. Chief Executive Don Phillips. ''They can't get coverage because they don't have assets, and they can't get assets because they don't get the coverage.'' To offer better visibility for these funds, Ferris, 28, and software entrepreneur James Price, 44, plan to launch MAXfunds.com in mid-November. The site (www.maxfunds.com) expects to provide daily pricing, portfolio summaries and analysis, and manager interviews for 200 funds with less than $25 million in assets. It also will provide pricing on all no-load equity funds, no matter the size. MAXfunds.com will list such funds as the $525,000, golf-focused Value Trend Links; the year-old StockCar Stocks Index Fund, ($4.7 million in assets); and the more seasoned, female-friendly Pro-Conscience Women's Equity ($11 million). HIDDEN GEMS. Ferris was inspired to create his site after struggling last year to help build up the Third Millennium Russia Fund, which has been plagued by volatile results. Ferris figured that many of the 800 other equity funds born each year also suffer for lack of attention. ''A lot of funds are small for a reason,'' Phillips says. ''Still, it doesn't mean there aren't diamonds in the rough.'' Indeed, Morningstar's vaunted five-star roster includes the microscopic Warburg Pincus Advisor Japan (with assets of $1 million), its sibling, Japan Small Company ($3 million), and the large-company growth Noah Fund ($8 million). If you're considering investing in a minifund, keep a close eye on asset size, as many minis falter when they grow up. For instance, Perkins Opportunity ranked first among Morningstar's small-cap growth funds in 1995, returning 70.3%. Then, the fund grew from $5.1 million to $68 million in assets in only one year. By 1996, assets were $103.2 million. The fund sank to 98th in its class, returning -7.3%, vs. 19.4% for its peers. The slide has continued, with the fund now ranked 100 among 220 small-cap funds for the past three calendar years. Its assets have shrunk so far that Perkins is practically mini again, with $29 million in assets. And it is again outperforming its small-cap peers and the Standard & Poor's 500-stock index. Is small beautiful? MAXfunds.com will give you a chance to find out. By TODD SHAPERA _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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