The first mutual funds based on Internet-related stocks are about to make their debut, providing a new way to participate in the Internet craze.
An Internet mutual fund will give individual investors a way to take part in "the next generation of computing" without having to pick their own Internet stocks, says Jim Greene, vice president of WWW Advisors, a new investment company in Lexington, Kentucky, that has filed with the Securities and Exchange Commission (SEC) to launch the WWW Internet Fund. Initial public offerings (IPO) of Internet companies are "virtually impossible to participate in unless you are extremely wealthy", says Greene, who is co-manager of the fund. And after the IPO, individual investors risk buying these extremely volatile stocks at the wrong time.
Another start-up, Kinetics Asset Management in Tarrytown, New York, has also filed its Internet Fund with the SEC this month. According to its prospectus, the fund seeks to invest in Internet or Internet-related companies in the following categories: Internet access providers, software developers, hardware manufacturers, content developers and publishing companies.
The WWW Internet Fund will initially focus roughly half of its investments in stocks from established technology companies with aggressive Internet strategies, such as Intel and Sun, according to the fund's managers. Another 25% of the fund will focus on companies that promise to grow quickly with the Internet, such as internetworking vendors Cisco Systems and Cabletron Systems. The remaining 25% of the fund will invest in pure Internet plays, such as Netscape Communications.
WWW Advisors plans to have a home page and offer the fund through new distribution channels as well as the traditional ones, says Lawrence York, president of the company and co-manager of the fund.
But at least one mutual fund watcher is sceptical of the concept.
"It sounds a little gimmicky to me," says Russ Kinnel, technology fund analyst at Morningstar Mutual Funds in Chicago. Investors would be better off buying into established high-technology mutual funds that have a good track record, such as Fidelity Investment's New Millennium, he says.