SAN FRANCISCO - Charles Schwab & Co. Inc. created its first indexed bond mutual funds by converting two older, actively managed funds.
Shareholders approved by an overwhelming majority the conversion of the $137 million Schwab Short/Intermediate Government Bond Fund to the Schwab Short-term Bond Market Index Fund, which tracks the Lehman Brothers Short Government/Corporate Index. Also converted was the $32 million Schwab Long-term Government Bond Fund, which became the Schwab Total Bond Market Index Fund. This fund tracks the Lehman Brothers Aggregate Bond Index.
The change was made primarily to allow the funds to broaden their investment mandate from a predominant emphasis on government and agency securities, said Michelle Swenson, senior vice president-investment products and research.
By investing in the bonds in the Lehman Aggregate Bond index, for example, the Total Bond fund will move from investing 100% of assets in U.S. Treasuries to 50% Treasury bonds, 30% agency bonds, 15% corporate mortgage-backed securities, 4% international bonds and 1% asset-backed securities.
The expense ratio for the short-term bond fund dropped to 38 basis points from 49. The expense ratio for the total bond fund remained at 30 basis points.
Kim Daifotis was hired to manage the funds. He previously was a vice president and portfolio strategist at Lehman Brothers, where he worked on index applications. Andrea Regan had managed the funds; she'll concentrate on managing a GIC products program.
Alpine Management to open
with 2 existing funds
NEW YORK - A new money management firm, Alpine Management & Research LLC, will open its doors in February with two proven mutual funds under its roof.
The firm's founding partners, Samuel A. Lieber and Marc R. Halle, managed the $36 million Evergreen U.S. Real Estate Fund and the $37 million Evergreen Global Real Estate Fund. When the two left Evergreen Asset Management Corp., Purchase, N.Y., they made a deal to buy the two funds and bring them under their own banner at Alpine.
The U.S. fund earned a five-star rating from Morningstar Inc., Chicago, and that company's best rating in a category of 66 real estate funds. Both topped their peer groups in three of the past five years according to Lipper Analytical Services Inc., New York.
Terms of the mutual fund purchases were not disclosed. The deal should be final by the end of this month pending shareholder approval.
The funds will be available on a no-load basis for individual investors, as well as with a multishare structure for use by financial advisers.
ProFund Advisors offers
series of aggressive funds
BETHESDA, Md. - ProFund Advisors LLC developed an aggressive series of mutual funds aimed at allowing investors to match or double the performance of major U.S. equity indexes.
Michael Sapir left his position as senior vice president of the Rydex Series Trust to co-found ProFund and brought with him its strategy of using futures, hedging and market timing to beat the market.
The Bull ProFund is designed to match the Standard & Poor's 500 index; the UltraBull ProFund will deliver twice the performance of the S&P 500; the Bear ProFund provides the inverse of the performance of the S&P 500; the UltraBear ProFund seeks to be twice the inverse of the S&P 500; and the UltraOTC ProFund seeks twice the performance of the Nasdaq 100 index. The Money Market ProFund, managed by Bankers Trust Co., does not attempt to outperform a benchmark.
Because the funds are designed to allow investors to take advantage of short-term changes in market indexes, there are no restrictions on the exchange shares between the funds, and there are no entrance or exit fees.
William E. Seale is the director of portfolio management of the funds and developed the investment strategies used.
Fremont adds 2 funds
to investment stable
SAN FRANCISCO - Fremont Investment Advisors launched two new mutual funds, rounding out its investment capabilities.
Kensington Investment Group Inc., Orinda, Calf., was hired to manage the new fund that invests in real estate securities, using the more conservative of the company's REIT investment strategies.
Paul Gray is the leader of the investment team for the new fund. Investors in the company's more conservative, income-oriented separate account strategy were converted into the Fremont mutual fund. The company's more aggressive style still is available in separate account form.
John Kosecoff manages the other new fund, the Select Fund, in which he invests a minimum of 80% of the fund's holdings in 30 or fewer stocks, selecting stocks using a growth strategy with quantitative disciplines. The median market capitalization in this concentrated portfolio is $1.9 billion. Mr. Kosecoff also manages institutional separate accounts at Fremont.
Timothy Plan rebounds
in performance, assets
WINTER PARK, Fla. - The Timothy Plan, a domestic equity fund designed to appeal to Christian investors, made significant changes in 1997 that contributed to a doubling in assets.
The fund invests only in companies that avoid activities inconsistent with Christian values, and so excludes companies involved in gambling, abortion or pornography, for example.
The fund began 1997 with $11 million, after disappointing performance for its first three years under subadviser Systematic Financial Management Inc., Fort Lee, N.J., said Arthur Ally, president of the Timothy Plan.
"The only reason we kept any clients is because we are who we are and have a mission," he said.
Awad & Associates Asset Management assumed the role of subadviser last January, and performance has improved.
Calendar-year performance in 1995 was 7.9% vs. 21.35% for 1997, according to Morningstar Inc., Chicago. The fund's one-year return placed it in Morningstar's 68th peer percentile ranking. The annualized three-year performance of 13.82% put the fund into Morningstar's 99th peer percentile ranking for the period ended Dec. 31.
Mr. Ally said improved performance has led to a doubling in assets to $22 million.
The fund also was converted at the end of September to offer classic A and B shares, which carry a commission structure more attractive to brokers and financial planners. Prior to the conversion, the Timothy Plan only offered a very low load retail and a no-load share class.
Acorn Fund shareholders
OK hike in fees
CHICAGO - Shareholders of the Acorn Fund approved the first upward fee adjustment in 27 years.
The fund's manager, Ralph Wanger, president of Wanger Asset Management LP, said the fee adjustment was necessary to allow the company to attract and retain the top analytical talent necessary to keep up the small-capitalization equity fund's high performance record.
The new management fee is 0.69% and the total expense ratio, 0.87%.
IronWood to launch
small-cap value fund
BOSTON - IronWood Capital Management LLC, Boston, has registered the ICM/Isabelle Small Cap Value Fund with the Securities and Exchange Commission.
The fund will allocate at least 80% of its assets to stocks of companies with market capitalizations of less than $1 billion, using the established value stock picking style of the company's president, Warren J. Isabelle.
Mr. Isabelle started IronWood in 1997 and brought on Rick Droster to handle sales. Mr. Droster formerly was director of institutional marketing at Heartland Advisors Inc., Milwaukee. IronWood will provide both mutual fund and separate account investment management to institutional clients.
Mr. Isabelle was the head of domestic equity management at Pioneering Management Corp., Boston, and manager of the Pioneer Capital Growth and the Pioneer Small Company funds until last January. He then briefly took portfolio management jobs at Boston-based companies, Keystone Investment Management Co. and Prospect Street Investment Management, before starting his own company.
Christine Williamson can be reached at [email protected]
