BOSTON -- Mutual fund managers might be biting their nails to the quick, given a 51% first-quarter drop in net flows to long-term funds, down to $42.1 billion, compared with $86.7 billion by the end of the first quarter of 1998.
That's the lowest first quarter net flow to long-term (non-money market) funds since 1995, according to fund data from Financial Research Corp.
The heaviest bleeder was Franklin Distributors Inc., San Mateo, Calif., which watched a net $7.3 billion leave its long-term funds, with a net $3 billion leaving its international and global funds in the first quarter. Merrill Lynch Asset Management, Princeton, N.J., also had an awful first quarter, losing a net $3.8 billion from long-term funds.
The Vanguard Group of Investment Cos., Malvern, Pa., on the other hand, had a robust quarter, attracting net flows of $18 billion to long-term funds, primarily to indexed funds. Janus Funds, Denver, racked up $9.6 billion in net assets by March 31, more than four times what it attracted in first quarter 1998 -- $797 million, FRC reported. Fidelity Investments, Boston, also had net inflows of $6.6 billion to long-term funds in the quarter.
The Janus Twenty Fund was the quarter's best-selling single fund. Investors poured a net $4.7 billion into the fund before it was closed to most new investors.
Net flows to international and global funds were a negative $8.4 billion for first quarter compared with a year earlier, when they were a positive $6.8 billion.
Realty funds show faint signs of life
NEW YORK -- U.S. real estate mutual funds showed a faint pulse at the end of April, the first sign of life after one of the worst real estate markets in memory, according to a report by Moody's Investors Service.
Real estate funds gained nearly 10% in the last few weeks of April, according to data from Moody's Real Estate Equity Fund Index. The Moody's index was up 4.59% during the two weeks ended April 22, in contrast to a disappointing first quarter when it was down 4.6%. Real estate funds were in very bad shape in 1998, with the Moody's index losing 17.7% for the year.
Moody's analysts attribute the recent jump to the undervalued share prices of real estate funds, combined with evidence from the broader markets of the beginning of a sector rotation back into value and cyclical stocks. Moody's estimated real estate investment trusts, the primary holding of most real estate funds, are cheaper relative to the Standard & Poor's 500 index than at any time in the preceding four years.
The best performing real estate funds so far this year are heavily weighted in hotels, apartments and industrial real estate and light in regional malls, outlet centers and diversified REITs, said Henry Shilling, vice president of Moody's Managed Funds Group.
But Mr. Shilling and analysts at Moody's apparently were unwilling to place bets on the continued recovery in real estate funds in 1999, noting the upswing might not be sustainable, especially as technology stocks reassumed their dominance at the beginning of May.
Screened Shepherd funds to span asset classes
NASHVILLE, Tenn. -- Shepherd Financial Services Inc. is the first to offer a family of screened mutual funds that will fully span the asset class spectrum.
The first two mutual funds in its Shepherd Values Family of Funds -- the Shepherd Values Large-Cap Growth Fund and the Shepherd Values Market Neutral Funds -- are now open. The fund family eventually will total 12 funds.
The subadviser for the two funds is Cornerstone Capital Management Inc., Colorado Springs, Colo.
Five more funds will be available within three months: a domestic small-cap growth fund managed by Nicholas-Applegate Capital Management, San Diego; an international equity fund managed by Templeton Investment Counsel Inc., Fort Lauderdale, Fla.; an active bond fund managed by Potomac Asset Management Co. Inc., Bethesda, Md.; a screened Standard & Poor's 500 index fund, managed by Cornerstone; and a money market fund that hasn't been assigned a manager.
The family's final five funds will fill in more of the asset class spectrum.
Every fund manager will apply a screened approach that will eliminate companies involved in the pornography, abortion, gambling, alcohol and tobacco industries and also, companies that promote same-sex lifestyles. Investment research and the screen will be provided to fund subadvisers by an independent researcher Values Investment Forum, Jackson, Miss.
Advertising and marketing for the funds is just beginning, primarily through Christian consumer publications, said Mark T. Bolt, national marketing director. Marketing arrangements with Christian affinity organizations and congregations also will be sought.
Mr. Bolt, together with his brother Stephen R. Bolt, are both Christian financial advisers and run the fund family and the Values Financial Network Inc., a network of other Christian financial advisers. The funds will be available primarily through the Network, but also will be available through fund supermarkets such as Charles Schwab & Co., San Francisco, and on a direct-sold basis.
More companies sign on to new analysis service
SAN FRANCISCO -- A new holdings-based mutual fund analysis service is gaining converts.
Vestek, a unit of Primark Corp., launched Vestek Select in the fourth quarter of last year and already has signed on more than 80 mutual fund companies managing about 55% of total U.S. mutual fund assets. The latest are New York-based Warburg Pincus Asset Management and Scudder Kemper Investments Inc.
Vestek Select uses holdings-based analysis to develop comprehensive fund profiles. Some mutual fund companies use the profiles for self-analysis and some specify which third-party distributors can receive the analytical reports. The fund company also can control how frequently reports are sent to distributors and the level of information -- holdings information or summary characteristics --each distributor receives.
Vestek's primary analytic tools for mutual fund evaluation are portfolio analysis, sector-based performance attribution and performance contribution. More information is available at www.vestek.com.
Vanguard Web site adds interactive financial planning
MALVERN, PA. -- The Vanguard Group of Investment Cos. added a new, free financial planning tool to its Web site (www.vanguard.com) that helps investors plan college, retirement, investment and estate planning goals.
The Vanguard Online Planner's interactive planner lets investors determine the right asset allocation to meet their needs through two paths: one is quick and suitable for basic planning needs, while the other path is more detailed for more advanced financial planning requirements.
The more detailed planning path allows users to create a single asset allocation and savings plan to meet all of their planning needs and includes advice on the specific Vanguard mutual funds that fulfill the program's asset allocation recommendations. Investors can opt for an all-index fund approach or a mix of active and passively managed funds.
Kenwood to manage fund for American Express Financial
MINNEAPOLIS -- American Express Financial Advisors formed an affiliation with Kenwood Capital Management LLC, Chicago, a joint venture of its subsidiary, American Express Asset Management Group Inc. Kenwood will manage a new mutual fund and institutional accounts using a small-cap strategy for American Express Financial Advisors. The fund's managers blend growth and value disciplines and invest in companies with market capitalizations of about $1 billion. The portfolio will hold on average between 175 and 225 stocks. The AXP Small Cap Advantage Fund was opened May 3.