The latest in a growing number of well-publicized and well-received subscription periods for mutual fund is the launch of two new funds from
Merrill Lynch Asset Management which combined to raise combined $1.214 billion during an initial subscription period, which the New York brokerage called "the firm's largest-ever equity mutual fund IPO."
The lion's share of the assets gathered went into the 20-stock
Merrill Lynch Focus Twenty Fund which raised $1.05 billion, while the broader
Merrill Lynch Premier Growth Fund raised $157 million. Both new funds will be managed by
Jim McCall, the ex-
Pilgrim Baxter portfolio manager, who joined MLAM in late 1999.
"The funds are designed to overlap," said McCall. "The companies in Merrill Lynch Focus Twenty will represent our 20 best ideas, so they'll also be in Merrill Lynch Premier Growth. We'll then layer our next 30 ideas into Premier Growth for investors who want a little more diversification."
A Merrill spokesperson said that there had been a five week roadshow to promote the funds, with McCall visiting dozens of branch offices. She added that the promotion had not differed significantly from the firm's other large launches.
Subscription periods have been traditionally used by the wirehouses, but are now increasingly of interest to other asset managers striving to fill the style gaps in their mutual fund lineups. Several recent fund launches have attracted significant inflows before a cent was invested, including the
Hambrecht & Quist's
IPO & Emerging Company Fund, which gathered about $200 million before it started investing and closed to new investors a month later after assets topped $400 million.
Paine Webber also reported raising $2.1 billion during a six-week subscription period for its
Strategy Fund in Oct.- Nov. 1999, assisted by an increased payout to brokers selling shares in the new fund.
And
Janus Funds, not known for value investing, and in a market not favoring the value style, raised over $1 billion in a subscription period that ended three weeks ago, for the
Janus Strategic Value Fund.
Geoff Bobroff, president of
Bobroff Consulting, felt that the new launches were intended to showcase McCall's addition to MLAM and create some buzz around the offerings.
"They're trying to centerpiece (McCall) and starting these new funds will do just that," said Bobroff. "The subscription period gives the opportunity to create some sizzle for the funds -- it doesn't hurt that the offering closes at or near the end of the month, the end of the sales period for brokers, which also creates some immediate gratification for the shares sold."
Avi Nachmany, director of research for
Strategic Insight, agreed, as he said "there's always an interest in high-promise portfolio managers, if there's an investment process in place that's well-respected."
Nachmany added that he believed all of the major wirehouses now had added a focused product to their propietary funds over the last two or three years.
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