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Rating:August 3, 2000 Not Rated 3.0 Email Routing List Email & Route  Print Print
Thursday, August 3, 2000

August 3, 2000

Reported by Sean Hanna, Editor in Chief

Sector funds rake in the bucks
From TheStreet.com
Nearly half of fund flows (44%) are now earmarked for sector funds. The worry is that these investors are hoping to get rich quick rather than becoming long-term shareholders. Through May of this year, $44 billion poured into sector funds, compared to $29 billion in all of 1999. Oh yes, 1999 was a record year for sector funds, according to FRC. "From 1990 through 1998, sector funds never accounted for more than 4.8% of total flows to U.S. stock funds. But in 1999 that shot up to 19.9%, and in the first five months of this year it's up to a whopping 44.4%," according to the article.

Why is the Fidelity Fund so popular?
From TheStreet.com
The Fidelity Fund was the top-selling fund in June when it took in $870 million, says FRC. The odd thing is that the fund lost its manager, Beth Terrana, on June 1 and has a negative return for the year and ranks only in the 20th percentile of its peer group. All of this leaves Fidelity watcher mystified. One explanation could be marketing, recent ads feature Peter Lynch touting the fund, but this doesn't satisfy observers. Another possibility could be that the fund is a new option in a large 401(k) plan. But a spokesperson refutes this explanation.

Canadian tech fund hit by scandal
From CBS.MarketWatch
Forty-six employees of Transamerica Life Canada allegedly used an arbitrage scheme to bilk shareholders of the NN Information Technology Fund out of between $4 million to $6 million. The fund company said yesterday that it fired three employees, suspended 17 and placed 36 under review. It has retained Deloitte and Touche to audit the fund and develop a restitution process. The scheme entailed employees buying and selling the fund at 3 o'clock (Toronto time) based on whether the Nasdaq was rising or falling.

Goldman completes offering
From Wall Street Journal
Goldman Sachs Group Inc.'s successfully completed the secondary offering of 40 million shares yesterday. Despite the new float, the stock price rose $1.50 on volume of 13.2 million shares (average daily volume is 1.7 million). The offering was priced at $99.75 a share.

Emerging-market funds may bounce
From Wall Street Journal
Is the fall in European emerging-market funds, have plunged in value along with the Nasdaq., logical? The paper says some fund managers say no since "the two regions are, in economic terms, light-years apart." The managers are expecting a bounce in the value of their investments after emotions cool. Still, these funds are "very telecom, media and technology heavy."

Funds eye Taiwan
From Wall Street Journal
Is Taiwan an attractive market? Boosters point to "high savings rates, relatively high incomes, and a population that seems to be falling in love with funds," says the paper. Still, total assets in Taiwan are equal to only a month or so of net cash flows in the United States. The fund market in Taiwan is worth only $41 billion, according to Cerulli Associates. Fund companies already in this niche market include: Jardine Fleming, AIG, ING CHB, SSB Citi Asset Management, Dresdner RCM Global Investors and Fidelity Investments. Several other fund companies have won licenses to open shop or have applications pending, according to the paper. Altogether, 38 companies are authorized to sell onshore funds. The paper also points to regulatory hurdles in opening a fund including restrictions on taking funds out of the country and a rule requiring funds to raise NT$3 billion from at least 3,000 investors within 45 days of launching. One solution is to buy in. ABN Amro Holding NV purchased Kwang Hua Investment Trust, Citigroup purchased 15% stakes in five Fubon companies.

Markets are not efficient
From New York Times
Are markets efficient? MBA's are taught that they are but a Harvard Prof claims that academics are off-base. In a new book, Andrei Shleifer, winner of the John Bates Clark award for an outstanding economist under 40, points to research undermining the hypothesis. For example, research has shown that stocks that performed poorly in one period typically did better on average over time. Also affecting the market is human behavior. Shleifer argues that in practice riskless arbitrage is virtually impossible in markets with thousands of securities. He also points to the "index-effect" of stocks rising in value merely on the announcement that they will be added to the S&P 500. So why do investors trail the market? Shleifer says both evidence and theory suggest that many investors do poorly in the market over time because they chase the latest fashion. If he is right it means that "speculative and dangerous stock market bubbles are entirely possible and even likely, that the federal authorities must remain vigilant about the complete and open flow of information, and that the stock market does not necessarily allocate capital investment to the right places."  

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