MutualFundWire.com: Odd Lots, June 7, 1999

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Monday, June 7, 1999

Odd Lots, June 7, 1999

Are fund makers handing control to fund distributors?
From Morningstar.net
John Rekenthaler pegs Merrill's new pricing strategy as trouble for fund companies -- and he is right. The warning shot across the industry's bow was Merrill's Launny Steffens telling Merrill reps on Thursday that a bond fund charging 1.2% in annual expenses was "totally uncompetitive." Rekenthaler predicts that in the new world this will mean that distributors squeeze the bulk of asset management fees from the fund makers. Hey John! It's already happening. Merrill, Schwab, and Fidelity already are asking for 35 basis points. Look for this figure to expand further.

Wall Street Journal's Monthly Fund Coverage:
Fund cos. shun the Web
From The Wall Street Journal -- Registration Required
Nearly one-third of assets held in on-line accounts are invested in mutual funds, yet with two notable exceptions the fund industry is not exploiting the Web as a distribution channel. The two exceptions are Vanguard and Strong. Janus, which has a Web site with on-line trading capabilities does not promote it. Old habits die hard. Fund companies still like the phone, says an analyst from Cerulli. This is leaving an opportunity to more nimble funds. MSB Funds with $70 million in assets saw flows jump 50% when it added the Web to its distribution channels.

Funny ads don't work
From The Wall Street Journal -- Registration Required
Many in the industry scratched their heads when Fidelity paired Peter Lynch with comedians Don Rickles and Lily Tomlin. Most people, after all, think money is a quite serious matter, thank you. The Boston Behemoth now has Lynch once again touting performance not one-liners an fund sales are on the rebound. It took in $10.4 billion in net sales through April, or 5% more than last year, according to Financial Research Corp. Fidelity's share of all net sales was 16% -- or more than its existing market share.

Assets flow to top performers
From The Wall Street Journal -- Registration Required
Don't blame the WSJ for reporting what we all know: only the top performing funds are pulling in new assets. The paper frames the story with the perspective of Stephen Kendall, former regional manager for RJR Nabisco, and now head of distribution for Skyline Asset Management. Skyline is a small-cap, value adherent. The paper also fingers the usual suspects to blame: easier access to information by investors and fund supermarkets.

Active funds close on indexes
From The Wall Street Journal -- Registration Required
Active managers trailed the S&P 500 index by just 135 basis points (6.47% to 5.12%) through the first five months of 1999. A. Michael Lipper, chairman of Lipper Analytics, goes so far as to predict that the majority of funds will top the index sometime this year as the market widens and small stocks' performance recovers.

Other stories
May showers bring flowers
From USA Today
The paper reports that the average fund dropped 64 basis points in May. This storminess though, rained more pain on the S&P 500 which dropped 2.3%. The bottom line: fund performance topped the index by 1.7%. The hardest hit group were Net funds. Monument Internet Fund fell 16.2% in May.

Bringing gambling back to the street
From The Boston Globe
This is not a fund story, but it may be of interest anyway. A new site -- BetOnWallStreet.com is allowing those with a credit card to make bets on anything from stock prices and where the Dow closes to Alan Greenspan's next move. And who thought all of the signs of a bubble haven't yet emerged?

Fund mentions