Berger Mulls Over Four New Funds
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Friday, May 17, 2002

Berger Mulls Over Four New Funds

Berger Financial Group is working on three or four quantitative funds to be subadvised by its newly purchased Intech unit. The revelation was made by Jack Thompson, chief executive at Berger to the Wall Street Journal. The firm expects to have the funds ready by October 1, assuming clear passage through the registration process.

The unit of Stilwell financial will base the funds on the S&P/Barra style indices. They will effectively mirror the Intech Enhanced Index, Large Cap Core and Large Cap Growth portfolios. The firm has not decided if it will also base a fund on the Large Cap Value portfolio. Intech will use quantitative models to try to outperform the indices by at least 130 to 450 basis points annually. The firm also hopes to use the models to limit the downside risk in the funds.

The track record of "enhanced" index funds such as these is mixed. Even when funds have beaten their bogey, they have failed to catch on in the retail market and draw large amounts of assets. Most likely, the funds will appeal to a sub-group of "quantitative" investment advisors seeking new options for their clients. The minimum investment will be $10,000.

Thompson said that the funds will also be offered to 401(k) plan sponsors, but that is likely to be a fringe market at best as few plans have space in their core offerings for this type of fund.

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