Tuesday, March 02, 2004
Awash in cash, more mutual funds closing the door
With money pouring into mutual funds at the fastest rate in years, mutual fund companies are increasingly shutting their doors to new investors.
In the past seven months, at least 33 mutual funds � many focused on the red-hot small-cap sector � have shut their doors to new investors, according to Morningstar data. That's up from 15 funds in the first seven months of 2003.
On Feb. 20, Baltimore fund company T. Rowe Price Group locked down two funds: T. Rowe Price Small Cap stock and T. Rowe Price High-Yield bond.
That marks three funds T. Rowe has closed since early December. Those three funds attracted about $3.4 billion in new money last year, which represents about 45 percent of all the money that flowed into T. Rowe for the period.
The rash of closings reflects the huge inflows of money into mutual funds in recent months.
Funds often close when they have too much cash and not enough good investment prospects. Investors are shoveling money into equity funds at the fastest rate since 2000: nearly $153 billion last year and nearly $50 billion in the first seven weeks of 2004.
Roughly two-thirds of the funds that are closing are focused on small stocks. That has been one of the hottest areas on Wall Street of late.
In addition, some mutual funds firms that haven't been hit by the ongoing scandal in the industry are getting a lot of new money as investors pull out of other funds.
With money pouring into mutual funds at the fastest rate in years, mutual fund companies are increasingly shutting their doors to new investors.
In the past seven months, at least 33 mutual funds � many focused on the red-hot small-cap sector � have shut their doors to new investors, according to Morningstar data. That's up from 15 funds in the first seven months of 2003.
On Feb. 20, Baltimore fund company T. Rowe Price Group locked down two funds: T. Rowe Price Small Cap stock and T. Rowe Price High-Yield bond.
That marks three funds T. Rowe has closed since early December. Those three funds attracted about $3.4 billion in new money last year, which represents about 45 percent of all the money that flowed into T. Rowe for the period.
The rash of closings reflects the huge inflows of money into mutual funds in recent months.
Funds often close when they have too much cash and not enough good investment prospects. Investors are shoveling money into equity funds at the fastest rate since 2000: nearly $153 billion last year and nearly $50 billion in the first seven weeks of 2004.
Roughly two-thirds of the funds that are closing are focused on small stocks. That has been one of the hottest areas on Wall Street of late.
In addition, some mutual funds firms that haven't been hit by the ongoing scandal in the industry are getting a lot of new money as investors pull out of other funds.
Strict Discipline Is Behind Fund's Gains
Pimco CCM Emerging Companies Fund buys fast-growing companies at the lower end of the small-cap Russell 2000 index.
The managers rely heavily on a proprietary computer screen that gives them weekly a list of about 160 companies that have excellent earnings and revenue growth, rising earnings estimates and a track record of beating analysts' earnings estimates. They also want companies with rising margins and return on equity.
But besides all that, they want to buy companies that are relatively cheap. They look at estimated P-E ratios for the current and next year and compare them to P-E ratios in the industry.
"It's like a fish finder," said lead manager William Bannick. "We're looking for interesting stocks with certain attributes."
more...
Pimco CCM Emerging Companies Fund buys fast-growing companies at the lower end of the small-cap Russell 2000 index.
The managers rely heavily on a proprietary computer screen that gives them weekly a list of about 160 companies that have excellent earnings and revenue growth, rising earnings estimates and a track record of beating analysts' earnings estimates. They also want companies with rising margins and return on equity.
But besides all that, they want to buy companies that are relatively cheap. They look at estimated P-E ratios for the current and next year and compare them to P-E ratios in the industry.
"It's like a fish finder," said lead manager William Bannick. "We're looking for interesting stocks with certain attributes."
more...
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