New Products Are Birds of a Different Feather
The stock market may be flat, the economy sluggish and the political situation uncertain, but why let such minor inconveniences get in the way of great investment ideas?
That’s what a lot of mutual fund companies seem to be thinking as they continue to churn out new products.
Proving that there are more than 4,100 ways to slice up financial markets--that’s the current count of all funds tracked by Lipper Analytical Services--some new products offer unusual twists.
In the index arena, Vanguard is coming out with two new funds based on Standard & Poor’s 500. That’s nothing new, except that Vanguard is splitting the portfolios into growth and value components, based on subdivisions S&P; unveiled earlier this year.
The rationale is that one or the other investment styles tends to predominate at any given time.
In 1992, value investing has had the upper hand. This approach focuses on cheap stocks selling at low prices relative to their earnings, book values or dividends. During the three previous years, growth investing, which emphasizes profit improvements, was the place to be.
The Vanguard Index Trust Growth and Value portfolios (no load; 800-662-7447) are among the first index funds to focus on specific stock characteristics, as opposed to market segments. “Previously, if you positioned yourself as a growth or value investor, you may have had difficulty determining which category a particular fund fit in,” says Brian Mattes, a Vanguard vice president.
S&P;’s growth component currently numbers about 175 stocks, with the remaining 325 categorized as value, he says. The mix will vary over time.
Not everybody figures that indexing is the best way to buy into the market. But proponents argue that because it holds the same stocks that are in a popular market indicator, a fund will never lag that benchmark.
Also, index funds tend to stay fully invested, which means that you’ll never have to worry about missing rallies. And, because they’re not actively managed, index funds tend to accrue lower expenses, saving shareholders money.
Dreyfus and Santa Monica-based Wilshire Associates are taking this a step further, teaming up on four index funds that split the market into different sectors based on style as well as company size or capitalization.
The four Dreyfus-Wilshire Target Funds (no load; 800-645-6561) are divided into Large-Cap Growth, Large-Cap Value, Small-Cap Growth and Small-Cap Value. Dreyfus and Wilshire define large stocks as the top 750 corporations--those worth $725 million and up.
Dreyfus-Wilshire funds, however, won’t hold all the stocks in a particular index subgroup--just those showing the most pronounced growth and value traits at a given time, says Michael J. Napoli Jr., Wilshire’s director of marketing.
For example, the two large-cap funds combined might hold only about half the 750 companies available. This screening feature makes the Dreyfus-Wilshire products something of a hybrid between true index funds and actively managed portfolios, Napoli says.
Another area seeing a fair number of new offerings is international funds.
Never mind that the average international stock portfolio has gained less than 2% annually over the past five years. More fund groups see this as one of those essential investment bases they need to cover to have a well-rounded product line.
The Columbia group of Portland, Ore., recently added an international fund (no load; 800-547-1707) to its solid lineup of domestic stock portfolios. The new product debuted Oct. 1 but is awaiting approval of California regulators.
Harris Associates of Chicago, whose Oakmark Fund was the No. 1 equity fund for the 12 months through Sept. 30, recently unveiled its first international portfolio (no load; 800-476-9625).
And so did Ralph Wanger, who has built a solid reputation for picking small stocks as manager of the Acorn Fund. His firm’s new Acorn International portfolio (no load; 800-9-ACORN-9) specializes in small and medium-sized foreign stocks. Wanger and the Acorn Fund used to be linked with Harris Associates.
Fidelity Investments apparently figures that the Tokyo market’s three-year slide is mostly over. In September, the firm introduced its first Japan Fund (800-544-8888; 3% load waived through August, 1993).
One of the more unusual global products is the new Calvert World Values Fund, which puts an ethical spin on overseas investing. The fund limits its holdings to U.S. and foreign companies that follow sound policies on the environment, human rights and other issues.
It avoids firms operating in South Africa or those with significant interests in nuclear power, weapons production, alcohol or tobacco. Calvert World Values (maximum 4.75% load; 800-368-2748), which debuted June 29, lost 4.6% in the third quarter, a difficult period for global funds in general.
