Janus’ Closing of Tech Fund May Start Trend

After more than tripling in value in 1999, the Janus Global Technology fund has effectively closed to new investors, making it the first red-hot tech-sector stock fund to close this year but surely not the last.

“It wouldn’t surprise me to see more close,” said Philip Edwards, managing director for Standard & Poor’s Fund Services in New York.

As typically happens, funds that invest in volatile stocks “get hot, a torrent of money pours in, and fund companies close off the spigot,” Edwards said. “And then when things cool off and money leaves, they’ll turn the spigot back on.”

A little more than a year after the fund was launched, Janus Global Technology swelled to more than $8 billion, making it Janus’ fifth-largest fund and arguably the fastest-growing mutual fund in history.

“Going from zero to $8 billion in a year is way beyond anything we’ve seen,” said Russel Kinnel, equity editor for Chicago-based fund tracking service Morningstar Inc.

In December alone, Global Technology pulled in approximately 15% of all the net new money that was invested in tech funds, or roughly $1.2 billion, according to fund research firm Strategic Insight in New York.

Historically, funds that post sizable gains one year attract sizable assets the next, as investors try to chase what’s hot. This is one reason analysts predict tech funds, many of which doubled or tripled investors’ money in 1999, will be among the most popular funds in 2000.

The problem is, if too much money pours into a fund too quickly, managers may have difficulty putting it all to work immediately, hurting the portfolio’s overall performance. Also, if a fund gets too large, it may find it hard to invest effectively in smaller stocks.

Making matters worse, last year tech-sector funds received more new money--$38 billion--than they did in the past 50 years combined.

“By proactively closing the fund, we will protect its flexibility to continue investing in leading companies around the world, no matter how large or small,” said Jim Craig, Janus’ chief investment officer.

As recently as November, there were signs that Global Technology was having difficulty putting all its new money to work. As of Nov. 30, the fund reportedly had 17% of its assets in cash. By comparison, the average tech fund had a little more than 6% in cash.

Technically, Global Technology closes as of Tuesday. But in reality, the fund already closed to new investors at the end of Friday--at least to those who hadn’t ordered a prospectus and application for the fund by then, said Janus spokeswoman Shelley Grice.

However, if investors already have the prospectus and application in hand, they can still get into the fund so long as they mail it back to Janus postmarked no later than Jan. 21.