Merrill Lynch Closes New Net Fund

That’s enough for now,” Merrill Lynch & Co. effectively told Internet-stock-hungry clients on Monday.

The biggest traditional brokerage said it closed its new Internet mutual fund after two weeks, the latest firm to turn away customers flocking to pour money into Web stocks.

Merrill raised $1.1 billion for its Internet Strategies Fund from March 1 to 17 before shutting it, following planned closings by the Munder NetNet Fund and the Amerindo Technology Fund.

“Even though the Internet sector has been skyrocketing, much of this growth has been attributed to a select group of Internet stocks. As such, those Internet funds might not find enough diversification in their portfolios,” said Ramy Shaalan, an analyst at Wiesenberger/Thomson Financial. “When there is a huge asset base, they can’t get in and out of a stock without affecting the price.”

For once-stodgy Merrill, the Net fund was part of a retooling effort aimed at attracting new customers. The firm saw net outflows of $1.2 billion from its stock and bond mutual funds in January, the largest withdrawals of any of the top 25 fund companies, according to consultant Financial Research Corp.

Merrill’s funds have focused mainly on “value” stocks, falling short of performance benchmarks and driving investors to growth-oriented firms such as Janus Capital Corp.

The closing of the Internet fund came two weeks after Merrill Lynch Focus Twenty Fund, patterned after one of Janus’ best-selling funds, took in $1.1 billion.

“These are our first-ever back-to-back $1-billion ‘IPOs,’ ” said Merrill spokeswoman Christine Walton, noting that the Internet fund’s subscription phase was shorter than the typical four to five weeks Merrill usually takes to shop funds to its brokerage force.

Paul Meeks, leader of the team managing Internet Strategies, was one of several portfolio managers brought to Merrill by Jeffrey Peek, president of Merrill Lynch Asset Management. Merrill tapped Peek, former head of its investment-banking unit, to revive its fund group in December 1997.

Merrill shares slid $4.50 on Monday to $109.25 on the New York Stock Exchange, trimming their gain this year to 31%.