‘Real-Time’ Funds Are Shuttered in Stock Slide
The first and only mutual funds to open their portfolios to investors via “real-time” tracking of trades online closed Thursday, the latest casualties of the stock market crash.
San Francisco-based MetaMarkets.com Inc. shut its struggling $9.9-million OpenFund, launched in August 1999, as well as its newer sibling, the $1.4-million IPO & New Era Fund.
MetaMarkets will liquidate the funds’ holdings and return assets to shareholders, and the firm has hired an investment banker to seek a buyer for its corporate operations and name.
“There was an amazing, quirky period in the late 1990s when hundreds of innovative companies like ours were springing up and flourishing amid all the excitement about the Internet. But that was then and this is now,” said Don Luskin, chief executive of MetaMarkets. “The reality is, this is the worst bear market since at least the 1930s, and the big, strong companies with deep pockets have recaptured the advantage from the insurgents. They just outlasted us.”
Mutual funds typically need a minimum of $25 million to $50 million in assets to operate profitably, according to industry analysts. OpenFund, which soared 89% in its first quarter but sank 42% last year and 26% in 2001, and IPO & New Era, which has lost 57% since its September 2000 debut, have fallen well shy of that level.
Luskin said MetaMarkets hopes to sell itself to a larger company and launch similar funds. In the meantime, the firm will continue posting columns from Luskin and other commentators on its Web site, https://www.metamarkets.com.
Since technology stocks began plummeting in early 2000, a slew of aggressive funds have been liquidated or merged into broader tech funds. The scrap heap includes DeLeon Internet 100, Zero Gravity Internet and StockJungle.com Pure Play Internet.
Though the two MetaMarkets funds invested in a range of other industries as well as tech, the firm used the Internet to break new ground on the controversial issue of portfolio disclosure.
While many funds report their complete holdings to shareholders just twice a year--as legally required--MetaMarkets posted all transactions online immediately upon completion, and the firm even mounted a Webcam in its trading room, allowing visitors to view behind-the-scenes decision-making.
MetaMarkets helped push the disclosure issue into the spotlight. Investor advocates led by Maryland-based firm Fund Democracy have petitioned the Securities and Exchange Commission to require mutual funds to disclose holdings more frequently, but the fund industry’s main trade group, the Investment Company Institute, has urged the SEC to resist such pleas, saying fund managers would be hampered by stiffer regulations.
Regardless of how the SEC rules on Fund Democracy’s petition drive, Luskin said MetaMarkets’ transparent portfolios will have a lasting effect on the industry.
“We’ll see more fund companies posting their holdings monthly on a voluntary basis, and I think we’ll see fund managers communicate more with investors,” he said.
