MUTUAL FUNDS
You won't find a more secretive priesthood on Wall Street than mutual fund managers, and for good reason: When you need to sell 100,000 shares of a single stock in a matter of hours, the last thing you want is thousands of scrappy daytraders divining your intentions and dumping the stock before you're finished. Consequently, most funds disclose their holdings only once a quarter. By contrast, San Francisco-based MetaMarkets.com posts its trades online as they happen - putting the "mutual" back into mutual funds.
MetaMarkets launched its tech-centric OpenFund last August along with a Web site where the public can monitor progress. When the managers complete a trade, they post the details to a message board. What's more, they gladly accept tips and criticisms from investors.
Trades aren't posted until they're completed, so snoopers can't "front-run" and spoil the party, according to founders Dave Nadig and Don Luskin. Although a savvy observer might catch on to the fund's trading patterns, the street-level perspective that OpenFund's managers glean from investors is worth the risk.
So far, the numbers support OpenFund's premise. In its first eight months, it attracted $33 million in assets without any help from advertising or brokerages. As of April 20, it had gained 80.3 percent since inception - on a par with other tech-focused funds and well ahead of the Nasdaq, which rose 33.0 percent in the same period.
Success hasn't won MetaMarkets much respect from the industry, though. In a December survey of visitors to Morningstar.com, which rates mutual funds, respondents ranked OpenFund as one of the biggest gimmicks of 1999. "I don't see a lot of value for investors in watching it real-time," agrees Russel Kinnel, Morningstar's director of fund analysis. The point of investing in a mutual fund, he notes, is to let a professional worry about the day-to-day details.
But even Kinnel concedes that greater transparency in the mutual fund industry is long overdue, and other funds are following MetaMarkets' lead. StockJungle.com launched its three funds in November, reporting stock positions daily and soliciting tips. If outfits like these continue to attract assets, traditional funds may have little choice but to grin and bare it.
- Kourosh Karimkhani (kourosh@govworks.com)
OpenFund: www.openfund.com.
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