| OCR Text |
Show The Salt Lake Tribune BUSINESSSunday, January24, 1999 YOUR FUNDS Euro Sparks Investment Interest MoneyScoreboard TS Cae els Currency change redefines European marketplace, creates newopportunities NEWSDAY The eurois here, and as an individualinvestor in CHARLES A. JAFFE First in Line No Guarantee Of Good Deal The newsis filled with stories of new stocks going public and shootingstraight to the sky. It's natural to be intrigued by the chance to buy into brand-new funds before they start trading A growing number of fund companies are making that possible, opening funds in a manner that smells like theinitial public offering of a stock. Among those that havetried this strategy recently are the Janus, Invesco, Acorn, Baron, Matthews International and WarburgPincus. These “subscription offerings” can be a very good dealfor the fund companyandindividual manager, but they turn out only Europeanor international funds, you may wonder what it meansto you. Directly, probably nothing. But it meansa lot to your fund managers because it changes the waytheythink aboutinvesting in Europe. The euro is somewhat simpler to understand than 11 currencies, but also moreinteresting, with newopportunities. OnJan. 1, the currencies of 11 countries effective- ly becameone currency. That is “profoundly important for Europe and investors,” said Carol Franklin, manager of Scudder’s Great Europe Fund. “It redefines the marketplace, makesit easier for investors to cross borders and removesthe threat of a sudden devaluation in a marketplace they might be selling into. “We haveto adjust our minds now whenwe look at the [computer] screens,” she said, “because we see prices in euros instead of deutsche marks orlira or francs, and wehave to adjust to that.” But the actual currency changeover, and the creation of a European Central Bank to manage monetary policy, is really the culmination of years of changes, said Paul Rogge, manager of AIM’s European Development Fundin Houston. “In essence, 90 percentof the changes had already taken place” as a result of efforts of countries like Italy and Spain to meet the criteria to get into the European Monetary Union, Roggesaid. “The biggest thing is that 10-year government bonds in Italy, for example, went from 12 and 13 percentto 4 percent. Countries that (had) chronically not shown monetary discipline hadto give up their monetary freedom. And stocks become moreattrac- so-so for the individualinvestor. tive wheninterest rates are lower,” hesaid. “This creates someanticipation about a new fund,” says Peter Mangan, executive vice president for institutional services at Wa- As a further exampleof concerted solidarity, European Central banksall cut interest rates Dec. 3 in terhouse Securities. “It makes people say ‘Gee whiz, I can get in right at the start.’ That has no economicvalue, butit is something the fund companies can marketto.” To better examine this trend, let’s look at a current example, the Warburg Pincus European Equity fund. The fund, announcedearly this month, is set to open Jan. 28. Un- advanceoftheofficial start of the euro. “Lowerinterest rates make investment moreat- tractive and give the economya lift. It is a structural change,” Roggesaid. For portfolio managers, the use of one currency “makes comparisons across borders easier, and there will be a lot more price transparency,” said Ron Chapman, head of international equities for Dreyfus Corp. in New York. “Companies are going to have to change their business aroundto meet competition. As we proved in this country, once you start to change your company, you look at the improved Bank Rate Monitor's survey of the 10 largest banks and S&Lsin the-10 largest metro areas. Mortgages are conventional loans at 80 percent loan-to-value. Car loans are for $9,000, 20 percent down, 48-month, companyand you continually look for ways to im- proveit.” But that improved price transparency doesn't new car. Personalloansare for $3,000 24-month unsecuredloan. mean products will beselling for the sameprices in different countries. “If you buy a McDonald’s Big Mortgages Macin Iowa and in New York, they won't cost the same,” said David Lui, who manages the International Growth Fundfor Strong Funds in Menomonee Falls, Wis. “So a Big Macin Brussels will have a different price than a Big Mac in Madrid.”” Date But, said Thomas Mengel, manager of Waddell & Reed’s International Growth Fund, in Overland Park, Kan., “Price convergencewill take a long time. butovertime companieswill become more competi- Others 1-year 30-year 15-year ARM This week 6.78 Lastweek 682 Lastyear 692 6.44 Car Personal 647 576 869 15.07 14.14 6.56 5.56 9.25 15.33 16.78 ee ; 872 Bank deposit yields tive.” The eurois also expected to encourage the heavy 15.07 14.14 Bank Rate Monitor's weeklysurveyof the 10 largest banks and S&Ls cross-border mergeractivity, as well as help compa- in the 10 largest metro areas. Date nies make restructuring decisions. Patricia Maxwell- Arnot, head of European equities for Credit Suisse This week Last week Asset Management in New York, said companies that had operations in several countries to take advantage of their currencies might nowconsolidate activities and close someplants to become more effi- MMDA* Last year 2.21 2.21 6-months 1-year 2-i/2-year 5-year 2.56 4.14 4.14 4.27 4.26 435 435 4.48 4.49 4.78 5.03 5.19) §.35 * Money Market Deposit Accounts cient. The restructuring will probably add to Europe's 11 percent unemploymentrateas state-ownedtele- NACE Mey am elle fe (Tae) ULL:eee Here are the 15 biggest money-market mutual funds open to individuals with their current seven-day annualizedyields. communications companies privatize. But MaxwellArnot and Mengelsaid that new companies, such as resellers of long-distance time, will spring up, as will companiesthat take advantage of new technologies. “Information technology has been neglected and Fund (rankedbysize) Merrill Lyach CMA Money Fund now companiesare discovering technologyto gain competitiveness,” Mengel said. Therewill also be some big growth epportunities in the financial services. European banks have done This week 4.56% Last week 4.59% mostofthe financing for companies, while U.S companies use the stock and bond marketsto raise capital. And European companieshave not been share- Smith Barney Cash PorvClassA Vanguard MMR/Prime Port Fidelity Cash Reserves Schwab Money Market Fund S hi b Val ae i se PAWaD WAIN OV anIage Centennial Money Market Trust 4.56% 4.89% 4.899% 45% at 4 0% 4.66% Ue 4 ae 4.67% holderfriendly, giving out little of the information MorgStan DeanWit/Liquid Asset 4.619 4.65% PaineWebber RMA MF/MM Port Prudential/Command Money Fund 4.56% 4.72% U.S. companies provide. But now,to raisecapital in the financial markets, they will have to. Dean Witter/Active Assets MT Merrill Lynch Retirement Res. MF In addition, Europe's population, like that in the United States, is aging, and that is expectedto create a demand for investment products for retirement “A a seamen ie the auaal ind padsEy is Alliance Captial Reserves Fidelity Spartan MMF Mengelaid. Thegrowthofamulualfond industry SUageeaachMoney Market Fund will require companies to be more transparent to shareholders. It will also provide greater liquidityin stock trading, which will makeit easier for U.S. fund managersto invest Credit card 5.71 Avstaxesee fund _ BX pe Tones = Source: Money Fund Report 4.69% 4.80% 4.25% 4.89% 6 mos. ago 5.08% 4.60% 4.90% 4.90%. 4. 57% 4.99% 5.31% 5.219 4.91% a 5 20% 4.99% 5.05% 4.68% 4.79% 5.17% 5.16% 4.59% 4.75% 5.06% 5.14% 4.28% 4.89% 4.66% 5.24% 441% 444% 4.91% AAT oO pee econcroe = — Gannett News Service til then, when the fund becomes operational, investors can buy sharesat the subscription price of $10, either direct from the com- pany or through Charles Schwab Correction Notice Ultimate Electronics &C‘0. Soif the fund takes in $25 million,it will issue 2.5 million shares,all worth the $10 each Due to manufacturer availability, we are out of that was paid for them. Oncethe fund opens and the manager starts trading, the shareprice will advertised in the 1/24/99 flyer. No rainchecks will be issued. We apologize for any inconvenience this may have caused. be calculated based on the value Wake upwith ourspecialWinter Rares and complimentary breakfast WASHINGTON Spokane Inn at the Park - $79.00 The Ridpath - $65.00 River Inn - $69.00 Fourth Avenue - $55.00 Seattle - $105.00 stock on the $1199°* 50” Big Screen TV of what the stock owns, just like every other fund out there. Therewill be noprice spike, no (ekeech Kennewick - $70.00 Yakima Yakima Center - $65.00 a rocket to the moonlike with the Gateway Hotel - $59.00 Olympia - $69.00 IDAHO initial public offerings of individ- ualstocks. But it’s good for the fund company for two reasons: 1) The company raises awarenessofits new fund, attracting more money up front and eliminating the need Post Falls - $64.00 Boise - $79.00 ‘Twin Falls - $65.00 Pocatello - $69.00 Sea for seed money. (Most fund com- panies ante up to get a fund off the ground.) 2) The manager starts with a bigger pool to invest, makingit easier to diversify or to take advantage of the investment Idaho Falls - $69.00 4 The Outlaw - $39.00 = This bigger investment pool also helps cut the trading costs thefirst stocks While that heipsinvestors, the pire oer for individuals buying during the subscription period. On the upside, investors get a specific, known price — normally they send money in andare un- sure of exactly how many shares it will purchase — and from the first day, which makes perfor- manceeasy to track. And when load funds make subscription offerings, they may reduce or waive sales charges, which creates a tangible financial incentive to get in on the ground floor. Onthe downside, the first in- eee WINTER RATES SO LOW, 7 ' 1 a YOULL THINK YOURE DREAMING. that the fund pays whenit buys scales are no better than balanced MONTANA Kalispell Kalispell Center - $49.00 ideas that have been building while the fund was in formation. with one year 7 service contract : a Tataae la s Helena - $69.00 om Hillsboro - $59.00 Vi our web ste for other Cavanaugh Great Northwest Escapes! CAVANAUGHS ees HOTELS Soler lage PP‘etme eeeae te 533-1111 © 1371 So. West Temple . offer valid with this-ad only vestors pick up all of theinitial trading costs, Rememberthat brokerage commissions — what funds pay to buy andsell the stocks they own — arenotpart of a fund's expenseratio, but get taken off thetop. While these costs may be reduced bythelarger pool of moneyraised during the subscription period, they are borneentirely by thefirst investors. Latecomers actually pass some of thecost of in vesting their deposit onto the first shareholders. Inaddition, subscription depos- its sit idle or earn a money-market return while waiting for the new fundto open. Andif the fundraises a ton of money during the subscription period, the manager could have trouble finding good places to put it all to work, especiallyif the fundis focusing onthinly traded arenas, among them micro-cap stocks and emerging markets. 6 month 5.25” American Investment ‘Bank High Performance. CDs consistently, earn you-among the highest interést rates available-with security and a guaranteed gta er molaeit op by.today Certificate of Deport ee If your fund familyor super marketnotifies you of openings andthenovelty of getting in on the ground floor is appealing, look for a quality manager with experience runningsimilar funds Charles A, Jaffe is mutual funds columnist at The Boston Globe. Hecan be reached by e mail at jaffe@globe.com or at The Boston Globe, Box 2378, Boston, MA 02107-2378. AAMERKC( MM INVESTMENT BANK.N.A. Ny enn eri a) Downtown: 297-1700 + 7th East: 265-1522 * Bountiful: 297-1050 |
