Net fund opening arms to investors again
Faced with a buyers market for heavily discounted technology stocks, Munder NetNet--one of the pioneers of Internet mutual funds--plans to reopen its fund to new investors Wednesday.
"Investing in the market environment today is substantially different than a year ago," said Alan Harris, a senior portfolio manager with Munder NetNet. "A year ago we were operating in a sellers market for Internet and tech stocks, and now it has changed to a buyers market. We're finding solid values in the marketplace now for investors that are focused on a long-term Internet portfolio."
Munder NetNet is one of roughly 35 Munder Funds. The 5-year-old fund, with assets of $2.37 billion as of April 30, concentrates on investments in three categories: Internet companies, technology companies that help build the Internet, and Old Economy companies that are using the Internet to move their businesses forward.
Munder NetNet, like numerous other technology mutual funds, has seen a dramatic decline in its asset size in the past year, as skittish investors have yanked out cash as technology stocks have tanked.
But with many technology stocks now trading at steeply discounted prices, fund managers are hoping to build up their war chests to go shopping for stocks.
Munder NetNet closed the fund to new investors last April, as hordes of investors flocked to the fund and its asset size ballooned to $8.5 billion. Money managers typically close a fund to new investors when the asset size becomes too large to reinvest effectively.
Now the fund has less than $2.5 billion in assets--with a drain of about $1 million a day over the last 45 days alone. But the decision to reopen the fund has nothing to do with investors pulling money out of it, Harris said.
"The outflows are moderate, considering we have over $2.3 billion in assets," Harris said. "Throughout the (tech market) decline over the past year or so, we have never had to liquidate securities to meet (investor) redemptions. We have always had enough cash on hand."
The fund had 7.6 percent of its assets in cash as of last April. And most of this year it has remained in the high single digits, Harris said. The fund historically has maintained a cash position of zero to 10 percent.
Munder NetNet focuses on companies that fit the Internet builder category, but in the last couple of months the fund has increased its investments in pure Internet companies, Harris said.
As of May 16, AOL Time Warner had the largest holding, followed by Microsoft, VeriSign, Internet Security Systems and Qwest Communications International.
Munder NetNet is down 25.5 percent for the year, as of Thursday. The Standard & Poor's 500, in comparison, is down only 2 percent for the year, according to mutual fund tracking firm Morningstar.
While there is no guarantee investors will flock to the fund once it reopens, Harris said he believes long-term investors should be considering technology investments given the current environment.