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Tech Industry

Tide changes for tech mutual fund investment

For the first time in almost two months, more money is flowing into tech mutual funds than is flowing out.

For the first time in almost two months, more money is flowing into tech mutual funds than is flowing out.

Tech mutual fund investors poured $170 million into such funds during the week ending January 17, a slight increase from the $120 million invested the previous week, according to Banc of America Securities..

"Two weeks of inflows are nice, but it's nothing to get excited about. If it keeps up for another two or three weeks, then maybe we'll be on the way to a trend," said John Gipson, vice president and co-portfolio manager of Alpha Analytics, which manages $3.3 million in assets.

The sector is breaking out of a record seven-week run of net redemptions, with more money flowing out of funds than coming in.

"Technology sector funds enjoyed their second-straight week of net inflows after seven consecutive weeks of net redemptions, while most other sector funds are experiencing modest redemptions," said Thomas McManus, an equity portfolio strategist for Banc of America Securities, in a report.

Steven DeSanctis, director of small cap research for Prudential Securities, said he would like the inflow of cash to reach a couple hundred million dollars a week for the next three to four months.

Even that rate would pale in comparison to the roaring days of late 1999 and early 2000. That's when tech funds were inundated with $2 billion to $3 billion a week in net inflows, DeSanctis said.

Tech funds have seen a net outflow of $260 million since the start of the year, but several events may be in the works to help funds overall, market watchers say.

"The average tech fund is up 9.5 percent from Jan. 2, and some Internet funds had a nice pop, and those in the semiconductor space have done well," said Christine Benz, a senior analyst for mutual fund research firm Morningstar.

Other events that may prod tech mutual fund investors include the looming April 15 income tax deadline. Investors are able to sink money into IRAs, up until the tax deadline, and still have it count toward the 2000 tax year.

"January, February and March are important for IRAs, because that's when people make decisions of where they'll but their money for retirement assets," DeSanctis said.

Year-end fund performance statements also start to come out this month, giving investors another reason to consider where they wish to put their money, Gipson said.

But while investments in tech funds may get a slight boost from these events, investors shouldn't expect a sudden surge in tech stocks.

"Tech funds make up only a small percentage of all mutual funds, and they have less impact on the markets than diversified funds, which are much larger and have a fairly-sizable technology stake," said Benz.

Gipson typically reinvests investor funds within a day or two of receiving them and is looking for sectors in which the fund is underweighted, he said. The fund started to increase its stakes in Microsoft a few weeks ago when it was trading about $43.75 and also with Sun Microsystems when it was at $26.20. The stocks closed at $60.13, and $30.50, respectively, Monday.

But not all portfolio managers may be quick to reinvest the money, DeSanctis said.

"If managers have seen seven weeks of net redemptions, they may want to stock pile their cash until they see several more weeks of inflows," he said. "I think, in this period, managers may be feeling a little more conservative."