SAGE SCOOP ON MUTUAL FUNDS
July 21, 2000
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In This Issue
FundWatch
Profile: New Perspective Fund
Top Ten Global Funds
Profile: TRP International Discovery Fund
Community Speak: Diamonds In The Rough
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Dear Members:
Summer is usually the time we feel the most
adventurous. We are a little more relaxed, a
little more apt to try new things. Speaking of
which, we are excited to introduce Multex
subscribers to Sage Scoop On Mutual Funds!
We hope that the Scoop becomes an integral
asset in your quest to stay informed and aware
of your investment options. So, this summer
expand your horizons and look into investing
strategies and funds in places that you never
thought of before. Just because you explore
does not mean you have to leave your comfort
level behind you. And as always, have fun
doing it. Happy investing!
Alan & Stephen Cohn,
CFPs and Sage Online founders
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With thousands of funds to choose from, aren't
you glad that you have FundWatch to help you
keep current and abreast of what's happening
in the world of mutual funds?
FUNDWATCH
ANOTHER 'HOT HANDS' APPROACH THAT
IS LACKING
There are fewer buy-and-hold mutual fund
investors today. Fund investors are now trading
mutual funds like many individuals trade in-
dividual stocks.They use a momentum approach
or following the "hot hands" manager. Forgetting
the long-term track record, their approach is a
"what have you done for me today" attitude.
FUND FEES ARE CONFUSING AND THAT
SUITS THE FUND INDUSTRY
The fees charged investors by mutual fund
companies are hard to get a handle on. You
would think because mutual fund assets have
jumped from $374 billion in 1984 to $7 trillion
today, the economies of scale would mean that
fund companies would have drastically lowered
their fees. But that hasn't happened. The fact is
the mutual fund industry doesn't want investors
to get an exact handle on how much their invest-
ments cost.
VAN KAMPER MERGES CONVERTIBLE
FUNDS; AETNA LAUNCHES NEW FUND
Van Kampen Funds plans to eliminate the
closed-end fund Van Kampen Convertible
Securities Fund by merging it into the open-
end Van Kampen Harbor Fund, which invests
primarily in convertible bonds and preferred
stocks, reports Standard & Poors....Aetna
Funds launches its fourth mutual fund, Aetna
Principal Protection Fund IV, with a guarantee of
principal. It is being offered to investors from July
6 to September 6, with a guarantee period running
from September 7 through September 6, 2005.
DESPITE POOR RETURNS, INVESTORS
SHOWER MUTUAL FUNDS WITH MONEY
For the year through most of June, mutual funds
returned an average of just over 2 percent. Yet
investors continue to shower funds with new
money. Based on figures for the first six months
of 2000, the inflow of cash into mutual funds is
about to set an all-time record, reports
InvestmentNews.com. Morningstar research di-
rector John Rekenthaler tells InvestmentNews
that 2000 may well be a strong year for asset
inflows into funds, but the greater question is
how good a year will it be for fund performance.
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Trying to broaden your horizons? Wanting to
include new and diverse perspectives among
your own? I could be talking about life or,I
could be talking about one of the Sage Fund Award
contenders: http://208.55.34.187/survey/bestof2000/best2000.html.
Perhaps it is time for investigation
on both fronts.
PROFILE: NEW PERSPECTIVE FUND
by SageBasics
Looking for a global fund in which the managers
employ a buy-and-hold philosophy? The $35.1
billion five-star New Perspective Fund, a bank,
broker, and financial intermediary sold fund from
the American Funds Group, is one such fund.This
large-cap, low risk and above average, growth-
oriented fund is up 5.1 percent for the first six
months of 2000 after gaining 40.1 percent in 1999.
According to Morningstar, New Perspective's
multiple managers "invests in cheap stocks
around the world and trades infrequently. The
fund has delivered above-average returns with
minimum volatility." In 1999, there was only a
29 percent turnover of the fund's holdings, and
the year before that, only 30 percent. The fund
can invest all of its assets outside the United
States and there have been periods when New
Perspective had more than 75 percent of assets
invested outside the U.S. borders.
The fund diversifies in blue chip companies both
at home and abroad. According to the fund com-
pany, New Perspective emphasizes multinational
or global companies and also focuses on
"opportunities generated by changes in global
trade patterns and economic and political
relationships."
About one quarter of the fund is invested in the
services sector and another quarter of the fund
is invested in tech stocks. The fund is 11.6
percent invested in financial services companies.
Vodafone Airtouch was the top holding in this
fund in the period ending March 31. Other top
holdings include Micro Technology, LM Ericsson,
Astrazeneca, Pfizer, Time Warner, Taiwan Semi-
conductor, Viacom, AT&T and Samsung
Electronics. The fund's average annual returns
have also been consistent.
For the 12 month period ending June 30, the
fund's return was 29.5 percent. The three-and
five-year average annual returns in the period
ending June 30 was 23.2 and 22.2 percent
respectively. The 10-year annualized return
ending June 30 was 16.75 percent.
Managers of New Perspective in the period ending
March 31had the fund about one-third invested in U.S. stocks and about 28
percent invested in European markets. A little over 11percent of the fund is
invested in Japan and about 7.3 percent
in the Pacific Rim.
The initial investment into the fund, advised by
Capital Research & Management, is $250 for both
a regular account and IRA's. Additional invest-
ments in a regular account can be as low as $50
and $25 for IRAs. If you choose to use an auto-
matic investment plan, the minimum investment
is $50. Like most of the American Funds, this
fund is sold with either a front-end load of 5.75
percent or a declining rear-end load. But the total
expense ratio for the "A" class shares is a
modest 0.77 percent.
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Exposure to markets outside of the United
States is a positive thing, not something of which
you should be afraid. So take the plunge and
examine our Top Ten Global Funds.
TOP TEN GLOBAL FUNDS
10) UMB Scout WorldWide [UMBWX]
9) Montgomery Global Opportunities R [MNGOX]
8) New Perspective [ANWPX]
7) AIM Global Consumer Products & Services
Fund A [GPSAX]
6) Forum Austin Global Equity [AGEQX]
5) Putnam Global Equity A [PDETX]
4) Oppenheimer Global A [OPPAX]
3) Citizens Global Equity Standard [WAGEX]
2) Pilgrim Worldwide Growth A [NAWGX]
1) Warburg Pincus Global Post-Venture Capital
Fund [WVCCX]
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T. Rowe Price has a solid reputation but does
that mean every fund in the family is a high flyer?
Not necessarily, but it probably means that you
should look and see.
PROFILE: T. ROWE PRICE INTERNATIONAL
DISCOVERY FUND
by Louis A. Hames
T. Rowe Price International Discovery's objective
is the long-term growth of investors' capital by
investing in the small and medium sized
companies outside of the United States.
As of its latest reporting the fund held 41 percent
of its assets in Europe, 16 percent in Japan, and
15 percent in the Pacific Rim. The fund has been
heavily invested in the technology and the services
sector. There is also a 10 percent weighting in
industrial cyclicals.
The fund recently had less than 10 percent of its
assets in domestic U.S. companies and another
nine percent in cash. As of May 31, the fund's
annualized return was 12.56 percent comparing
favorably with the foreign index return of 9.56
percent.
Sadly, this fund is currently closed to new
investors.The fund's expense ratio of 1.42 percent
compares favorably with the expense ratio of most
foreign funds with the average ratio being closer to
2 percent. The fund charges no front-end or
deferred charges and there is no 12b-1 fee
associated with this fund.
The T. Rowe Price International Discovery fund
has shown an extremely volatile past. Over the
past 10 years, the fund lost investors' money
during five of those years. In 1999, investors who
remained invested in this fund were rewarded with
a total return of 155 percent, far outdistancing its
relative the index (The MSCI EAFE ND), by
128.07 percent.
As with many funds that have recently experi-
enced exceptional return years, the fund is
currently ahead by 0.78 percent. Those who
waited until last year to jump on the bandwagon
maybe sorely disappointed. The previous high
return year for this fund in the last decade was
49.85 percent in calendar year 1993.
While adhering to the principles of diversification,
investors must be aware of and prepared to accept
the increased risk associated with international
investing. In addition to the normal market risk,
there is also the political risk in many foreign
countries; changes in the political climate can
have a tremendous affect on your returns.
Fund manager Ian MacDonald in a recent interview
discussing Japan had this to say: "From a broad
viewpoint, the signals continue to be mixed. The
economy, for example, remains on an improving
trend, with both first-and second-quarter GDP
expected to show a recovery from the weak
second half of 1999. However, consumer-spending
patterns are cautious at best, and dwindling
government coffers are making it difficult to prime
the economic pump with more government
spending. The political scene is also uncertain
now in the wake of former Prime Minister Keizo
Obuchi's death."
MacDonald went on to say that he believes that
true restricting lies at the corporate level and not
influenced by the government. This could be true
and there maybe a move in Japan as well as
other Asian countries to make progress in spite
of the political forces at works in these areas.
Looking at traditional risk measures offer little
help in this area. The T. Rowe Price fund has a
beta of 0.53. Casual glances at the returns point
out the uselessness of this measure. Morningstar
Principia does, however, calculate certain "Equity
Portfolio Statistics" for us and these give us
some clue as to the average price being paid for
the holdings in the fund's portfolio.
The average P/E ratio of the fund's holdings
recently was 45.1 percent; this is 18 percent
higher than its relative index and 21 percent higher
than its category. While it may have become a
lost art to consider such things while going
through the fund selection process, this is one
area where attention to this detail is vital. The
price/cash flow and the price/book ratio each are
30 percent above the relative index and category.
Investors seeking international exposure and with
a desire to invest with this family because of the
initial low cost to would be well advised to in-
vestigate a few of the other international funds
offered by the company. This fund, being closed,
is not currently an option for the new investor.
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Our Message Boards stay busy! You know,
everyone seems to havea fund that they love but
no one else seems to know about. These are a
few of your Diamonds in the Rough.
COMMUNITY SPEAKS:
DIAMONDS IN THE ROUGH
Just because this fund (ICM/Isabelle Small Cap
Value Fund [IZZYX] - no-load) doesn't have a
three year track record, everyone seems to be
over-looking it. Portfolio manager Warren Isabelle
managed the Pioneer Capital Growth Fund (load)
to a great record and now he is doing it with his
new fund. -- BullMkt101, 6/21/00
Ryan Jacob, of Jacob Internet Fund [JAMFX], has
felt the pain of the market but dear God, is it a
buying opportunity. Ryan knows his Internet.
You can buy me a steak dinner later; you'll
thank me. -- TILFY, 6/11/00
Check out the American Funds. If you are in
the long haul, you can't beat their discipline
over time. The load is worth paying for consistently
good returns in all types of markets. In my opinion
Janus and Vanguard will suffer for a while as we
go forward. -- GatrBait2000, 6/10/00
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BEFORE YOU GO...
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Subscribe now! We hope you enjoyed this week's
issue of the Sage Scoop. We encourage
feedback. Thanks for spending time with us!
-- Jill Bempong (SageSigma), newsletter editor
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