Fund Times: Openings, Closings, and Manager Changes

This week AIM expanded its horizons, while Fidelity limited its tech intake.

Openings
AIM Funds has been busy. This week the Houston-based fund complex filed five preliminary prospectuses with the SEC. Long regarded as a growth shop, over the past few years AIM has worked to broaden its lineup--and to appeal to portfolio-minded financial intermediaries who sell the funds to investors. This latest round of fund ideas helps continue that effort to some extent, but none of the new portfolios is a screaming buy.

In early 2002, it plans to launch AIM Total Return Bond, the fund family's first foray into investment-grade corporate bonds. Robert Alley, Jan Friedli, and Scot Johnson will manage the portfolio. Alley and Friedli also steer AIM's high-yield and multisector bond funds; Johnson chips in on two of its government-bond funds. None of those funds, however, has a particularly strong performance record.

Another first for AIM will be AIM Mid Cap Basic Value, slated to launch late this year or early next year. AIM has had some success with AIM Basic Value   (an all-cap fund that focuses primarily on mid- and large-cap stocks) and the 15-month-old AIM Large Cap Basic Value  . Unlike some of AIM's other "value" funds, these two put less money into growth areas, including the technology and health-care sectors, and sport comparatively small price multiples. The duo of Bret Stanley and Matthew Seinsheimer, who head Basic Value and Large Cap Basic Value, will also run the mid-cap fund.

Also next year, look for AIM Global Biotech, which will invest at least 80% of its assets in biotech companies, both stateside and overseas. Although sibling AIM Global Health Care  (GGHCX) can--and does--invest in biotech stocks, the new fund won't focus on some of the large pharmaceutical companies, such as Pfizer (PFE), that its older sibling does. The fund will be managed by Michael Yellen, who is also part of the Global Health Care team, and Abel Garcia, who also pitches in on the disappointing AIM Global Telecom and Technology  . Garcia ran Waddell & Reed Science and Technology   from January 1984 until April 2000, with solid long-term results.

AIM Core Strategies, with a preliminary prospectus date of December 31, 2001, sounds like it will end up a concentrated fund in the large-blend category, after managers Polly Ahrendts, Paul Rasplicka, and Evan Harrel pluck "a limited number" of large-cap stocks from the S&P 500 index or Russell 1000 index. Ahrendts and Rasplicka are part of the team the manages the large-growth AIM Select Equity  , while Harrel heads up AIM Value   and AIM Value II  , both large-blend funds.

Another year-end newcomer is AIM Large Cap Equity, which could also land in the large-blend group. SEC filings suggest the fund will use a growth-at-a-reasonable-price investment style, homing in on out-of-favor stocks with good growth prospects. Paul Rasplicka, Roger Mortimer (who runs Global Health Care and AIM Global Resources  ), and Ronald Sloan (Global Health Care, AIM Mid Cap Equity  , and AIM Small Cap Equity  (SMEAX)) will managed this fund.

Fidelity is very close to launching its so-called "structured portfolios." About a month behind schedule, on October 22 Fidelity will launch four new funds that will operate with tightly defined investment-style characteristics. The Boston fund giant filed registration statements with the Securities and Exchange Commission for the following actively managed funds: Structured Large Cap Value, Structured Midcap Value, Structured Large Cap Growth, and Structured Midcap Growth. 

Robert Macdonald will manage Structured Large Cap Value and Structured Midcap Value. The former fund will use the "Russell 1000 Value Index as a guide in structuring the fund and selecting its investments," according to the filing. Meanwhile, the Russell Midcap Value index will serve as the benchmark for Structured Midcap Value. Macdonald works on the institutional side of Fidelity's business, and is not currently the manager of an open-end mutual fund. Jeff Kerrigan will run Structured Large Cap Growth, whose bogy is the Russell 1000 Growth index, and Structured Midcap Growth, which will attempt to beat the Russell Midcap Growth index. Like Macdonald, Kerrigan is an institutional manager who does not presently run a mutual fund.

MainStay is planning a new fund. Scheduled to launch in January 2002, MainStay Core Equity will be actively managed by McMorgan & Company, a new subsidiary of New York Life Investment Management, which primarily runs private accounts. For this fund, McMorgan & Company will use computer models to determine portfolio characteristics and to help choose stocks. MainStay says the fund expects to have sector weightings similar to those of the S&P 500 index. Just three weeks ago, MainStay announced it plans to close MainStay Equity Index   on November 1, 2001.

Vanguard plans to open a new institutional bond fund. Like Vanguard Total Bond Market Index (VBMFX), Vanguard Institutional Total Bond Market Index will mimic the Lehman Brothers Aggregate Bond index. It will sport a $100 million minimum. It expects the portfolio's expense ratio to be 0.05%--or $0.50 for every $1,000. That would be one of the lowest expense ratios of any mutual fund. Vanguard Total Bond Market Index, with a minimum purchase requirement of $3,000, boasts a comparatively small 0.22% expense ratio.

Manager Changes
Citizens Global Equity   announces its third manager change in as many months--and it says this isn't the last change. More specifically, Michael Schoeck and a team from SsgA Funds Management just replaced Jeff Schappe and a team from Citizens as the interim manager of this fund.

The change comes after Citizens fired Clemente Capital and brought the fund's management in-house. But Citizens claims that it always planned to get Schappe and his team outside help and that SEC regulations required formalization of that relationship. 

Citizens, which plans to have the permanent subadvisor and manager in place by early 2002, described the growth-oriented style of Schoeck's team as similar to those of their various predecessors. Meanwhile, Schappe and his team will continue to screen the fund's stocks for social considerations.

Etc.
Fidelity isn't hurrying back into technology stocks. In the past, Fidelity has been known to smartly delve back into tech stocks after they had fallen. But despite the severe pounding many of these stocks have taken in the past year, Fidelity generally isn't biting. Indeed, according to the fund shop's monthly mutual-fund guide, most funds' tech stakes as of September 30 are noticeably smaller than they were a year ago.

For example, Fidelity Magellan  (FMAGX) currently sports an 11% stake in the information-technology industry, compared with a near-30% weighting last year. Although the pummeling tech stocks have taken accounts for most of the decline, manager Bob Stansky was also a net seller of tech issues earlier this year. Instead, he has opted for financials, such as Citigroup (C), and health-care names, including Pfizer (PFE). That positioning has generally been a blessing for the nation's largest actively managed fund: Over the past 12 months through October 18, the fund's 19.6% loss lands well in the large-blend category's top half.

Although most of Fidelity's portfolios have been similarly reluctant to load up on tech, a few appear to be nibbling. Small-value fund Fidelity Low-Priced Stock's  (FLPSX) stake in information technology is up to 11.9% from 10.6% a year ago. Small-growth Fidelity Small-Cap Stock's  (FSLCX) has climbed to 19.2% from 16.7%.

Both Fidelity and Vanguard have posted estimated capital-gains distributions for all their funds this year. Perhaps not surprisingly, given the turmoil in markets in 2001, most of the gains, if any, are fairly minimal. There are a couple of exceptions, however. Vanguard Energy  (VGENX), for example, anticipates about a 6% gain, despite its 7% loss this year. Fidelity Equity-Income II  (FEQTX) projects a 5% payout; that fund has fallen about 13% in 2001. Fidelity Real Estate Investment  (FRESX), with a year-to-date return of 4%, estimates a 4.8% capital-gains distribution.