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Fund Spy

Big Real Estate Fund Launch Echoes Internet Fund Debacle

Some fund companies are still launching trendy funds.

Amid the fallout of the 2000-02 bear market, one of the fund industry's biggest embarrassments was the slew of Internet funds launched just before the bubble burst. Big fund companies like Merrill Lynch and Strong and small shops like Amerindo, Turner, and Westcott launched funds that soon lost a lot of shareholders' money. Nearly all of those mistakes have been swept under the rug (that is, merged away or liquidated) but you can click here to see a few of the gems that came out.

In light of that debacle, many fund company executives vowed never to repeat that again. They recognized that their greed for assets blinded them to the need to do what's right for fundholders and that it's just plain wrong to launch a fund that you wouldn't touch.

Yet here we are, eight years later, and the fund industry has launched a truckload of real estate funds on unsuspecting and/or greedy investors. All told, 37 real estate funds have been launched this year (including those launched on the last day of 2006). The timing of those launches is just downright atrocious.

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