Thursday, November 15, 2007

Launch of New Mutual Funds 2007


Stewart Capital Advisors, the private wealth management arm of Indiana, Pa.-based S&T Bancorp, launched the Stewart Capital Mid Cap Fund last month.

And Symons Capital Management of Castle Shannon is offering the Symons Alpha Growth Institutional Fund [Ticker: SAGIX] and the Symons Alpha Value Institutional Fund [SAVIX].

"We know there is a broader market for our investment strategies," said Michael P. Czajka, chief executive officer of Symons, which manages about $240 million.

The Symons funds require a minimum initial investment of $5,000 ($2,500 for retirement and trust accounts). At the same time, the firm is raising the minimum initial investment for its separate account clients to $500,000 from $200,000.

Stewart, which has a $250,000 minimum for its private account business, will accept minimum investments of $1,000 for its fund, including retirement accounts. Investors can invest a minimum of $100 if they agree to make direct deposits monthly from their bank account, says Malcolm E. Polley, Stewart Capital's chief investment officer.

Mr. Polley says Stewart's load fund typically will hold 30 to 60 stocks and that holdings in any single industry won't account for more than 30 percent of the fund's net assets. The limited holdings reflect Stewart's strategy of having a thorough knowledge of the companies it invests in, he says.

Stewart says fees investors will pay for management, administration and other expenses will be capped at 1.5 percent through next year. The fund doesn't have a ticker symbol yet. The upfront sales charge starts at 4.44 percent for investments of up to $100,000 and disappears for investments of $1 million or more.

The Symons no-load funds are based on the growth and value strategies the firm already employs with its separate account clients. The growth portfolio, available since mid-1997, has produced annualized returns of 9.2 percent for those clients. The value portfolio, which Symons has managed since mid-1980, has delivered annualized returns of 15.2 percent.

"Our intention is to mimic those products as closely as possible," Mr. Czajka said.

Holdings in each of the funds typically will be limited to 20 to 30 stocks. Fees will be capped at 1.49 percent through Nov. 30, 2008.

Symons and Stewart are following in the footsteps of three other Western Pennsylvania managers who are running mutual funds.

Ron Muhlenkamp started his Pine-based Muhlenkamp Fund [MUHLX] in 1988. The $2.9 billion no-load fund stumbled last year, generating a return of 4.1 percent vs. 15.8 percent for the Standard & Poor's 500. But it has beat the S&P 500 in six of the last 10 years and has made Forbes' honor roll for six consecutive years.

Fort Pitt Capital Group of Green Tree launched its no-load Total Return Fund [FPCGX] in 2001. It has assets of $44.5 million, and it delivered a 14.3 percent return to investors last year vs. its average annual return of 13.2 percent since inception.

Snow Capital Management of Franklin Park began offering its Snow Capital Opportunity Fund [SNOAX] last year. The fund invests in stocks, debt and derivatives, and had assets of $67.1 million as of Sept. 30. It has generated an annualized return of 14.1 percent since June 1, vs. 20 percent for the S&P 500.

The biggest marketing challenge for new funds is that many advisers won't recommend to their clients any funds with less than a three-year track record. It takes that long to get a rating from Morningstar and to get on Charles Schwab's select list of funds, says Michael Iachini, director of mutual fund research for the Schwab Center for Investment Research.

"That's the way a lot of investors find their funds," he said.

Mr. Iachini says the first question investors should ask themselves about a new fund is whether it fills a need in their portfolio. If they already have a well-performing fund targeting that need, there's probably no reason to switch unless the investor concludes that, among all the other funds with the same objective, something really stands out about the new offering, he says.

If the new fund still looks attractive, investors will want to look at the fund's fees as well as its turnover and tax efficiency. While the fees will be spelled out in fund literature, information on turnover (how often a fund trades its holdings) and tax efficiency (how much taxes fund holders will pay on capital gains those trades generate) may be harder to come by, Mr. Iachini cautions.

High turnover means higher costs for commissions and other trade-related expenses that investors end up paying. Higher taxes reduce the amount of their earnings that investors keep.

"Those are two things that are important for most investors," Mr. Iachini said.

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