After what they've been through the past three years, fund investors aren't exactly clamoring for new equity funds. Cooked books haven't helped, either.

Do these trials and tribulations spell doom for equity mutual funds? No, they spell opportunity for some enterprising fund managers. And as one sees it, turnaround is fair play.

Alsin Capital Management of Eugene, Ore., at the beginning of this year, filed with the SEC for the Turnaround Fund, which will invest in companies the manager believes are struggling but poised for a rebound. Struggles can include business issues, management changes, mismanagement, operational issues related to specific products or services, financial challenges or balance sheet problems.

The fund is the brainchild of Arne Alsin, president of the 12-year-old advisory company that bears his name and author of "The Turnaround Artist," a popular, regular column featured at Alsin will manage the new fund.

According to the filing, the fund will invest in companies Alsin expects are on the brink of a turnaround by virtue of a promising business strategy, anticipated revenue upturn due to changes in products or services, or lowering its off-balance-sheet liabilities.

So what type of companies will fit the Turnaround Fund's profile?

"We approach the market that every company will be a turnaround company. Everyone is going to stub their toe" from time to time, Alsin said.

Perhaps the biggest question is, with all of the turmoil corporate America has suffered, will investors bite? "Investors want to see the upside potential of a company whose stock is off 50% because of problems," Alsin said.

Even more severely distressed securities are on the menu for another new fund, the Pennsylvania Avenue Event-Driven Fund, which registered with the SEC last November, but has not yet launched. The fund will be managed by Thomas Kirchner, founder of Pennsylvania Avenue Advisers of Washington, which is in the process of becoming a newly registered investment adviser.

Taking its cue from corporate events, the fund will invest in arbitrage situations, such as where companies' sport mispriced securities, are involved in proxy fights, are in or close to bankruptcy, or where there are publicly announced mergers, takeovers, tender offers, and other corporate reorganizations, according to the fund's Nov. 21, 2002 filing.

Kirchner declined to comment, pending final registration of both his firm and the fund.

It's not just the sickly market that's spurring new funds. "We are looking at what are typically hedge-fund strategies becoming more available in a mutual fund format," said John Orrico, manager of the $46 million Arbitrage Fund, and president of the fund's adviser, Water Island Capital of New York. Less-affluent investors are now demanding access to the same strategies once reserved only for the very rich, he added.

With so many plain-vanilla growth or value funds in the universe, it has become hard to distinguish yourself from the pack, said Jeff Keil, vp with Lipper, Inc.'s Denver office. "People are skittish about investing, so managers are looking for a catalyst to make equities a worthwhile investment," Keil said. "No matter what the market conditions are, there are companies out there making money; you just have to find them," he added.

While novel funds may garner attention, the $64,000 question is: Will they also garner assets? It might be an uphill battle for an unknown fund adviser, Keil said. "People are getting comfort from seeing a well-traveled name."

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