Competition between Internet funds has heated up so much that they are grabbing at every possible opportunity to build market share.
When Ryan Jacob, portfolio manager for The Internet Fund of North Babylon, N.Y. announced his intention to leave the fund, it only took the Monument Internet Fund of Washington, D.C. a couple of days to come up with a strategy to win away investors disgruntled with Jacob's departure.
The tactic? On June 29, Monument offered investors in any other Internet or technology fund the opportunity to transfer their assets into the $50 million Monument Internet Fund without incurring a sales load from Monument. Shareholders in those other funds would, of course, be liable for any expenses or penalties, such as a back-end load, they might incur from leaving their current funds.
The next day, The Internet Fund, which has $675 million in assets under management, sought to soothe any disenchanted investors by announcing that they were hiring two veteran fund executives from Chase Manhattan Bank's fund division to oversee Kinetics Asset Management, the fund's adviser.
Kinetics hired Steven R. Samson as president and chief executive officer and Lee W. Schultheis as managing director and chief operating officer. Samson was managing director at Chase Global Asset Management and Mutual Funds, which is adviser to the Chase Vista Funds. Schultheis was director of business development for Vista Funds Distributor, distributor of the Chase Vista funds.
Kinetics has not yet, however, named a successor to Jacob. And, Monument believes that Jacob's resignation bolstered Monument's standing among Internet fund money managers.
"In our opinion, Monument senior portfolio manager Alexander Cheung is now clearly the leading manager of pure-play Internet stock mutual funds," said David Kugler, Monument Funds group president, in a statement.
Kugler also tried to distance the Monument Internet Fund from other Internet funds. He has tried to represent the competition in Internet funds as a two-horse race by saying that the Munder NetNet fund, another Internet fund based in Birmingham, Mich., was not purely invested in Internet stocks and so was not an "apples-to-apples competitor" with Monument or The Internet Fund.
A year ago, there were three Internet funds competing for assets. Then, in November 1998, the Monument Internet Fund was introduced. Several months of inactivity followed. Now, at least two new funds have been introduced just in the last few weeks.
Unified Financial Services of New York introduced a new no-load Internet fund on June 29 that Financial Services claims has the lowest expense ratio - at 35 basis points - of all the Internet funds. And, ING Funds of Newtown Square, Pa. introduced its own Internet fund, the ING Internet Fund, which is sold through brokers, on July 6 (See At Deadline, page 2).