The investment adviser to the Internet Fund - a portfolio that returned better than 300 percent for the 12-month period ending Jan. 31 - is considering opening a new fund.
Kinetics Asset Management of North Babylon, N.Y., tentatively plans to start a second mutual fund this year, James G. Doyle, a lawyer for the Internet Fund, said last week. The new fund is not expected to be a pure Internet fund, Doyle said. Kinetics may file a registration statement regarding the offering with the SEC in the coming weeks, Doyle said. He declined to provide additional details about the new fund's investment objectives.
Kinetics will have a tough time creating a hotter fund than the Internet Fund. Financial Research Corp. (FRC), a fund research firm in Boston, said that the fund had a total return of 316 percent through Jan. 31. The Internet Fund's total return last year, about 196 percent, was the best of all mutual funds in 1998, according to Lipper.
Those performance numbers have generated sales for the no-load fund. As of Dec. 31, the Internet Fund had assets of only $22.2 million, according to FRC. Its net sales last year were $16.5 million.
In January, sales took off. The Internet Fund had approximately $64 million in sales for the month, according to FRC. It estimated fund assets under management of $110 million as of Jan. 31. The sales trend appears to have continued. Doyle estimated February sales at $100 million.
The Internet Fund's popularity surprised Kinetics. As sales continued, the fund, which was incorporated in New York state, started to run out of shares that it could legally sell. New York requires that funds incorporated there identify the maximum number of shares they will sell. The Internet Fund set that limit at 10 million shares when it incorporated on March 20, 1996.
As of March 12, a Friday, the fund had sold 9.1 million shares, Doyle said. On March 15, after another day of net sales, executives shut the fund temporarily as total sales ran close to the 10 million-share cap, Doyle said.
The fund now is asking shareholders in a proxy vote to increase the amount of shares the fund could issue from 10 million to 50 million. A meeting is scheduled for March 29. Doyle said if shareholders agree to the proposal, the Internet Fund expects to resume sales on March 30.
The circumstance is an unusual one in the mutual fund world, Liberatore said. It is, however, not so surprising with a small mutual fund that grows quickly.