Investors of the Firsthand Funds' Medical Specialists Fund are in for a surprise. Kendrick Kam, one of the fund's two portfolio managers and president of Interactive Research Advisors, the fund's adviser, is launching his own investment advisory firm and intends to take the $6 million fund with him.

On July 15, Kam filed a registration statement with the SEC for his six-day-old, new investment advisory firm, Ingenuity Capital Management, to be based in Los Altos, Calif. Kam will manage the Medical Specialists Fund under the Ingenuity Capital Trust moniker.

While it is not unusual for a fund manager to fly solo, and even create a new fund that is the mirror image of the one previously managed, it is unusual for a fund's co-manager to pack up the fund and move it with him. A shareholder vote asking investors to approve the fund's new investment advisory agreement is expected to follow within a few months.

According to publicly filed fund documents, on June 12, Interactive Research Advisors of San Jose, Calif., entered into a plan of reorganization that called for three of the firm's equity owners to sell their stakes to a remaining owner. The newly reconstituted firm will be minus three of its current owner/principals.

Those departing include Kam, who has served as the Medical Specialists Fund's co-portfolio manager since the fund's inception in December of 1997, as well as Yakoub Bellawala, the firm's chief operating and chief financial officer and Interactive's Vice President and Partner Steve Witt. The reorganization is expected to close September 3.

The departures leave current Interactive vice president Kevin Landis in the driver's seat as the sole portfolio manager for the three remaining no-load funds: the $326 million Technology Value Fund, the $93 million Technology Leaders Fund and the $47 million Technology Innovators Fund. All three funds will retain the Firsthand Funds name.

The filings do not indicate the reasons behind the trio's departure. At press time, neither Kam nor Landis had returned calls seeking comment. But according to soon-to-be former Interactive partner Witt, the reorganization allows Kam more freedom "to proceed with new ideas." He declined to elaborate on specifics.

Filings do reveal that despite the principals' parting of ways, effective October 1 Kam is expected to sign on to provide investment advisory consulting services to Interactive on behalf of the firm's flagship Technology Value Fund for four more years.

In reality, while Landis is losing one fund, the continued management of the three remaining Firsthand technology mutual funds is far from a consolation prize for Landis, who was the new products marketing manager for a semiconductor firm in San Jose prior to co-founding Interactive in 1993. The funds, each of which carries a $10,000 minimum initial investment, can gloat over some stellar performance.

The five-year-old Firsthand Technology Value Fund co-managed by both Kam and Landis was recently named by Morningstar, the Chicago-based fund research firm, as the number one technology fund over the past five years as of July 31. It returned an impressive 115 percent over one year and 52 percent annually over the past five years. The newer Firsthand Technology Leaders Fund was up 98 percent in the last year, and the Firsthand Technology Innovation Fund gained 168 percent over the same time period, also according to Morningstar. Both of the newer funds were managed exclusively by Landis.

It may also make perfect sense for Kam to continue at the investment helm of the Firsthand Medical Specialists Fund, a health, medical technology, and biotechnology fund. Before co-founding Interactive, Kam was the co-founder and vice president of marketing and finance at Novoste Corp., a medical device company headquartered in Puerto Rico.

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