The outlook for value fund sales improved slightly in April and there were signs of an increasing demand for value oriented portfolio managers.

Value funds had net redemptions of only $4 billion in April, down from $14.2 billion in March, according to Financial Research Corp. of Boston, a financial services tracking and consulting firm. Net redemptions were approximately $45 billion from January 1 to March 31, according to FRC. The improved sales figures come at a time when some fund companies are introducing new value funds and demand for value managers is increasing, according to executive recruiters.

Recruiters and industry consultants attribute the improvement in value funds' prospects in part to market volatility, which may be dampening investors' interests in the growth stocks and funds that delivered triple-digit returns in 1999.

"This is the first time in the last couple of years that we've seen a number of requests for value managers," said Alex Thompson, vice president with Pendelton James, an executive recruiting agency in Boston. Fund companies that are adding value managers are doing so in anticipation of prolonged market volatility, he said.

Prior to last year, value funds had not suffered a year of net redemptions since 1990, the first year in which FRC tracked sales in that category. In 1999, however, value funds had net redemptions of $50.6 billion, down from $20.4 billion in net sales in 1998, FRC reported. About 350 of the approximately 550 value funds were in net redemptions in 1999, according to FRC.

Value funds were faring even more poorly at the beginning of this year. Value funds had net redemptions of approximately $15.3 billion, $15.5 billion and $14.2 billion in January, February and March, respectively, according to FRC.

Volatility in the stock market beginning in March eventually may help value funds' sales, said Scott Cooley, a senior analyst with Morningstar of Chicago, the fund rating firm. After several years of strong performance, the earnings prospects for growth companies may not be as bright in the current market, Cooley said. That change could make value stocks more appealing, he said.

Cooley was cautious in his predictions of the immediate prospects for value fund sales. Investors over the next three to five years should be better served by investing in value funds over growth funds, Cooley said. But it probably will take months before investors reach that conclusion and begin investing substantially in value funds, Cooley said.

Some firms are betting that the turnaround is coming for value funds by offering new value fund products. The Franklin Group of Funds of San Mateo, Calif. introduced a new value fund, the Franklin Large Cap Value Fund, on June 1. Alleghany Asset Management of Chicago recently announced the formation of King Street Capital Partners LLC of Alexandria, Va., a new firm that will specialize in large-cap value funds. The firm began operations last week.

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