StockJungle.com Investment Advisors of Culver City, Calif. is shutting the doors of its tiny online S&P 500 mutual fund and liquidating the proceeds after only four months.
The online S&P 500 index fund was to close on April 7, according to a prospectus amendment the fund group filed with the SEC on March 27. The fund also expected to fully liquidate any remaining holdings that day.
The StockJungle.com fund group attracted attention late last year when it introduced four online-only mutual funds, including a no management fee, no expenses index fund that tracked the Standard & Poor's 500 Index. The fund's "free" premise was that the hard work - picking stocks - had already been done. So the adviser agreed to absorb 100 percent of the fund's operating costs and charge no management fee to investors.
It was not that the online mutual fund concept did not fly with investors, according to Brian Levy, president and chief operating officer of StockJungle. Rather, this particular index fund simply failed to attract enough assets to be viable, he said.
"The fund didn't have the asset level necessary to replicate the S&P 500," said Levy.
An S&P 500 index fund would need between $10 million and $15 million to be able to initially purchase all of the correctly- weighted equities of that common index, Levy said. The StockJungle.com S&P 500 Fund had attracted less than $1 million since its inception in November.
"They (online investors) simply weren't looking for an online S&P index fund," said Levy. "That's not a reflection on our commitment" to providing mutual funds via the Internet however, he said.
The fund adviser had originally anticipated it would take several months to build up enough of an asset base to replicate the large cap S&P 500 stock index. So it made it clear to investors from the start that it would initially purchase Standard & Poor's Depository Receipts (SPDRs) which are futures, in place of actually purchasing the index's components. According to the fund's website, the fund adviser anticipated moving investments out of SPDRs and into companies that comprise the index as fund assets accumulated. But that plan was recently abandoned.
The failure of the online index fund to gain enough momentum has not deterred StockJungle.com. While investors may not be clamoring for low cost index funds offered exclusively via the Internet, StockJungle's other Internet mutual funds have fared somewhat better in attracting investors.
The StockJungle.com Pure Play Internet Fund that invests in Internet companies had attracted $1 million by April 4, said Levy. And the StockJungle.com Market Leaders Growth Fund, which invests in companies that are the leaders of their industries, attracted $300,000 through Jan. 31 of last year, according to Lipper, the fund data tracker of Summit, N.J. Both funds were opened at the same time as the S&P 500 Index fund.
But the group's novel Community Intelligence Fund which invites amateur investors to visit the StockJungle online Community area and recommend stocks for the fund's managers to consider for investment, has attracted $3.6 million, according to Levy. That fund also opened in November. The StockJungle.com website even awards $50 for investors judged to have superior stock picking skills, based upon a stock's subsequent performance. Once the recommendation is made, whether or not the stock is purchased for the portfolio, if its performance is outstanding for the subsequent three months, the amateur "analyst" receives the reward.
StockJungle's online Community concept has attracted thousands of sophisticated, self-directed investors to the site, Levy said.
The fund posts its stock picks and holdings at the site, he said.
"There is no curtain there that anybody's hiding behind," he said.