Putnam Investments has filed with the SEC to create a tax-managed mutual fund.

The new fund, the Putnam U.S. Core Tax Managed Fund, will begin as an incubator fund - one in which only Putnam employees will be able to invest. But, the Boston company is considering bringing so called "tax-managed" funds to market in the future, a company spokesperson said. If Putnam does so, it would join a growing list of fund companies that are offering tax-sensitive mutual funds targeted to those who are not investing through tax-shelters like individual retirement accounts and 401(k) plans.

Vanguard offers four retail tax-managed funds already and Fidelity put its own product on the market late last year.

Several other companies, including Eaton Vance, Dreyfus, T. Rowe Price and J.P. Morgan, also offer funds which seek to minimize the effect of taxes on investment returns. There are now 51 tax-managed funds available to retail and institutional investors run by over 20 fund families, according to Morningstar of Chicago.

The market for tax-managed mutual funds has expanded at the same time as the 401(k) market. There were only four tax-managed funds by year-end 1993 holding $714 million in assets, according to Financial Research Corp. of Boston. By year-end 1997, there was $6.9 billion in assets in 21 funds. But assets have nearly tripled since then. As of the end of the first quarter of this year, there were $16.4 billion in assets in a total of 24 funds, according to FRC. Flows have increased at a steady pace. In 1997, there were net inflows of $2.3 billion, and in 1998 there were net inflows of $5.2 billion. Already this year, there have been $1.3 billion in net flows into tax-managed funds, about the same pace as last year.

Tax-managed fund portfolio managers seek to maximize the fund's post-tax returns by minimizing distributions and realized gains from the sale of stock. (Both distributions and realized gains can increase taxes for a shareholder even if they do not redeem their shares.)

The best performing tax-managed fund over the 12-month period ending March 31 was the Bridgeway Ultra-Large 35 Index Fund, a large-cap, which had a one-year tax-adjusted return of 29.12 percent, according to Morningstar. That fund had $2.8 million in assets as of the end of March.

The Schwab 1000 Index Fund, an index fund that markets itself as a tax-managed vehicle, had, as of March 31, the most assets under management of any tax-managed fund, with $4.18 billion, according to Morningstar. That fund had a 12-month tax-adjusted return of 16.39 percent as of March 31 and a three-year tax- adjusted return of 25.86.

Eaton Vance has been active in marketing its tax-managed funds, of which it has three, including an international tax-managed fund it added in April, 1998. The company markets its tax-managed funds as "Mutual Funds for People Who Pay Taxes."

"Eaton Vance offers a breadth of experience in tax-managed mutual funds and a firm commitment to meeting the investment needs of people who pay taxes," the company says in online marketing materials. The company also compares its tax-managed funds to variable annuities.

"Eaton Vance's Tax-Managed Funds offer features that make them an attractive alternative or complement to a variable annuity," according to Eaton-Vance's website. It also says the tax-managed funds are ideal for giving money to children rather than under the Uniform Transfer to Minors Act since the parents never lose control of the funds.

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