Technology funds take a beating
Bloomberg News Service
BOSTON — U.S. technology mutual funds have seen $78.6 billion in assets vanish in the past year as the average tech fund has lost more than two-thirds of its value.
According to AMG Data Services, an Arcata, California-based money flow tracking firm, assets in U.S.-based technology mutual funds totaled $81.1 billion on March 14, about half their level of $159.7 billion on March 15, 2000. The fall represents declining market prices as well as investor withdrawals.
As the Nasdaq composite index has fallen 64 percent from its March 10, 2000, peak, the average technology stock mutual fund tracked by Bloomberg has lost 68 percent of its value. Internet and telecommunications funds, which Bloomberg ranks separately, have dropped 72 percent.
"It's obvious that it's been tough," said Craig Callahan, chief investment officer at Meridian Investment Management Corp., adviser to the $100 million Icon Information Technology Fund, the best performing technology fund of the past 12 months according to Bloomberg.
Callahan said he sold "mainline" tech stocks like Qualcomm Inc. and Altera Corp. in January and February last year because their valuations had gotten too high. He said he is now looking for bargains among the same stock group. Icon Technology has lost 21 percent over the past year.
For some funds, the ride has been much rougher. Amerindo Technology Fund has fallen 84 percent in the past 12 months, the biggest drop among tech funds tracked by Bloomberg. Amerindo Technology gained 249 percent in 1999.
Internet
Internet funds have been hit even harder. Potomac Internet Plus Fund has lost 89 percent in the past 12 months while Jacob Internet Fund has fallen 88.5 percent — the two top losers among the Internet and telecommunications funds tracked by Bloomberg.
Some technology investors say the gloom has gotten so thick that now could be the best time to move back into the sector.
"One of these days we are going to look back and say 'That was the day,' " the market hit bottom, said Michael Sandifer, a member of the investment committee at Amerindo Investment Advisors Inc. "When everybody is awfully gloomy or has decided they wished they had never invested in a stock in their life, then stocks start going up."
Sandifer said Amerindo's three retail mutual funds as well as its institutional portfolios have begun to see modest investor inflows during the past two months, with institutional investors showing the most interest.
More Pain
Amerindo Technology's assets have eroded to $120 million after peaking at about $800 million in March last year. Its top three holdings are Ebay Inc., Homestore.com Inc. and Gilead Sciences Inc.
Other tech fund managers remain gloomy and say the tech sector may yet see more pain.
"The way most people are investing in technology I'm not that encouraged, and I think they are going to experience much more down side," said Peter Doyle, chief investment strategist at Kinetics Asset Management Inc., whose $400 million Kinetics Internet Fund lost 52 percent last year.
Doyle said the problem with most tech funds is that they load up on the same large-cap stocks such as Cisco Systems Inc., Intel Corp. and Dell Computer Corp. When industry conditions sour, "the consequences ripple through 95 percent of your portfolio," Doyle said.
"Dell and Intel have such a link to one another other, that if Dell has a shortfall in revenues and earnings, it means that they are buying less chips from Intel," he said. "A lot of people are invested in technology with a high degree of codependence."
