Newspaper article St Louis Post-Dispatch (MO)

These Didn't Live Up to Their Name

Newspaper article St Louis Post-Dispatch (MO)

These Didn't Live Up to Their Name

Article excerpt

What's in a mutual fund's name? Sometimes not enough, Alan Wildstein, a Connecticut investor, found.

Wildstein bought shares in the Warburg, Pincus Growth and Income Fund on March 29. "I was looking for a fund that balanced the risks of a growth fund with the comparative safety of an income fund."

When the price dived 9 percent less than a month later, he considered the loss so acute - similar funds fell roughly 2 percent in the period - that he sold on April 20.

So when he read a newspaper report last month that the fund's yield was negligible and that it had owned a big chunk of volatile technology stocks, he was annoyed - especially because the fund's share price bounced quickly back after he had sold.

"I'm sure the manager didn't do anything he wasn't allowed to do," Wildstein said. "But the very name of the fund suggests a more conservative bent."

Also among the rudely surprised in 1994 were a whole slew of short-term bond investors who saw their funds' share prices tumble, even though their issues were expected to weather the rising interest rates better than longer-term ones.

The Fidelity Short-Term Bond Fund lost more than 4 percent of its value last year while its peers fell just 0.8 percent, according to Morningstar Inc. The fund was hard hit by its emerging-markets debt - more than a third of its holdings in 1994.

While the prospectus lets the fund do so, "I don't think all the shareholders knew they were so heavily invested in foreign debt," said Jeffrey R. Kelley, associate editor of Morningstar Mutual Funds in Chicago.

He added, "You'd think that a fund labeled `short' would hold up in a rising interest rate environment."

Not Scudder Short-Term Bond, whose share price slipped to $10.94 from $12.01 last year, nearly 3 percent. Its problem involved big holdings in what Kelley termed "funky mortgages," like inverse floaters and private-label mortgages.

Then there is MIM Bond Income, which paid no yield at all in 1994. That is because it owned no bonds, just convertible securities and stocks.

The name TCW/Dean Witter North American Government Income Fund suggests stability from government issues. But the fund's United States holdings are almost entirely mortgage securities, some of them private-label mortgages, which are not backed by the government. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.