Newspaper article The Christian Science Monitor

US Mutual Funds Multiply, Spawning Many New Hybrids

Newspaper article The Christian Science Monitor

US Mutual Funds Multiply, Spawning Many New Hybrids

Article excerpt

INTENSE competition from banks, insurance companies, and Wall Street brokers has made the mutual fund industry particularly skilled at introducing unusual products to lure investor dollars.

In recent years, traditional equity and bond funds have been joined by a host of diversified funds, including precious metals, European, Asian, "good works," adjustable-rate mortgages, and corporate bond funds.

As mutual funds proliferate by the hundreds, investors need more and more information to distinguish between funds. The complexity of new funds requires more care, time, and analysis in picking the right one.

Mutual fund companies love to create hybrids - funds that defy easy categorization. They include a "little bit of this and a little bit of that," says Frank Holmes, chairman and chief executive officer of United Services Advisors Inc., which manages a family of 14 mutual funds in San Antonio.A unique new hybrid fund

United Services Funds has just introduced a fund that does not fit ordinary categories. The new fund represents a case study of how mutual fund companies constantly look for "unique" products. Opened to the public this month, the no-load United Services Special Term Government Fund cheerfully combines the higher yield of a bond fund with the security and interest rate sensitivity of a money-market fund. It also has characteristics associated with both ARM and ARP funds - that is, funds based on adjustable-rate mortgages or adjustable-rate preferred corporate securities. But the fund holds no mortgage-backed securities.

Mr. Holmes, a Canadian who bought controlling interest in United Services Advisors in the late 1980s, calls the new fund an "alloy." Don Clark, a company spokesman, has a hard time describing it as well, calling it a "super-super short-term government bond fund." John Collins of the Investment Company Institute, a mutual fund industry association in Washington, says the fund resembles a short-term government bond fund. …

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