Foreseeing a Power Surge, Chase Mutual Funds Unit Plugs into Utilities Sector
Quittner, Jeremy, American Banker
Chase Manhattan Corp.'s asset management division is turning its attention to an industry that many investors have ignored.
At a recent forum on global markets, executives in the bank's mutual fund division said the current climate of deregulation among utilities has led them to reexamine the sector, which has lost money for three years.
"We have been increasing our exposure to electric utilities," said David Klassen, head of U.S. equities for Chase's global asset management division.
There have been "dramatic and fundamental changes in electric utilities which people have not picked up on."
Mr. Klassen said 15% of its Vista Equity Income Fund, which has $80 million of assets under management, is now invested in utilities, including electric companies, regional telephone operating companies, and gas companies.
Investors typically have viewed utility stocks as a safe haven. Like bonds, utility stocks reacted to the fluctuations of interest rates, dropping in value when interest rates have risen.
But Anthony M. Gleason, vice president and senior portfolio manager for the Vista Equity Income Fund since 1995, said that dynamic changed a few years ago.
"Interest rates were going down, and utilities were also going down," he said.
Mr. Gleason added that the need to build new power stations has diminished as deregulation has led to consolidation. …