May 15, 2002 — Internet-oriented funds fell 18.8% in April, a difficult month for technology companies overall following poor earnings and concerns over corporate fraud. Stocks of higher-beta Internet companies were most susceptible to negative news during the month.
The broader market and the Nasdaq outpaced most Internet funds in April. The S&P 500 fell 5.8%, and the Nasdaq slid 8.5%. Internet-focused funds tracked by Standard & Poor’s were down 19% on average as of the end of April. The Nasdaq lost 13.5% for the same period.
A few Internet funds bucked the trend for the month. Kinetics Internet Emerging Growth Fund (WWWEX), rose 10.7%, and Baron iOpportunity Fund (BIOPX) rose 6.0%. Both Internet-oriented funds take a broad approach to the sector, avoiding companies with financing risk and paying close attention to valuation.
Kinetics New Paradigm Fund (WWNPX), which rose 10.4% in April, is essentially a large-cap growth offering that holds few Internet stocks. Instead, the fund seeks to capture the growth of the Internet by investing in companies whose business models lend themselves to the medium.
Both Potomac Internet Plus Fund (PNETX) and Potomac Internet/Short Fund (PDISX) were removed from the list this week after closing on April 30. The funds, which are based on the Dow Jones Internet Composite Index, were designed to produce returns in excess of the index (Internet Plus), or opposite of the index, (Internet Short). Potomac closed the portfolios because the managers believed they wouldn’t attract long-term assets. Both funds had no more than a few million dollars in assets.
At the close of business on May 3, Munder Funds:International Net Net (MNIAX) was merged into Munder Funds:NetNet (MNNAX). Munder Capital justified the action on the basis that International NetNet lacked assets and was not expected to grow. The fund lost 38.4% for the one-year period ending in April. From its inception in April 2000 through the end of April, it was down 51%.
In another development, Ariston Capital Management is in the process of shutting down Ariston Internet Convertible Fund (AICEX) this month. The fund, launched in May 2000, invested in convertible stocks of Internet companies. With about half a million dollars in assets at the end of April, the portfolio wasn’t a great seller, Ariston conceded, once the Internet got a bad name.
Likewise, ING Groep will merge the $15-million ING Internet Fund (INGAX) into ING Global Communications Fund (IGCAX), effective May 17.