Finding something new under the sun


BOSTON -- Up and down Wall Street and across the nation, there are highly educated and meticulously trained individuals toiling late into the night seeking something, anything, that might be new in a mutual fund.

There's not much left. Just about everything in the investing universe has been tried in one form or another. But every now and then, some original soul comes up with a new twist.

This time it was Warburg Pincus. It's come up with the Warburg Pincus Post-Venture Capital Fund -- as if there weren't enough new products and enough risk in the world of funds.

The new Warburg Pincus product invests the bulk of its assets in start-up companies that sold common stock to the public in the past 10 years.

That means the fund invests in a broad range -- from big-sized companies like Cisco Systems Inc. and Genzyne Corp. to tiny Maryland-based Manugistics Group Inc. and Applix Inc.

The bulk of the fund's money will be put into companies that only the most curious investors will recognize -- names like Manugistics and Applix.

Manugistics, based in Rockville, develops business software and services. Applix, based in Westboro, Mass., makes software and applications aimed at helping managers make decisions.

Warburg Pincus Counsellors Inc., the fund's investment adviser, acknowledges that the new fund is more risky than the average stock fund.

"The fund is more aggressive than other funds in that it invests most of its money in technology, health care, consumer and business service-related industries," and many of the companies hardly anyone has heard of, said Robert S. Janis, who helps manage the fund.

But the new fund, introduced Sept. 29, is less risky than the typical small-cap stock fund since there are no restrictions on how big a company can get before the fund must sell its shares, he said.

Most small-cap stock funds require a manager to sell shares of a company once its market capitalization exceeds $500 million.

"That isn't the case with our fund," Mr. Janis said.

Warburg Pincus is "putting a nice face on what's another go-go technology fund," said Jeff Kelly, managing editor of Morningstar Mutual Funds, a biweekly industry publication.

L "That's my understanding of the situation, anyway," he said.

Today, about 42 percent of the fund's $2 million is invested in technology-related companies. "It's not a pure tech fund by any means," Mr. Janis said. "In fact, the fund has fewer tech stocks than a lot of growth stock funds."

Take the Fidelity Magellan Fund, for instance, Mr. Janis said. The $53 billion fund had 41.9 percent of its assets invested in tech stocks as of Aug. 31.

"The new fund is a logical extension of our existing business," Mr. Janis said. "What we're doing is transferring what we do on the institutional side to the mutual fund side."

For its institutional clients, Warburg Pincus invests more than $1 LTC billion in companies that received venture capital financing, either as a start-up or as part of a restructuring, and that then sold securities to the public markets.

"You look at the great companies of the past few years, like Cisco or Xilinx," Mr. Janis said. "They were start-up companies that received venture-backed financing. If you had invested all your money in these companies you would be rich today."

To be sure, "there are also a lot of companies that haven't made it," Mr. Janis said. "That's where our expertise comes in."

Still, Warburg Pincus' overall expertise has been mixed this year. Its Growth & Income Fund, for instance, is ranked 404th of 422 such funds tracked by the research group Lipper Analytical Services Inc.

The new venture fund is being led by veteran managers Stephen J. Lurito and Elizabeth B. Dater, who together have overseen the Warburg Pincus Emerging Growth Fund since its inception in 1988 and who will continue to manage this fund as well.

The Emerging Growth fund is ranked No. 35 of 301 "small company growth" funds tracked this year by Lipper.

Warburg Pincus is a closely held company controlled by E. M. Warburg Pincus & Co. The firm manages about $6 billion spread among 14 no-load mutual funds, as well as money for institutional clients.

Ms. Dater believes the new venture capital fund has enormous potential.

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