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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Momentum Funds Lack Any

Bill Atkinson Baltimore Sun

Momentum funds are for investors with guts.

They are funds known for churning out huge gains one year, only to slide off the cliff the next. And these days, some of the best are scraping the canyon wall.

“It is painful watching this,” said Robert G. Mewshaw, an investment counselor with Van Sant and Mewshaw Inc. in Lutherville, Md., who closely tracks mutual fund performance.

“The momentum funds which have been so, so popular are being decimated.”

Momentum fund managers load their portfolios with fast-growing, high-performance companies - many of them high-tech companies - hoping to profit as their earnings and share prices soar.

One whiff of negative news about a stock in the portfolio, and the fund manager dumps the stock and replaces it with another racy company.

The strategy has produced hefty returns for mutual fund shareholders, especially in 1991 and 1995, when the stock market sizzled.

But with the market trekking south - it has fallen 7.89 percent since its high of 7,085 on March 11 - shareholders of momentum funds have been punished.

Some of the biggest losers among large U.S. diversified mutual funds include: PIMCO Opportunity C, PBHG Emerging Growth and American Century-20th Century Giftrust.

PIMCO Opportunity returned a negative 18.88 percent from Jan. 1 to March 27 - a dramatic reversal from returns of 41.53 percent in 1995 and 68.08 percent in 1991, according to Morningstar Inc., the Chicago-based mutual fund rating company.

“The last six months have been pretty tough,” said Phil Neugebauer, a spokesman for PIMCO Funds, which is based in Newport Beach, Calif. He said the fund is “riding out a longer hiccup in the market than we are used to.”

PIMCO Opportunity invests in businesses with market capitalizations of up to $1 billion.

Its managers like high-technology stocks, many of which have been battered for months.

“It’s a daring fund,” said Jim Raker, senior research analyst at Morningstar. “It is very aggressive.”