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Fidelity offers backbone
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July 10, 2000: 11:25 a.m. ET
Two Select funds added; Putnam goes tech; Dunn on cost of fund management
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NEW YORK (CNNfn) - Need a little backbone? That's what Fidelity hopes you'll be looking for come September, when it plans to launch two new Select funds: Networking and Infrastructure, and Wireless.
Sophisticated investors, for whom these funds are meant since their narrow focus can make them volatile, might think these new offerings are going to be Internet plays in a big way.
Also in this column, Putnam launches a new technology fund; and Barclays' chairwoman reminds investors just how much they pay others to worry about their money.
But that's not how Fidelity is characterizing them. These funds will not be a "pure dot.com investment," said spokesman Jim Griffin.
Put another way, "They're not going to be chasing after the sizzle sites," said Jim Lowell, editor of the independent newsletter Fidelity Investor. Lowell nevertheless sees the funds as "a direct play on the Internet." Without the Internet, he believes, these funds would not exist.
The Wireless portfolio will invest in wireless communications services and products, a hot sector being embraced by a number of growth fund managers.
The Networking and Infrastructure fund, meanwhile, will focus on companies that make, sell or distribute products and services that support the flow of electronic information.
So, in addition to Internet-related businesses, Griffin said, the fund may invest in the makers of everything from the set-top box on your television to encryption software.
But Lowell believes the makers of routers and other equipment that make dot.coms tick technologically will be a big draw. And that's good for investors who want to take a refined position in a narrow slice of the market, he said.
"Owning the parts tends to be a lot safer and a lot more rewarding," Lowell said.
The new funds, which will bring the number of Fidelity Select funds to 41, will charge front-end loads of 3 percent and require a minimum investment of $2,500, Griffin said. A redemption fee of 0.75 percent will be charged for accounts opened for 29 days or less.
Putnam adds tech exposure
There's also a new fund on the docket at Putnam Investments.
Come July 17, you can invest in the Putnam Technology Fund, which will focus on companies in fast-growing computer, software, semiconductor, electronics, communications, telecommunications and biotechnology companies based in the United States.
"Many of our funds have a strong proportion of their assets in cutting-edge technology companies. We felt it was time to offer this choice to investors who ... wish to place their assets in a specialized technology fund," said Putnam managing director John J. Morgan, Jr. in a statement.
The new offering will be managed by David Santos, co-manager of the Putnam Growth Opportunities Fund; Paul Marrkand, co-manager of Putnam's Tax Smart Equity and Voyager funds; and Saba Malak, who has served as a computer and technology stock analyst for the company since 1997.
Putnam Technology Fund will charge a front-end load of 5.75 percent and requires a minimum investment of $500. There will, however, be no redemption fee imposed, said spokesman Matthew Keenan.
What does $130B get you?
Another dagger has been thrown in the debate over the virtues of traditional active management versus indexing, this time by the chairwoman of Barclays Global Investors, Patricia C. Dunn. Her target: the high price of letting somebody else worry about your money.
 There is a war going on "between mystery and transparency in investing," Dunn told participants at the Morningstar Investment Conference at the end of June. "Our industry has a vested interest in the mystique of investment management."
That's because U.S. investors pay about $130 billion a year -- or 1 percent of the collective U.S. equity market portfolio -- for financial advice and active investment management, she said.
She was there, of course, to promote exchange-traded funds, of which Barclays is a leading provider. Barclays' ETFs, known as iShares, have undercut the expenses of traditional index funds, once the lowest cost mutual fund option, by as much as half.
And as they gain a stronger foothold in the market, they may well make investors question how much they are paying for the privilege of financial advice and active management if the returns don't justify the means.
At present, there are only index-based ETFs, which trade like stocks and whose holdings are transparent.
There has been some buzz about the possibility for actively managed ETFs, but Dunn wouldn't let on if Barclays has a specific launch in mind. "It's not our top priority," she said.
Still, she has no doubt there will come a day ... and one gathers in the not-too-distant future.
"I predict there will be active exchange-traded funds at some point. ... There could be an application for broadly diversified [funds] ... like enhanced index funds ... where the information value of any particular position is not so valuable that you'd be afraid of being picked off by those who come and get your information and trade on it," Dunn said. 
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