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Fund wants you to watch
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July 28, 2000: 12:15 p.m. ET
Montgomery debuts a 'transparent' fund that shares its strategy and holdings
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - Fund manager Andy Pratt has all of his investors looking over his shoulder these days, but as far as he's concerned his job hasn't changed.
Pratt, of the Montgomery U.S. Select 20 Portfolio, is part of a new series of "transparent" funds that is putting all of its holdings and strategies on the Web for shareholders.
"What we're offering investors is more information," Pratt said. "We're communicating things I'm thinking about."
 The fund, tiny with about $3.3 million in assets, launched Jan. 1 and became "transparent" in April, said Montgomery spokesman Pete Greenley. It is up 20.30 percent year to date as of July 24, and its holdings as of July 27 include stocks like Sun Microsystems, Nortel Networks and Citigroup.
Fund disclosure has become a hot-button issue in the industry. By law, funds must reveal their holdings only twice a year. The Securities and Exchange Commission has proposed some changes that would require funds to divulge more information.
Some funds post their top 10 holdings on their Web sites, and other pioneers are flirting with more disclosure. For example, Metamarkets.com, a San Francisco-based startup, last year launched an interactive fund called OpenFund.
"It's good news for investors," said Morningstar analyst Russ Kinnel about the Montgomery fund. "I think investors can benefit from more information."
Also in this column: Flamboyant fund manager Alberto Vilar sees promise in two new funds that have delivered strong returns in spite of a Nasdaq correction.
By having a better handle on what your fund owns, you can find out if your portfolio is overweighted in certain sectors or stocks.
Diversification and asset allocation are two of the biggest factors in reaching your long-term goals. (Click here to read CNNfn.com's latest Portfolio Rx, a new regular feature that examines these issues.)
But the problem with funds giving up more of their secrets is they risk something called front running. That's where investors can copy what a manager is doing and risk triggering an unnatural rise or fall in the stock price. Montgomery has a two-week delay on its information to avoid the problem, Pratt said.
Pratt acknowledges that a big fund - say, Fidelity's $100 billion Magellan Fund, one of the nation's largest mutual funds - would never be able to put all of its holdings and strategies on display. It could take Magellan manager Bob Stansky weeks or longer to build a position in a new stock. But Pratt can easily get in and out of a stock in a day.
Maybe a big fund could have a four-week lag instead of two weeks, Pratt said.
Check your mutual funds on CNNfn.com.
"I think mutual fund disclosure is a good thing," Pratt said. "As a mutual fund shareholder myself, I enjoy reading stuff from the funds I own. Now, you only get information every six months. While I wouldn't want to get these every day, I would want to get them more frequently."
Kinnel said front running shouldn't be a problem while the fund is small, unless it is investing in very small stocks. The challenge, he said, will be when assets get larger.
"For the most part, I think it's a good thing," Kinnel said. "I think funds should report every month. Some fund companies haven't taken advantage of technology to report information."
Montgomery plans to introduce three more "transparent" funds this year, including an international fund, a global fund, and a fund that focuses on the new economy. Each will own 20-to-30 stocks.
On the Web site, investors can find out all of Pratt's holdings, the price he paid for the stocks, and their current market value. Shareholders can research each stock, and sort the holdings by average cost, volume and daily changes, among other factors. Only shareholders of the fund have access to the information via a password.
Among Pratt's favorite stocks these days are storage company EMC (EMC: Research, Estimates), and telecom equipment maker Comverse Technology (CMVT: Research, Estimates).
He looks for stocks that are in a growth cycle of at least three years, with strong management teams that are accessible to him. He also looks for reasonable valuation compared with peers, although that won't keep him away from stocks like Cisco (CSCO: Research, Estimates).
But you can read more - a lot more -- about what Pratt thinks on the Web.
Alberto Vilar's two new funds
As the Nasdaq Composite index claws its way back from record volatility and losses this spring, fund manager Alberto Vilar has been moving into two areas he thinks will be on fire in the coming years: business-to-business and biotechnology.
Vilar, the globe-hopping manager of the Amerindo Fund, which gained 250 percent in 1999 with stocks like Ariba, has seen strong preliminary gains with two new funds that debuted May 30.
 Amerindo Internet B2B Technology Fund is up 92 percent year to date as of July 20, while Amerindo Health & Biotech Fund is up 50 percent in the same time.
"These are two sectors that investors really need exposure to," Amerindo said in a recent telephone interview from London. "The two biggest events in the rest of your life is going to be the further development of the genetic code and the build out of the Internet."
Vilar sees the business-to-business sector in three parts: Pure stocks like Ariba and Commerce One (CMRC: Research, Estimates); Infrastructure companies like Exodus (EXDS: Research, Estimates); and businesses that are building out the fiber optic network to help transport the data, like Sycamore Networks (SCMR: Research, Estimates).
"All of these stocks are inherently capable of going up five to 10 times from here," Vilar said.
Even a stock like Akamai Technologies, which corrected the most in the spring, has doubled in three-and-a-half months, he said.
As far as the health fund, Vilar said he expects to see major advances in the next five-to-15 years. An international team of scientists recently decoded the genetic makeup of humans.
"It doesn't mean we'll have a cure for cancer, but it means many new therapies will develop," Vilar said.
Vilar seems unflappable about massive stock swings in technology, and said it comes with the territory.
"We owned 10 percent of Cisco when it first came out," Vilar said. "The fluctuation of the stock was 55 percent. Yet we had a thousand-fold gain in that stock. These corrections come with the territory. The stocks get ahead of themselves and they correct."
But, in the long run, for investors who have time and patience, the stocks will pay off, Vilar said.
"These corrections are very healthy," Vilar said. 
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