Lipper Research Senior Analyst Don Cassidy on "Business for Breakfast" 1060 KRCN - Colorado-Managed Funds

Tuesday, December 27, 2005

A. Sure. It has really not turned out to be a bad year at all for equityfund investors--not spectacular, but not hard either.

Q. Can you put some numbers around that?

A. Of course. There are 391 Colorado-managed funds and classes of fundshares that have been around for all of 2005. All but 43 of them are equityfunds; the rest are bond and money market funds. As of late last week whenI ran the numbers 369--or more than 94%--were up for the year. Among equityfunds, it was 94.6%--very close to the overall industry average.

Q. That's a lot of funds. What are the assets under management?

A. At the end of November it was $116.9 billion (or about twice the size ofFidelity Magellan). But that is less than Janus alone had about six yearsago. And of course INVESCO is now in Houston, except for a football field.

Q. How does the product mix here compare to that nationally? Are we stillbasically an equity town?

A. Definitely. Bond and money market funds total only $11 billion, or justunder 10% of the local total assets. Nationally, that percentage is about40%.

Q. Okay, back to performance if we can.....

A. The average locally managed equity fund was up 8.26% through late lastweek. That's about 2 percentage points lower than the average for allequity funds in the Lipper database.

Q. What caused that relatively big difference?

A. It's a question of product mix. We have a smaller percentage of locallymanaged funds that invest internationally than does the whole fundsindustry. Also, we locally are under-represented in natural resources andutility funds, and those kinds all had nice gains this year. Those were themajor factors.

Q. Which Colorado equity funds were the biggest winners and losers?

A. Curiously, ICON had three funds in the top-five list and two in thebottom-five list. But that is naturally very possible with specialty fundslike most of ICON's are.

• ICON: Asia-Pacific +45.6%

• ICON: Energy +44.7

• Janus Overseas +29.3

• Janus Intl Growth +29.2

• ICON: Intl Eqty +29.0

• ICON: Leisure - 9.6%

• Choice Mkt-Neutral - 8.2

• ICON Info Tech - 4.2

• Drey Founders Discov - 2.4

• Agile Multi Strategy - 1.7

Q. The big winners you just named were all either energy-related oroverseas types...

A. Right, and that's a big part of the story for 2005 overall in equityfunds. The average world equity fund is up 16% and domestic funds are ahead6.9%, so there is a big gap. Among the top 23 equity funds locally managed,21 are energy-related or world funds.

Q. Which are the two winners NOT of those types?

A. Janus Orion (+20.1%) and Cambiar Conquistador (+19.2%)--multi-cap andsmall-cap, respectively.

Q. How did the various fund companies perform, on average?

A. It is not really fair to compare averages of the funds, because theproduct mixes are quite different. But we can look at numbers of winnersand losers: For companies with at least two different portfolios (up/totalnumber):

• Janus 37/37

• Olde Mutual 18/19

• ICON 15/16

• Dreyfus-Founders 7/8

• Westcore 7/7

• Marsico 4/4

• AXA 3/3

• Cambiar 3/3

• CNI 3/3

• Choice 0/2

Q. What was the problem at Choice?

A. Actually, that is a good illustration of the point; Choice's two fundsare market-neutral and long/short in nature. In a market that is up, suchfunds have a hard time showing gains.

Q. What do you think of how Janus has done lately?

A. Janus has added selling discipline, and it has some measures in place toensure that the whole shop does not own too much of one stock. Janus'sperformance has clearly turned around. If 2006 is a year for growth stocksas contrasted with value, as we believe it may be, Janus could have quite anice time. We are now more than three years from the market bottom inOctober 2002, so everyone's three-year numbers look good again. Thiscertainly helps Janus, since it is more aggressive than average. But youwill not see much advertising about that from Janus, since it is focusingmarketing resources on the intermediary and institutional markets now.Janus has some very good 2005 ranks in specific types of funds, within thelocal population:

• #2 in Balanced, Global, and Healthcare

• #1 in International Multi-Cap, Large-Cap Growth, and Multi-Cap Growth

• #1, 2, 3, and 4 in Large-Cap Core Equity

Q. And overall for the local funds business?

A. It was a solid, decent year. Denver may never again be the huge hotcenter for funds that it was in the late 1990s, and we are starting to livewith that new reality. We have seen a few new entrants and some mergers. Itis all part of the natural evolution of any business. Hedge funds are afactor that is chipping away, gaining a niche. I would expect that tocontinue in the future.

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Don Cassidy is a Senior Research Analyst at Lipper specializing in fund flows, exchange-traded funds, (ETFs), closed-end funds, equity fund performance, and author of Trading on Volume (McGraw-HIll).