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New fund to buy only IPOs
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September 19, 1997: 10:37 a.m. ET
Renaissance Capital plans to go from analyzing offerings to investing in them
From Correspondent Charles Molineaux
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NEW YORK (CNNfn) - Investors soon could have a way to cash in on the excitement of initial public stock offerings.
Openly on the 'Net and privately to its clients, Renaissance Capital picks and pans IPOs.
But starting in October, the Greenwich, Conn., research boutique is set to practice what it preaches by launching the first mutual fund exclusively invested in IPOs.
Skeptical analysts already say if the fund becomes popular it could quickly outgrow the IPO market.
Others question whether a newcomer can get access to stocks when they're first offered.
"When you don't have an established name, it's tougher for you to get the IPOs you want, because you may not have the relationships you need to have with the underwriters and with the syndicates that put out the IPOs," Morningstar analyst Kevin McDevitt said.
Renaissance's prospectus indicates it won't just rely on getting starting gun IPO prices, then holding. Observers say its strategy looks partly like that of a hedge fund, including short selling.
Speaking of selling, Renaissance predicts an annual portfolio turnover up to 200 percent. The no-load fund will charge an annual management fee of 1.5 percent.
Some say the glamour and thrill of IPOs could work in Renaissance's favor.
Other mutual funds do trade in them, but experts say the novelty of trading just in IPOs will bring plenty of cash for the company's startup.
"The interest and the magic of the word IPO will attract people," said John Fitzgibbon, editor of IPO Aftermarket. "But after market, it's up to Renaissance's ability to not research the stocks which it's been paid for, but to pick the right stock."
Among the almost 650 IPOs of the past year, the average appreciation has been only 13 percent since their first day close, the point at which most investors can actually get in on the action.
Analysts say that will make Renaissance's ability to pick the right offerings the most important -- just like any other fund.
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