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Mutual Fund Notebook
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November 2, 2000: 8:34 a.m. ET
A 'decent' 4Q in store for financials, according to one T. Rowe Price manager
By Staff Writer Jeanne Sahadi
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NEW YORK (CNNfn) - Your growth funds may have gotten clocked, and your tech plays pounded. But if you invested money in a financial services fund this year, you're probably extending some heartfelt thanks to a higher power.
As the No. 2-performing fund category year to date according to data from Morningstar, financial funds have racked up an average gain of 19.13 percent, thanks in part to increased merger activity and the fact that the Fed held interest rates steady starting in May. T. Rowe Price Financial Services Fund has been a top 5 leader in that rally, turning in a year-to-date gain of 32.3 percent through Oct. 31.
Also in this column: costly changes afoot at Scudder; Fidelity gets aggressive again; what it means to be really diversified; plus, big-number stars among large-cap growth funds.
Anna Dopkin, co-manager of the $246 million no-load fund, expects the sector to fare reasonably well in the fourth quarter, although perhaps not as well as in recent months.
 "The chance for a home run in the fourth quarter is pretty limited since we've seen a tremendous rally throughout the year," Dopkin said. Still, she noted, "The fourth quarter should probably shape up to be a decent quarter."
But much depends, as always, on the Fed and the economy, she said. Dopkin believes Greenspan & Co. may adopt a more neutral stance on rates, and possibly even ease them late this year or early in 2001. While lower rates often mean good news for financial stocks, it may not if, say, the Fed feels pressed to lower rates due to, among other things, weak consumer credit, when people are not paying back their personal loans and credit card debt, she noted.
Up on Chase, Freddie Mac
Should that happen, she said, "we're back in a mode where companies that can put up good results will perform," noting that this year some firms have rallied despite poor fundamentals and have offered investors what she calls "dead-cat bounces."
It's her job to invest in those firms that perform well under multiple interest rate scenarios and that promise long-term growth in share price, she said.
One stock she anticipates will offer good investment return in the next six to 12 months is Chase Manhattan (CMB: Research, Estimates), which was among her top 10 holdings through Sept. 30.
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 TOP 5 HOLDINGS AS OF 9/30/00
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Citigroup
Marsh & McLennan
Freddie Mac
Bank of New York
Mellon Financial
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Investors have been trading Chase as if there is not much to recommend its recently announced merger with JP Morgan, she said, noting that its stock is trading at a discount relative to its peers. Just a few weeks ago it was trading in the low 30s, well below its 52-week high of $67.16. Chase has a good management team, she added, and she is confident "the acquisition can work."
She also likes Congress-chartered mortgage financier Freddie Mac (FRE: Research, Estimates) because its credit risk is limited and its political situation is improving as moves are made to boost its disclosure and expand its risk management.
Scudder adds load; Kemper gets new name
If you were thinking of investing in a Scudder fund partly because it is a no-load, you'd better act fast.
That's because by year-end Scudder Kemper Investments will add a load to more than 30 Scudder funds, the firm said this week in a filing with the Securities and Exchange Commission. That means new investors will pay a sales charge through a financial advisor.
But three kinds of investors will be exempt from the load: existing Scudder fund shareholders; those who invest through their employer-sponsored retirement plans; and AARP members who invest through the AARP Investment Program.
"This commitment to sales through financial professionals underscores industry trends, which show that in the increasingly complex financial services arena, investors more and more are seeking the help of financial advisors to address their long-term investment needs." said Bill Glavin, president of the firm's U.S. Retail Distribution Group, in the filing.
Scudder Kemper Investments also noted that it would rebrand its Kemper retail mutual funds, which already carry a load, under the Scudder name.
Fidelity launches new fund
Speaking of loads, Fidelity Investments is adding an aggressive growth fund to its lineup of products sold exclusively through financial advisors.
The Fidelity Advisor Aggressive Growth Fund, which launches Nov. 15, will invest primarily in mid-cap stocks with potential for accelerated earnings and revenue growth. It will be managed by Beso Sikharulidze, who previously managed the Fidelity Convertible Securities Fund and Fidelity Select Health Care Portfolio.
Like its no-load retail cousin, Fidelity Aggressive Growth Fund, the new fund will be benchmarked against the Russell Mid-cap Growth Index. But because the two funds will be run by different managers, their holdings and performances may differ, spokeswoman Jessica Catino said.
Minimum investment in the fund is $2,500. Your load will differ depending on which share class you purchase.
Question of the week: Is the world enough?
Having a well-diversified portfolio doesn't have to mean owning 12 different mutual funds. But is just one enough to do the job? One reader wrote to CNNfn.com recently with a question about the merits of owning a world-stock fund and nothing else.
Question: I am a student, with all my present (and limited) investments in a single large global mutual fund. It is 25% invested in the U.S & Canada, about 25% in Europe, about 20% in the Pacific Rim, about 5% in Japan, and the remaining in Latin America and elsewhere.
I feel that there is good diversification within this single fund, and that multiple funds are not necessary. My study partner says that this really is not diversification. Who is more correct?
It really depends on the fund in the question, said certified financial planner (CFP) Joel Bruckenstein, president of Global Financial Advisors Inc. in Pleasantville, N.Y.
Generally speaking, "If you have a limited amount to invest, a globally diversified fund is a good place to start," Bruckenstein said. But he stressed that you have to look under the hood to see whether the fund itself is well-diversified, meaning it is a multi-cap fund that invests broadly across not only geographic regions but at least five main sectors as well.
For CFP Virginia B. Gerhart's money, she would prefer a fund that has more exposure to North American stocks than the one the reader describes. "Twenty-five percent of holdings in North America is not really adequate," said Gerhart, who is based in San Rafael, Calif.
She recommends that the reader should consider taking half of what he has invested in the global fund and put it in a pure multi-cap U.S. stock fund within the same fund family, so that there will be few if any costs to make the switch.
You can learn more about mutual funds on CNNfn.com's mutual fund page. Or, if you need portfolio help, e-mail our experts at retirement@cnnfn.com.
Still livin' large
The average large-cap growth fund has lost 2.71 percent year to date, according to data from Morningstar. But not all funds in the category are eating humble pie.
Here are the top 5 performers through Oct. 31: American Eagle Capital, up 92.5 percent; American Eagle Twenty, up 63.9 percent; AIM Large Cap Opportunity, up 36.6 percent; Berkshire Focus, up 31 percent; and AIM Large Cap Growth, up 28.1 percent. 
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