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Emerging-market fund kaput
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September 24, 1998: 2:52 a.m. ET
Robertson Stephens to liquidate its Developing Country Fund, report says
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NEW YORK (CNNfn) - Robertson Stephens Investment Management is planning to liquidate its $8 million Robertson Stephens Developing Countries Fund as a result of global financial turmoil, the Wall Street Journal reported on Thursday.
Such funds have been hit hard by market chaos, with net redemptions in the emerging-markets sector over the last three months ranging between $20 million and $258 million every week, the newspaper said, citing AMG Data Services Inc.
Even so, liquidations of such funds have been relatively rare. In the three years from the end of 1994 to last year, only three emerging-markets funds have liquidated, according to Morningstar Inc. This year, only one other, managed by Piper Jaffray, was liquidated, the Journal said, citing Lipper Analytical Services.
The liquidation itself does not mean a further loss for investors, other than those suffered by the stocks in the fund's portfolio. Instead, when the fund closes for business, its holdings will be sold, and the investors will receive the net asset value of their holdings, as if they were redeeming fund shares.
A date for the liquidation has not been set, but the Journal said a Robertson Stephens official expects it to occur in about six weeks. Robertson Stephens is a unit of BankAmerica (BAC), which plans to sell the San Francisco-based brokerage in conjunction with its planned merger with NationsBank.
The experience with the Developing Countries Fund has led Randy Hecht, president and chief executive of Robertson Stephens Investment Management, to conclude that conventional mutual funds are not an appropriate vehicle for investing in emerging markets, the newspaper reported.
Instead, he said, such investments should be managed through venture capital or closed-end funds, which would not have to sell into illiquid markets in order to meet the redemption demands of panicky investors, the way mutual funds must.
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