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Small Portfolios Face Struggle to Get Listed

June 09, 1996|RUSS WILES | RUSS WILES, a financial writer for the Arizona Republic, specializes in mutual funds

The Papp America-Abroad Fund would not seem to have trouble attracting shareholders.

The Phoenix-based portfolio sports a top five-star rating from Morningstar Inc. in Chicago. It does not charge any loads or 12b-1 fees, and its manager also happens to be the majority owner of the parent investment company, which means he's highly unlikely to jump ship.

Also, the fund takes the unusual tack of investing in leading U.S. exporters such as Coca-Cola, Motorola and Merck, thereby offering shareholders a way to play the boom in global trade without having to buy foreign stocks.

Yet Papp America-Abroad remains small, with less than $20 million in assets and fewer than 400 shareholders after four years in existence. (The fund once had a $10,000 minimum, although now it is $5,000.) Part of the problem is that the fund cannot get listed in the daily tables published by most newspapers.

"It's frustrating because we know some people won't buy the fund if they can't see it in the paper," manager L. Roy Papp said. "They could always call us [toll-free] to get the price, but most would rather look in the paper."

Papp America-Abroad is not alone in this regard. More than 1,000 other funds do not make the cut for daily newspaper listings.

Fund companies provide their prices each day to the National Assn. of Securities Dealers in Washington for distribution to wire services and then to newspapers nationwide. But to be included in the NASD's automated quote service, a fund must have either $25 million in assets or 1,000 shareholders.

About 4,800 stock and bond portfolios qualify. But newspapers then pare the list further, often eliminating smaller funds, out-of-state municipal bond funds, funds with high minimum investments and others.

"Very few papers publish the full list," said Marty Rose, market tables editor for Associated Press in New York.

(The Los Angeles Times publishes approximately 3,300 funds Tuesday through Saturday and about 3,500 on Sundays. After removing funds designed for residents of other states and some restricted fund classes, the tables contain the largest funds by asset size. At the end of each quarter, The Times publishes more than 4,500 funds.)

Newspapers are under pressure to cut or freeze the amount of space available for price listings, primarily because newsprint costs have escalated.

Meanwhile, the number of stock and bond funds continues to grow, recently having topped 6,000.

Hundreds of broker-sold funds now are available in A, B, C and other share classes, each of which may receive its own line of newspaper type. Such funds are essentially the same but can have different net asset values, or NAVs, and performance results because of different ways expenses are applied. Additional share classes thus have contributed to the space problem, as has the general growth of mutual funds as the fund managers often strive to have product line "families" with individual funds catering to most investors' interests.

"There has been a tendency to move into overseas funds and attempts by families to broaden their scope so that shareholders can allocate assets more effectively," said Kevin Farragher, a director of operations for the Investment Company Institute in Washington.

Only money market funds have not contributed to the problem. They maintain a stable $1-a-share price, thus making daily listings of these investments unnecessary. (The Times Business Section lists the top-returning money funds on Thursdays.)

In addition to Papp America-Abroad (no load; [800] 421-4004), other tiny five-star funds include 59 Wall Street Short-Intermediate Fixed Income (no load; [800] 625-5759), a tax-free portfolio; Fontaine Global Income (no load; [800] 247-1550), a world bond fund; Henlopen (no load; [302] 654-3131), which buys small stocks; and Monetta MidCap Equity (no load; [800] 666-3882), a growth-stock fund.

Some of these funds have a fairly high nominal minimum investment. But you can purchase their shares for less through a discount brokerage such as Charles Schwab and Fidelity Investments, or by opening an individual retirement account.

Fund companies that lack $25 million in assets or 1,000 shareholders may have to rely on other tactics to gain attention. These include print and broadcast advertising, direct-mail campaigns and public relations efforts designed to lure financial journalists. All of these avenues, especially advertising, can be expensive.

Incidentally, funds are under no legal obligation to supply their prices to the NASD for release to the wire services and newspapers--their efforts are voluntary, Farragher said.

But considering how highly shareholders value this service, virtually every fund group tries its best to get its name, and numbers, in print.

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