Jeff Tjornehoj on "Business for Breakfast" 1060 KRCN Tuesday, July 18, 2006 - Fund Mergers

A: I think it's great. And while the managers put their unique styles and strategies to work separately, Lipper does consider each fund a multi-cap growth fund. So, in terms of style not much will change.

Q: So, they didn't mirror one another--but did they read from the same playbook?

A: Just a bit. About 20% of their portfolios were common to the other. For instance, Celgene is about 5% of each fund. But I would characterize the Orion Fund as more willing to jump into mid- and small-cap stocks. As a result, it's reasonable to call it slightly more risky than the Olympus Fund. But, for that effort it has produced better returns than Olympus. We rate Orion much better for category performance than Olympus, as well.

Q: Do you think people will be turned off by Orion's "since inception" return of minus 1.6% per year, while Olympus is up 10.5% per year since it started?

A: Honestly, that could freak out some people. The thing to remember is that Olympus started in 1995 and had a great beginning. Orion, on the other hand, started in June 2000 and had a baptism by fire. But Ron Sachs, Orion's manager, has done a superb job steering this fund through volatile markets.

Q: Are fund mergers more common these days?

A: The year 2005 was a big one for all types of corporate events: new funds, mergers, and liquidations all spiked. So far this year we're on pace for about half the level of activity we saw in '05, although liquidations seem to be heading up.

Q: Was it the aftermath of the fund scandals?

A: Yes, I think so. Certainly the compliance rules changed and became more expensive, so there was some housecleaning going on, as well as middle- and small-tier firms deciding the business climate was more competitive and expensive, so they merged or sold out to larger companies. The jump in new funds seems out of place in that environment, but it might just be a reflection of new sales channels, since we measure these things in terms of share classes--not actual portfolios.

Q: Would any of these events send up a red flag for investors?

A: In a merger the best way to assess the situation is to ask yourself if you'd buy the surviving fund: does that fund suit your needs? Is it more/less risky than you like? Is the fund company burying an older fund's track record for something that hasn't seen a market correction? A liquidation is different--you're about to get your money back if you don't switch to something else. In that case open up your search to other fund companies--you don't have to stay with the same one.

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