Beware Of Funds Bearing New Offerings

The launch ofJanus Capital Management's hedge-like mutual fund was greeted with a lot of hoopla, butChuck JaffeofMarketWatchis telling investors to beware of funds that are not traditional fare of their issuers. Jaffe calls both the new Janus fund and theStrategic Income Fundlaunched byWasatch Advisers"head-scratchers." He says that while both houses have built up considerable positive track records in their traditional areas they have virtually no track record in unknown territory – and their skills in one area are not necessarily transferable to their new venture. Jaffe notes that in the 1990s, fund houses would expand into other areas to become "one-stop" operations, only to close or reorganize underperformers. He notes, for example, that Wasatch'sWasatch International Growth, is the sole member of the firm's family that has a below-averageMorningstarrating.

"In each case," says Jaffe, "the investor needs to approach the new fund a bit like a baby bear; it may look cute and cuddly, but it could have a vicious temper."