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Hard Times For A Soothsayer

Up Front


Stock market oracle Elaine M. Garzarelli is out of one of her jobs. The shareholders of her mutual fund, the Smith Barney Shearson Sector Analysis Fund, quietly voted last month to shutter the fund by merging it into another Smith Barney portfolio. The reason, explains Smith Barney Executive Vice-President Heath B. McLendon: lackluster fund performance and an eroding asset base. (Smith Barney took over the fund when it acquired Shearson last year, while Garzarelli remained a strategist with Lehman Brothers.)

Launched in August, 1987, the fund had a stunning start when Garzarelli turned bearish in September and actually made money in the October crash. But it has seen lackluster returns since. Average annual return over life of fund: 4.7%, vs. 5.8% for the S&P 500. And assets, which hit $700 million in 1988, had dwindled to $130 million.

Garzarelli, who argues she might have logged better performance without the high fees imposed by both Shearson and Smith Barney, admits running your own fund is far different than advising others who run funds. "My work is very good, but that was not reflected in the fund," she concedes.EDITED BY JAMES E. ELLIS AND JULIE TILSNER By Jeffrey M. Laderman

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