A Side Door Entrance To A Top Fund GroupJeffrey Laderman
If you've thought about investing in any of Michael Price's five Mutual Series Funds, here's something that might make you open your checkbook soon. Pending an Oct. 25 shareholder vote, these top-performing mutual funds, which are sold to investors without sales charges, will become part of the Franklin Fund group, which levies loads as high as 5.75% on its equity funds.
By investing in a Mutual Series fund before the Nov. 1 merger, you'll retain the right to continue investing without ever paying a load. You will also be able to make no-load investments in other Mutual Series funds. And starting next May, you'll receive another valuable perk: the ability to switch from Mutual Series funds into any of the Franklin funds at no cost. The minimum initial investment for Mutual Beacon and Mutual Shares is $5,000. For the others, it's $1,000. To get a prospectus, call 800 553-3014.
Although primarily a bond-fund manager, Franklin offers a number of noteworthy equity funds, such as Franklin Global Health Care and Franklin Small Cap Growth I. It also owns the top-drawer Templeton funds, which specialize in overseas investing.
BACKFIRE? Recent returns on the Templeton funds pale next to those on Price's funds, but international markets have been lackluster for most of that time. Compared with all funds investing abroad, Templeton returns generally have been in the top 25%. In fact, Templeton Developing Markets I is in the top 1% of all diversified emerging-markets funds for the three years ending Aug. 31.
This switch isn't risk-free. Investing now to save a load later may backfire if the Price fund in which you park your money sinks and the Franklin fund you want to buy rises. But the opposite could happen as well, and then you'll have more money to move into a Franklin or Templeton fund.
Of course, if you're going to hand your money over to a mutual-fund manager, Price is about as good as they come--and the funds are worthwhile even if you never make the switch to Franklin. His funds make money through an eclectic mix of "value" stocks, debt instruments, and securities of bankrupt companies. Morningstar gives four of Price's funds five stars, its highest rating. The fifth, Mutual European, only opened for business earlier this year and isn't rated yet.
Some fund watchers worry that Price, who will collect $610 million in cash and stock for selling his company to Franklin, might slack off or lose his edge. But under the terms of the deal, Price has to invest $150 million in the funds, and he stands to earn a $195 million bonus if the funds meet certain performance goals over the next five years. Price still has a considerable incentive to work hard for shareholders--you might say several hundred million dollars worth.