The feeling is mutual

Donald Saltz

August 30, 1991|By Donald Saltz

Early this year, T. Rowe Price assumed all the services that the State Street Bank of Boston had been performing for the mutual fund company, as Price decided to handle its client relationships directly. To facilitate this part of its business, Price opened new offices in Owings Mills.

The product is important but so is service in the burgeoning mutual fund business, notes Steven Norwitz, vice president who heads public relations for the firm which has its headquarters in Baltimore.

Price manages about $32 billion -- $20 billion of this in its 37 varied funds and $12 billion for private clients -- and it is one of the nation's leading mutual fund and money management companies.

In recent years, investors have moved away somewhat from owning individual stocks to the lure of professional management and better price stability of mutual fund shares. Also, specialized funds such as international or science are especially appealing to investors.

In 1985, there were almost 35 million shareholder accounts among the nation's mutual funds; last year, the total had risen to more than 62 million. This does not mean 62 million people because some of us deal with more than one mutual fund company, but there is an estimate by the Investment Company Institute, the industry's trade association, that 56 million individuals own fund shares.

For clarification, all investment companies are not open-ended mutual funds which issue new shares as additional money is placed with them for investment. There are also closed-end funds which have a set number of shares. Those shares, as the shares of corporations, are traded back and forth.

Price is a "no-load" fund; its shares are bought and sold without sales charges. All of its funds are no-load, thus there are no bid and ask spreads. It is not the only no-load fund company but many of the big management firms that offer no-load funds also have a few "load" funds. All funds have management fees ranging, perhaps, from 0.4 to 1 percent of the funds' values.

When T. Rowe Price, the man, went into the fund business in 1950 after 13 years of private money management, he did it with a single fund specializing in growth stocks -- no-load, of course. Growth stocks remain the objective of many investors but the industry's mammoth size in recent years can be attributed to 401-K retirement plans and to folks seeking better yields on their investments. As interest rates decline, savers tend to buy shares of bond funds with their higher yields as alternatives to bank savings accounts and certificates of deposit.

For example, high-yield bond funds carry yields of more than 11 percent; a more conservative Ginnie Mae fund about 8.4 percent, and a municipal bond fund more than 7 percent. Price's short-term high-grade bond funds contain bonds maturing in less than three years and yields of 7.5 percent and they've become very popular, says Norwitz.

Price's high-yield bond fund -- it contains lower-grade bonds often referred to as junk bonds -- is one of the big winners of the first seven months of this year, up 21.9 percent counting capital growth and dividends. The Science & Technology Fund gained 38 percent in the seven months. The Capital Appreciation Fund nearly doubled in value in the five years ended July 30, assuming reinvestment of dividends.

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