Sportsfund investors hope for big scores Risks include possibility that era of athletics could fade

August 11, 1996|By BLOOMBERG BUSINESS NEWS

NEW YORK -- The new Sportsfund sounds like a dream for couch-potatoes who want to combine sports and investing. But will a mutual fund that focuses on sports-related stocks hit home runs for investors -- or strike out?

Mark Kaplan, Portland, Maine-based manager of the fund, said he is counting on "continued growth in professional and amateur sports" as well as above-average returns of prospective investments to fuel interest in the fund.

"Sporting-related companies encompass a broad range," Kaplan said, citing apparel, equipment, franchises and shoes.

"This kind of specialty fund is clearly very narrow," said A. Michael Lipper, president of Lipper Analytical Services Corp. "I'd like to see a couple of years' performance. And it may have trouble if the country goes into a recession and leisure spending cools off from where it is now."

Kaplan declined to make predictions for the fund's performance. "You're never in control of where the market is going," he said.

The fund started operations Aug. 1 with $250,000 from its principals. It must amass $25 million before Nasdaq will assign the fund a ticker symbol, Kaplan said.

The Sportsfund is billed by its New York-based sponsors, Westwood Ventures and Forum Financial Advisers, as the first U.S. mutual fund to invest primarily in companies that focus on sports-related businesses. Kaplan said at least 65 percent of the fund's assets will be invested in sports-related companies.

Kaplan was an investment adviser at H. M. Payson & Co. But he has not managed a sports-oriented fund of any kind. His partners have overseen fixed-income investments, but have not been deeply involved with equities. Kaplan said he and his partners were "confident" they could handle the challenge.

Analysts said the fund manager has the luxury of investing in companies that have high visibility.

"As long as the sports boom holds up, the fund should perform well," said Steve Janachowski, partner in Brouwer & Janachowski, a mutual fund research company in San Francisco. "If the sports business cools off, the fund could have some problems generating above-average returns, though."

The sports business itself is vulnerable to the whims of the American public. "The risk with an investment in sports is that the public can be fickle, and interest in a team or a company can cool," said Robert Powell, editor of Mutual Fund Market News, a newsletter in Boston.

The capital-appreciation fund will maintain a portfolio of 25 to 35 stocks at a time, said Kaplan. He expects to use different investment styles, holding some stocks over the long haul while maintaining short positions in others. He reckons there is a universe of 125 sports-oriented stocks to choose from.

Among the stocks he expects to look at closely are Nike Inc. and Reebok International Ltd., two of the leading athletic shoe and apparel makers, as well as Callaway Golf Co., one of the most respected manufacturers of golf clubs.

"Nike has done extremely well," said Kaplan. "We've seen a pretty good rebound in Reebok."

Those companies represent a cross-section of the kinds of investments Kaplan is considering. Nike has been hailed this year as one of the strongest stocks in the United States because its earnings have been so robust and its prospects appear to be mighty.

Reebok, on the other hand, has posted disappointing results and its stock had performed sluggishly, until recently. Callaway Golf still remains a favorite of golfers because of the quality of its products.

The fund may be weakened by its determination to invest only in U.S. companies. Some fund managers who dabble in sports-connected investments have struck gold in Europe by taking a chance on such companies as athletic-shoe manufactures Adidas AG and Puma AG of Germany and the British soccer team Manchester United Plc.

Pub Date: 8/11/96

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