As investors full from a monthslong binge on Wall Street's buffet of biotechnology offerings pulled back from the table over the past several weeks, Alidad Mireskandari was readying another place setting for biotech investors.
"I think there is a subset of investors who missed the first biotech boom and vow not to do that again," said Mireskandari, a portfolio manager at Monument Funds Group Inc. who will oversee a new fund designed to attract those investors.
Monument executives believe that the Monument Genomics Fund, which they plan to launch this month, is positioned to catch a wave of excitement over companies that make gene-based medical treatments and the software and other tools to develop them.
Like at least six other funds focused purely on biotech stocks, the Bethesda company aims to attract investors excited by companies such as human genome sequencer Applera Corp.-Celera Genomics Group of Rockville.
But some analysts advise caution when considering investments in such narrowly focused funds. The funds tend to be volatile because the risk isn't spread across a number of sectors.
Moreover, biotech companies also tend to be relatively young, with few if any products on the market.
While the name of the Genomics Fund indicates a sharper focus than that of other biotech funds, many of Monument's investments likely will overlap those of other funds. Mireskandari says 90 percent of biotechs consider themselves to be genomics firms.
Jim D. McCamant, editor-at-large of industry newsletter Medical Technology Stock Letter, said the proliferation of biotech mutual funds will raise even more money in what has been a blockbuster year for biotech fund-raising.
Biotech companies raised $36 billion through mid-November, dwarfing 1999's full-year total of $7.7 billion, the newsletter said. The new money reduces the risk that biotech companies will fail, he said.
For a primer on the volatility of sector funds, analysts at mutual-fund tracking firm Morningstar Inc. say investors need only look to the plethora of Internet-focused funds that cropped up over the past year.
The first three began in 1996 but generated triple-digit returns by 1999, leading a stampede of mutual fund companies to start Internet funds. They did so just in time for the bottom to drop out.
Today, many of the more than 40 Internet funds have lost 40 percent to 60 percent of their value this year, says Christopher Traulsen, a Morningstar technology fund analyst.
