Last two eChapman funds are liquidated

Proceeds of mutual funds were sent to investors

January 07, 2003|By William Patalon III | William Patalon III,SUN STAFF

Nathan A. Chapman Jr. has liquidated his last two mutual funds, saying the move will help him right his struggling investment firm.

"We are refocusing on some of the proprietary products we have internally, as we refocus the activities of the company," Chapman said yesterday.

Baltimore-based eChapman Inc. on Dec. 31 liquidated the $1 million DEM (Domestic Emerging Markets) Equity Fund and the $6 million Chapman U.S. Treasury Fund. The proceeds have been distributed to fund holders, according to Chapman.

Sharp declines in the stock and bond markets have slashed the asset levels of many mutual funds - the two eChapman funds included, Chapman said. He would not say how large the funds were at their peak.

Tiny mutual funds are difficult for a company to operate profitably.

Chapman has liquidated mutual funds before: About five years ago, his firm shut down the DEM Closed-End Fund. The "DEM" prefix represented Chapman's core investment strategy of focusing on fast-growing firms headed by minorities.

A year ago, eChapman shut down its Domestic Emerging Markets/Minority Equity Trust, a product that pooled money from the firm's institutional clients to invest in emerging, minority-owned companies.

Among the trust's clients were the state of Maryland's pension system, which early last year fired eChapman as the manager of about $175 million in retirement funds after learning the firm was under investigation by the federal Securities and Exchange Commission.

The SEC told the state pension system it was looking into allegations that a money manager chosen by the Chapman firm had used state pension money to invest in eChapman shares. The SEC has announced no action against eChapman.

The state ultimately lost a little more than $5 million on the eChapman stock, buying into the firm's public offering at $13 per share. The shares closed yesterday at 5.5 cents per share, down half a penny each.

Chapman yesterday said that he and his management team are working to return the company to profitability, in part by narrowing its focus to private wealth management. Chapman would not say how much money his company still manages, saying only that it was more than $100 million.

In November, eChapman said it lost $479,000 in the quarter that ended Sept. 30, a slight reduction from the $503,000 net loss recorded for the year-earlier quarter.

For the first nine months of last year, the net loss was $219,000, down substantially from the net loss of $2.66 million for the first three quarters of 2001.

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