Investors are flocking to the Munder NetNet Fund, which uses an Internet edge to stay ahead of the stock fund pack.
The fund clocked a 54% first-quarter return, according to Weisenberger of Rockville, Md., a Thomson Financial company, making it the top performing bank-affiliated equity mutual fund during the period.
Comerica Inc., the Detroit banking company, owns the majority of Munder Capital Management, which is independently run in Birmingham, Mich., and manages more than $46 billion of assets.
Offered in four share classes, NetNet's assets under management jumped 55% in March alone, to $1.4 billion, according to the firm. As of Monday, it managed $2.5 billion.
Net inflows during the quarter were $682 million, according to Financial Research Corp. of Boston. Annual return for the retail shares from the fund's August 1996 inception through March 31 is 83.2%.
The rapid growth is typical of tech funds, which are attracting investors who are "going after performance," said Christopher J. Brown, an analyst at Financial Research.
"People have seen America Online and Amazon, and some of these stocks do really well," Mr. Brown said. "They're looking for the next hot fund and trying to capitalize on things." Investors are not deterred by the short track records of new tech funds, he added.
Direct sales of tech funds make up 46% of distribution, and banks accounted for 1% of sales in January, according to Financial Research.
As a tech fund, Munder NetNet is in a rarefied group among bank- affiliated portfolios. Others that also had high marks last quarter are proprietary to Bank of America Corp., Northern Trust Corp., and U.S. Bancorp.
Though specialized, NetNet's strategy captures what could be a main driver for sales across all business sectors. "We don't think of it as a trendy sector fund," said Munder chief executive officer Paul D. Tobias. "We see the Internet as a major force for change in our economy for quite some time."
The NetNet five-man portfolio management team takes a long view of electronic commerce, Mr. Tobias said, and allows for the fact that the "Internet sector will have its cyclical moments and everybody questions some of the pricing.
"Some of the pricing is a bit nerve-racking," he added.
The fund's managers arePaul T. Cook, Alan Harris, Brian Salerno, Carl Wilk, and Steve Appledorn. They select stocks from traditional companies using the Internet for additional distribution, as well as from technology companies, which made up 68.9% of its holdings at March 31.
The traditional companies included Charles Schwab Corp., Gap Inc., and Office Depot Inc. The top holdings out of 77 were Cisco Systems, Sun Microsystems, MCI Worldcom, America Online, and Microsoft Corp.
Over time the weightings should broaden as more companies get involved with the Internet, Mr. Tobias said. "That's what makes the story a durable one," he said. NetNet is sold through brokerages large and small as well as independent financial advisers nationwide.
For its part, Comerica Securities Inc., the banking company's brokerage, does not want retail clients to go overboard in reaction to NetNet's recent performance, a spokesman said.