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Fund to focus on direct investment plans


A publishing company that specializes in offering advice on how to invest in direct investment plans is getting into the fund business.

The MP 63 Fund will invest in companies in the Moneypaper 63 Stock Index, a list of companies compiled by The Moneypaper, a company in Mamaroneck, N.Y., which publishes several newsletters and runs a website dedicated to direct investment plans. The main impetus for starting the fund was requests by readers, said Vita Nelson, the chief executive officer of Moneypaper.

"There's been a lot of interest through our subscribers," said Nelson, who is also editor and publisher for Moneypaper's publications. Direct investment plans are offered by public companies and allow investors to buy stock directly from a company without going through a broker. Shareholders are then allowed to reinvest dividends to buy more stock.

Moneypaper also runs The Moneypaper Direct Invest Service, which helps people enroll in these direct investment plans for a fee. Nelson will manage the fund along with David Fish, the executive editor of Moneypaper, and Rod Drysdale, chief financial officer of Temper of the Times Communications, the broker/dealer that executes the trades for the Direct Invest Service. Nelson is president of the adviser, The Moneypaper Advisors.

Stocks in the Moneypaper 63 Stock Index, which was started at the beginning of 1994, are not only those that have direct investment plans but also those that produce a well-diversified portfolio and are what Nelson calls "investor-friendly." Investor friendly stocks are those of companies whose products an investor would want to buy.

Companies listed in the index include Coca-Cola, Exxon, Home Depot, Intel, Johnson & Johnson and Philip Morris. From Jan. 1, 1994 to Oct. 22 the index gained 147 percent compared to 131 percent for the S&P 500, according to Moneypaper statistics.

The fund will not impose an initial sales charge, but shareholders will be subject to a two percent fee if they redeem their shares before three years and a one percent charge if they cash out before five years. The fund is technically a passively managed fund and is charging only 70 basis points in management fees. But, portfolio managers will consider three factors when deciding how to invest shareholders' money, according to fund officials.

The managers will distribute most of its money evenly in stocks in the index and leave a small amount for redemptions. However some of the distribution will also be calculated with a proprietary model called "INVEST%". Under that model, those stocks in the index which are cheapest compared to their 52-week high are given the most weight. At the end of each quarter, any "excess uninvested cash" will be invested in this manner, fund officials say.

Moneypaper is getting into the fund business even though for years, Nelson's publications have criticized funds for being tax-inefficient and providing too little control for investors. Nelson says the MP 63 Fund addresses these problems by being passively managed and encouraging people to stay invested with back-end fees. Many of Nelson's investors use the fund in individual retirement accounts. Those who invest in direct investment plans cannot shelter their investments in IRAs, and that was one of the reasons her company is creating the fund, she says.

The fund is being distributed through American Data Services of Hauppauge, N.Y. and is expected to be introduced by the end of the year.