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Kinetics Charts Course Without Jacob


When Ryan Jacob, portfolio manager of the Internet Fund of New York, left Kinetics Asset Management this month to start a money management company of his own, the fund appeared to have lost one of its greatest assets. But since that announcement, Kinetics has made a number of moves to forge ahead without its star money manager.

The company has hired three executives from Chase Manhattan Bank and is attempting to establish a well-known brand that transcends the publicity surrounding the fund's performance under Jacob.

In late June, Kinetics hired Steven Samson to be its president and chief executive officer, taking him from Chase Global Asset and Mutual Funds, where he was managing director. In addition, Lee Schultheis, who was director of business development for Vista Funds Distributor, the distributor of the Chase Vista Funds, joined Samson at Kinetics as managing director and chief operating officer and Brooke Connell, formerly vice president of product management and development for the Vista Funds, has been hired as senior vice president of business development.

The departure of a star portfolio manager from a fund could make investors nervous. The $725 million Internet Fund had outstanding performance under Jacob, averaging a 98.23 percent return annually.

But Samson said Jacob's departure did not make him nervous.

"It was, I believe, a unique opportunity in the investment management business," said Samson. "We believe we're just beginning to scratch the surface."

Samson plans to develop Kinetics' product line and to establish the company as a niche player in the mutual fund world. Kinetics will run a print advertising campaign in The Wall Street Journal and The New York Times as well as in local publications to build brand awareness, Samson said.

Despite Jacob's departure, Kinetics will maintain the fund's investment style under the management of Peter Doyle, Kinetics co-founder, said Samson. Kinetics has no plans to hire a new portfolio manager and instead is assembling a management team to work with Doyle.

Kinetics is also creating three new funds, none of which have yet received SEC approval. Two of the funds will be Internet-related, according to Samson. One will invest in companies that create infrastructure for the Internet. The other will invest in companies that are benefiting from the Internet and electronic commerce.

The second fund should appeal to a wide audience since the companies the fund will invest in will be household names like Charles Schwab, The New York Times Co. and Barnes & Noble, Samson said. The fund will be marketed as a growth fund that can be used as one of an investor's core holdings.

The third fund, which Samson said is in registration with the SEC, is not related to the Internet. That fund will be a medical fund specializing in companies looking for a cure for cancer.

"Our broad goal is to be recognized as an innovative leader in this industry," Samson said. "You don't have to be a Fidelity to be successful in this area."

The Internet fund's performance has generated considerable publicity and new cash. It is distributed directly, without a sales load, through fund supermarkets such as Fidelity, Jack White, DLJ Direct and Waterhouse.

Jacob's departure has not slowed the fund's growth, Samson said. The fund grew by over $100 million in a 30-day period ending July 16, Samson said. He could not differentiate net sales from asset growth due to investment return. Jacob's departure was announced June 24.

In leaving Chase, Samson is taking a risk on a company that has only existed a few years and now only has one fund. At Chase, which he joined in 1993, Samson helped to build a $5 billion mutual fund family into a $50 billion fund family.