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Just short of one year after its launch of three online mutual funds, Asset Management of Palo Alto, Calif., adviser to the fund family, may have decided to get out of the mutual fund business. The four funds in the fund family have been offered exclusively via the Internet. Asset Management is a wholly-owned subsidiary of Corp. Corp. is also the parent of First Western National Bank of LaJara, Colo.

The firm has decided to discontinue its mutual funds so that it can focus on the domestic and global payment services it offers through its PayPal business - the electronic payment business which gained control of in March through its acquisition of Confinity, also of Palo Alto, according to an Oct. 27 prospectus amendment filed by

All four of the funds will stop selling shares to investors as of Nov. 15, according to the filing. Any remaining shareholders in the funds on Dec. 1, 2000 will have their shares automatically redeemed and returned, the filing said.

But is now denying that it intends to close the funds.

"We are not closing the funds on the first of December," said Vincent Sollito, an spokesperson in a telephone interview Nov. 1. "We are looking at consolidation strategies and to whom to market the funds. No decision to close the funds has yet been announced."

Sollito said that the Oct. 27 amendment filing appeared to have been made prematurely and that a follow up filing might be necessary to clarify's position. has dramatically expanded the offering of its funds by making them available to its current 4.2 million PayPal customers, said Sollito. The PayPal website says only that the money market fund is currently offered to PayPal customers.

The fund family includes three index funds - the U.S.A. Bond Fund, the Premiere S&P 500 Fund and the International Index Fund. The bond and S&P 500 funds were introduced on Nov. 18, 1999 along with the group's fourth fund, a money market fund which had $26 million in assets under management as of June 30. The International Index Fund were introduced on April 3 of this year.

The three index funds had total combined assets of under $3 million, according to the fund group's annual report filed with the SEC June 30. All of the funds were established as "feeder" funds under a master/feeder fund management arrangement. The master funds have been advised since inception by Barclay's Global Fund Advisors of San Francisco, a subsidiary of Barclay's Global Investors.

While's October filing announced that it would discontinue its mutual funds, it also said that it would probably relaunch a similar money market fund at some point under the PayPal name and tie it in with the PayPal program's services.

PayPal was founded in December 1998 as a means of moving money securely over the Internet. Both individuals and businesses can use the PayPal services to send money to others.

In mid-1999, first gained prominence when it announced plans to offer one of the first mutual fund groups designed and built specifically for online investors. All of the funds required that their investors agree to receive all fund-related information and statements in an electronic format via the Internet.

In April,'s struggles to operate online funds began surfacing. In an SEC filing in May, announced plans to add a $2.00 per quarter account maintenance fee on its three index funds for accounts with balances below $5,000. The fee was to take effect at the end of September. It is unclear whether that fee took effect as announced.

In addition, in May, just six months after its launch, announced it would seek to raise the annual unitary fee - a bundled fund management fee - plus other operating expenses it was charging on its money market fund, from 0.50 percent to 1.80 percent to pay for extra services it anticipated adding (MFMN 6/5/00.) expected to add unlimited checkwriting, a Visa debit card and an e-mail money transfer service to the services offered with its money fund.

It is unclear whether the higher unitary fee went into effect on July 21 as had planned.

People should not draw conclusions about the challenges of operating mutual funds over the Internet from's possible decision to get out of the fund business, said Brian Levy, president and chief operating officer at of San Francisco. introduced its own proprietary family of four online mutual funds at about the same time last year as, but discontinued its S&P 500 fund in April after failing to attract enough assets to adequately replicate the index.

"Their closing of the [] mutual funds is more of an affirmation of their success in the payment arena rather than anything else," Levy said.

Online mutual funds have proven to be viable innovations, he said.