Raymond James packages top picks
The company will offer a mutual fund composed of many of the stocks that it gives its highest rating.
By HELEN HUNTLEY
Published May 20, 2006
The research analysts at Raymond James & Associates tout so many promising stocks that it takes a bundle of cash to invest in them all. Now there's a low-cost alternative: buy shares in a mutual fund that will do the job for you.
Raymond James said Friday it raised $200-million at $20 a share for the new Claymore/Raymond James SB-1 Equity Fund, which will invest almost exclusively in the 100-odd stocks recommended by Raymond James analysts as "Strong Buy-1" - the company's top rating.
"We've been thinking of doing this for a long time, given the performance of our research picks over the years," said Jeff Trocin, who heads Raymond James equity capital markets group. To do it, Raymond James is creating its first closed-end mutual fund.
Unlike a traditional open-end fund in which shares are bought from and sold to the fund company, a closed-end fund has a fixed number of shares that trade like stock. Investors pay brokerage commissions to buy or sell. The new fund began trading Friday on the New York Stock Exchange under the symbol RYJ.
Trocin said the company liked the format because a closed-end fund doesn't have to keep cash to handle redemptions. By being fully invested, it can come closer to tracking the performance of the research recommendations. Although it is not an index fund, the manager's discretion is very limited. That makes the fund somewhat unusual among investment alternatives.
Fund investors won't be getting the benefit of any inside information. In fact, the fund plans to make portfolio changes twice a month rather than every time an analyst rating changes.
Raymond James will act as sub-adviser, but chose Claymore Advisers LLC, an affiliate of Claymore Securities Inc. in Lisle, Ill., as manager. Trocin said Raymond James wanted a third party to make the trading decisions to avoid potential conflicts of interest.
As it trades on the market, a share of a closed-end fund may sell for more or less than the value of the securities it represents, known as the net asset value. Initially, the Raymond James fund is trading at a premium; it closed Friday at $21.75 a share. The starting net asset value is $19.06 after subtracting sales charges and expenses from the $20 offering price. Closed-end funds more typically trade at a discount within a few months of the offering, so there is some risk in jumping on the bandwagon.
To protect shareholders, the Raymond James fund has a very unusual provision allowing conversion to an open-end fund after an extended period of trading for less than 90 percent of the net asset value.
Claymore entities manage $14-billion in assets through closed-end funds, unit investment trusts, mutual funds and separately managed accounts.
Helen Huntley can be reached at email@example.com or 727 893-8230.