Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, July 8, 1990                   TAG: 9007040013
SECTION: BUSINESS                    PAGE: E1   EDITION: METRO 
SOURCE: The Baltimore Sun
DATELINE:                                 LENGTH: Medium

MUTUAL FUND OFFERING LONG INSURANCE PLAN

Known as the Lord Abbett Equity Fund, the fund guarantees that investors can participate in the stock market for 10 years and at least get their money back.

The guarantee comes in the form of a 10-year insurance policy with Financial Security Assurance Inc., a New York-based company that has insured more than $15 billion in financial securities, primarily bonds.

Last month, the fund attracted $90 million, according to company officials, primarily from individuals who typically invest in certificates of deposit and money-market accounts offered by banks, which provide federal deposit insurance of up to $100,000.

"We did expect higher sales - maybe another $100 million to $200 million," said John Walsh, a partner in New York-based Lord Abbett and manager of the new fund. "But this tells us that individuals still are not ready to invest in equities and there's a good chance we might want to do another fund before the year is out."

The fund likely would have emotional appeal for unsophisticated investors, said Richard Compisi, manager of retail sales at Legg Mason Inc. in Baltimore.

"As an effective investment tool, I'm not sure of the value of an insurance policy," he said. "But it's probably fairly powerful in getting people to overcome their basic fear of the stock market and to put their money in mutual funds. I wouldn't be surprised in six months to a year if there were 25 different investment companies doing the same thing."

Over the past few years, several closed-end mutual funds, such as unit trusts and annuities, have offered investors a minimum break-even return by investing half their initial investment in zero-coupon bonds, which guarantee a fixed return after a certain period.

"But this is the first fund that, in itself, is insured," said Michael Lipper, president of Lipper Analytical Services, a mutual fund rating agency in New York.

The insurance policy enables the company to put at least 80 percent of the mutual fund's assets into common stocks instead of tying up half of the assets in fixed-income vehicles.

Mutual funds charge investors annual management fees, usually a small percentage of the investment. The fee for the Lord Abbett fund includes a 0.5 percent charge for insurance.

While Lord Abbett has a good long-term investment record, its new fund, which has a 1.58 percent annual cost, is relatively expensive, Lipper said. By comparison, the median expense ratio for mutual funds with $100 million to $250 million in assets is 1.1 percent, he said.

The new fund was modeled after Lord Abbett's Affiliated Fund, which has reported a 17.3 percent average annual return for the past 15 years, Walsh said.