Morgan Stanley Dean Witter recently announced plans to launch a new line of 'stock basket' investments, in order to try and topple Merrill Lynch's HOLDRs (Holding Company Depositary Receipts) from the top of this successful new asset category.
HOLDRs are basically exchange traded 'baskets' that purchase stocks in specialised and narrow market sectors, and so, effectively become their own indices. They differ from exchange traded funds in that they are not registered mutual funds, and so are not subject to the Investment Company Act of 1940, which caps the exposure a mutual fund can have to any one stock as a percentage of its total portfolio.
A Morgan Stanley Dean Witter insider said that the company plans to launch its own proprietary stock baskets in March, selling in round lots of 100 shares at roughly $15-20,000, but declined to reveal the brand names for the products. The American stock Exchange currently lists all 15 of Merrill's HOLDrs, but would not comment on whether it would list similar investments created by MSDW.
Fidelity and Schwab, two other mutual fund giants, have also announced that they are preparing to launch their own stock baskets in the near future. 'We are not trying to compete with mutual funds' said Tracey Esherick, executive v.p. of Fidelity's online brokerage operations, explaining that the forthcoming products will be designed for people wishing to take advantage of the stock picking expertise of top analysts, whilst retaining the control and convenience of trading individual stocks.
Fidelity plan to roll out their offering of five to ten baskets, made up of stocks picked by analysts from Lehman Brothers and Fidelity in June, and Schwab is already conducting a pilot study in the Washington D.C. area, offering investors two 'ready made' stock baskets, and following up with e-mail advice on how to trade stocks in the portfolio. .
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