Short Interests: Smooth sailing for Morningstar cruise

Although many cruise ships are suddenly morphing into the S.S. Stomach Bug, Morningstar Inc. is going full speed ahead with its plans to sail the Caribbean.

Next month, the Chicago-based fund tracker will hold its third annual investment cruise. Advisers and investors who attend the seven-day cruise will have the opportunity to schmooze with industry stalwart John C. Bogle, founder of The Vanguard Group Inc. in Malvern, Pa.

They will also get to attend investment seminars run by a host of Morningstar analysts – in between, of course, stops to exotic locales such as St. Lucia, St. Maarten and Tortola.

Given that many popular cruise ships have been forced back into port in recent months due to outbreaks of severe gastrointestinal distress, one has to wonder if that factor has affected enrollment for the upcoming cruise.

“Amazingly, it has not,” says Marianne Flood, conference manager at Morningstar.

So far, about 120 people have signed up. If they all go, the cruise will be the best-attended in Morningstar’s brief history of hitting the high seas.

“We are working with a very reputable company, and they are taking all the necessary precautions to make sure no one gets sick,” she adds.

Don’t be fooled

Even a blind squirrel finds a nut sometimes.

How else can you explain the fact that the $1 million American Heritage Fund was up 42.86% year-to-date as of last Wednesday, placing it in the first percentile of its world-stock category?

The fund has been the laughingstock of the fund industry for years, says Russel Kinnel, director of fund analysis with Morningstar Inc.

Mr. Kinnel suggests that the fund be taken off the market.

The fund, which finished in the 100th percentile of its category six out of the past eight years, owns shares only of five companies. Over 80% of its assets are invested in the American depositary receipts of one company, Napa, Calif.-based Senetek PLC, a British-registered biopharmaceutical concern.

The fund also has a startlingly high expense ratio of 12.61%, according to Morningstar.

Adviser bait

Rydex Funds in Rockville, Md., last week filed with the Securities and Exchange Commission to offer a registered hedge fund pegged to the S&P Hedge Fund index.

The new Rydex Capital Partners Sphinx Fund, expected to be available in April, was developed with the financial adviser in mind.

According to the filing, the fund will mirror the 40 funds represented in the S&P Hedge Fund index. Access to the fund will be limited to investors with a net worth of at least $1 million, and the initial minimum investment will be $25,000, with a $15,000 minimum on subsequent investments.

Management fees weren’t disclosed in the filing.

Rydex obtained licensing rights to the five-month-old index from PlusFunds Group Inc. in New York. The new Rydex fund represents a partnership with PlusFunds and could lead to other variations on the Sphinx Fund, according to PlusFunds chairman Christopher Sugrue.

He says the next generation will include an index fund with sales loads aimed at commission-based brokers.