Epoch Plans Optical Fund
Investors may soon have another option for mining the optical networking industry. Investment bank Epoch Partners has filed an S-1/A with the U.S. Securities and Exchange Commission to open the Optical Equipment NETS Trust, a fund based on shares in all of the leading public companies in the segment.
If the fund gets approved it could be among the first to launch in the U.S. Up to now, there have been only a selected number of optical networking funds worldwide, not all of them easily accessible to U.S. investors (see A Stock Fund as Pure as Light).
According to the filing, dated December 18, Epoch's not opening a mutual fund in the strict sense of the word. Instead, the fund will have its own shares, called Optical Equipment NETS, represented by the ticker symbol OPN. Each group of 100 OPN stocks (called a round-lot) will represent a specified number of shares in the following selected optical networking companies:
- ADC Telecommunications Inc. (Nasdaq: ADCT)
- Avanex Corp. (Nasdaq: AVNX)
- Avici Systems Inc. (Nasdaq: AVCI; Frankfurt: BVC7)
- Ciena Corp. (Nasdaq: CIEN)
- Cisco Systems Inc. (Nasdaq: CSCO)
- Corning Inc. (NYSE: GLW)
- Corvis Corp. (Nasdaq: CORV)
- Finisar Corp. (Nasdaq: FNSR)
- JDS Uniphase Inc. (Nasdaq: JDSU)
- Juniper Networks Inc. (Nasdaq: JNPR)
- Digital Lightwave Inc. (Nasdaq: DIGL)
- Lucent Technologies Inc. (NYSE: LU)
- MRV Communications Inc. (Nasdaq: MRVC)
- New Focus Inc. (Nasdaq: NUFO)
- Newport Corp. (Nasdaq: NEWP)
- Nortel Networks Corp. (NYSE/Toronto: NT)
- ONI Systems Inc. (Nasdaq: ONIS)
- Redback Networks Inc. (Nasdaq: RBAK)
- SDL Inc. (Nasdaq: SDLI)
- Stratos Lightwave LLC (Nasdaq: STLW)
- Sycamore Networks Inc. (Nasdaq: SCMR)
The number of shares in each company will differ, and they'll be weighted within the fund in order to reflect the relative equity market values of the companies included. For example, in late October, when Epoch's prospectus seems to have been written, the firm proposed that one round-lot of OPN shares would contain 7 Corning shares, weighted at 9.96 percent each; 10 Nortel shares, weighted at 9.22 percent; 4 Corvis shares, weighted at 4.92 percent; and so forth down the line.
The prospectus says the fund will offer investors greater flexibility, lower transaction costs, and tax benefits, compared to investing in each of the companies separately. Of course, the fund requires investors to place their faith in the fund's managers to maintain a winning balance of shares and to assign proper values to them. Relinquishing control could be a problem for some optical investors, who are used to tracking this volatile market for themselves.
Besides the companies listed above, the prospectus says the fund will eventually include shares in the company that survives the planned merger of JDS Uniphase with SDL; shares in Agere Systems, the spinoff of Lucent's Microelectronics unit; and shares in MRV's subsidiaries Optical Access Inc., which makes wireless gear, and Luminent Inc., a maker of components. (Luminent went public in November (see Luminent's Dull Debut).
Epoch Partners will administer and sell the fund to investors. Underwriters include Charles Schwab (NYSE: SCH) and Advanced Clearing Inc., a subsidiary of Ameritrade Holding Corp. (Nasdaq: AMTD).
No date for launch of the fund's IPO has been given, and Epoch was unable to provide further details by press time.
-- Mary Jander, senior editor, Light Reading http://www.lightreading.com