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Mutual funds sell Enron on management concerns

Several mutual funds that once held large positions in Enron Corp have either liquidated or reduced their holdings, their confidence undermined in the management and transparency of the once high-flying energy giant, fund managers said on Friday.

Portfolio managers said they were trying to balance concern about how the company managed its affairs against Enron's core strength as an energy trader.

"We hold some of it, but not as much as we did in the past," Ken Zschappel, portfolio manager of the $11-billion AIM Constellation told Reuters.

According to the most recent Morningstar data, 635 mutual funds, including multiple share classes, held 22 per cent of Enron's outstanding shares.

Shares of Enron, North America's biggest buyer and seller of natural gas and electricity, began slumping in May from difficulties culminating in the resignation its chief executive officer Jeff Skilling three months later.

The sell-off reached a climax this week with a 27 per cent decline that sent the stock all the way down to $25.15, within sight of the three-year lows it had touched in September.

A series of articles in the Wall Street Journal this week alleged possible conflicts of interest by Chief Financial Officer Andrew Fastow, who until recently ran a limited partnership that bought assets worth hundreds of millions of dollars from Enron. The company has said nothing improper occurred.

AIM Constellation's Enron stake accounts for about 0.50 per cent of its total portfolio, around half of the average holding in any other stock in the fund, Zschappel said. "It's a weak holding," he said, citing problems with transparency.

"It's very difficult to analyze Enron. The numbers are not broken out as well as people would like," he said.

He said the company runs its basic business well. "But there are enough question marks to be prudent. You don't want to surround yourself with stocks that have issues," Zschappel said.

Rick Giesen who manages the Munder Power Plus fund, said he liquidated his position in Enron more than a month ago at around the low $30s. "I thought getting back in at $25 might be a reasonable level. I still think there's more bad news to come," he said.

David Ginther, assistant portfolio manager of the $5.9-billion Waddel & Reed Adviser Core fund said he cut his position in Enron in half about two weeks ago. "There are so many issues out there. You're nervous with it being such a marginal performer," he said.

The American Century Ultra Investor fund, with $24 billion of assets under management, liquidated its holdings in Enron in either July or August, according to spokesman Brian Spano. "Enron is no longer a member of the portfolio," he said."

According to Morningstar, Enron shares represented a 0.50 per cent holding in the fund as of June 30, but by then the fund had already sold nearly 4.4 million shares.

Janus Capital had already cut its holdings in Enron earlier this year. As of June 30, Janus funds overall held 42.8 million Enron shares, compared with 51.9 million at the end of March.

A spokeswoman for Putnam Investments said the company does not comment on specific stocks. According to Morningstar Putnam Investors, Putnam Voyager and Putnam New Opportunities held Enron shares at the end of June.

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