ROANOKE TIMES

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

DATE: MONDAY, April 2, 1990                   TAG: 9003310052
SECTION: BUSINESS                    PAGE: A7   EDITION: METRO 
SOURCE: Carole Gould The New York Times
DATELINE:                                 LENGTH: Medium


MUTUAL FUNDS SEEK GOLD IN GARBAGE

Spinning gold from garbage is the alchemy of the 1990s.

That's the clear message from money managers, who are beginning to bet heavily on the environmental services sector.

"Cleaning up our polluted planet will be the growth industry of the 90s," said Donavon McKerchar, portfolio manager of Oppenheimer's Global Environmental Fund, launched last month.

Several small funds focus on the environment.

The $13 million New Alternatives Fund, a father-and-son operation that has been based in New York since 1982, invests primarily in alternative energy companies.

The $2 million SFT Environmental Awareness Fund, in King of Prussia, Pa., was set up at the end of 1988.

The Progressive Environmental Fund, part of the Schield Management Co. in Denver, will begin investing this month.

Its chairman, Glenn Cutler, says 5 percent of the fund's management fee will be donated to environmental groups each year.

(And, yes, the fee, at 0.95 percent, is one of the highest among environmental funds.)

But the big players ignored the sector until last June, when Fidelity launched its Select Environmental Services Fund.

The Freedom Environment Fund, part of the John Hancock group in Boston, followed in September.

The Oppenheimer fund just began investing and Alliance Capital Management is to launch the Global Environment Fund, the first closed-end environmental fund, in the next two months.

Why the sudden interest? Fund managers say environmental housekeeping has become the world's top priority and that each time there is another environmental scare - the Exxon oil spills, radon, asbestos, acid rain - the public calls for tougher regulations and higher public spending.

"Public opinion has given birth to this industry, and it's accelerating," McKerchar said.

With the environmental advocates as catalysts, public awareness is driving political action.

A big part of the interest in stocks of environment companies, of course, stems from the government's willingness to foot the cleaning bill.

"Hundreds of billions of dollars are pouring into a brand-new industry," said Larry Greenberg, who manages the Fidelity fund.

Other countries, too, plan heavy spending.

So the funds are looking for gold in the garbage heap.

They invest in companies in the business of solid- or hazardous-waste management, pollution control, paper recycling, engineering and construction, water technology and alternative energy sources.

Although the year-to-date returns for environmental funds have lagged stock funds, Michael Hoffman, pollution control and specialty chemicals analyst for Soloman Brothers, said "most of the poor performance is strictly a function of profit-taking of stocks that made 50 to 60 percent runups in 1989."

He said that, as a group, environment stocks would have "sound earnings" for 1990, although they would not record the big gains that they did last year.

The largest holdings of Fidelity's $85 million fund are Laidlaw Industries, a Canadian company, and Chicago-based Waste Management Inc., both leaders in solid- and hazardous-waste disposal.

Greenberg, the fund's manager, says both companies are well positioned to profit from two industry trends: privatization, as more municipalities turn over their garbage business to private companies, and consolidation of the 10,000 mom-and-pop garbage collection companies, which is taking place because increased regulations are making smaller companies less competitive.

David Beckwith, who manages the Freedom Fund, likes Zurn Industries, based in Erie, Pa., a manufacturer of equipment and instruments used in waste energy plants.

He expects the company to post strong gains as more plants are built and says that, as a supplier, Zurn can pursue its business "without the attendant regulatory headaches" that plague most environmental service companies.

Another favorite: Safety Clean, a Chicago-based recycler of liquid hazardous waste.

Andrew Groshans, manager of the SFT, likes the Chambers Development Corp., a Pittsburgh-based solid-waste management company.

He also likes Calgon Carbon, also in Pittsburgh, the world's largest provider of activated carbon used in water-treatment systems.

The New Alternatives Fund is run by two ex-lawyers who began investing $100,000 gathered from friends.

Its largest holding is Wellman Inc., in Clark, N.J., the nation's largest recyclers of plastic and synthetic fibers.



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