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Some funds raising ante to enter their game

One in an occasional series

As the game of mutual fund investing keeps getting bigger, opportunities to play for very small stakes are becoming harder to find.

Consider the Twentieth Century Funds in Kansas City, the nation's sixth-largest no-load fund family, with assets of more than $23-billion.

For most of its 36-year history, Twentieth Century set no minimum investment to open and maintain an account. Now, however, it has adopted a $2,500 minimum, except in specialized accounts such as automatic monthly investment and tax-deferred retirement savings plans.

It was "a difficult and emotional issue," says spokesman Gunnar Hughes. "But we began to see that we had hundreds of thousands of small accounts that people were not adding to.

"The business has changed. The costs of service have skyrocketed, and it's become more and more expensive to run a fund."

At another big no-load group, run by Benham Management Corp. in Mountain View, Calif., the minimum amount to open an individual retirement account rises from $100 to $1,000 effective Nov. 1.

"Low-balance accounts are costly to maintain," Benham says in the current issue of its quarterly newsletter.

Quite a few choices remain available to the smallest investors. The Berger Funds in Denver and the Delaware Funds in Philadelphia, for example, offer funds with minimum antes of just $250.

Much more common, however, are minimums of $1,000 to $2,500 for funds aimed at the broad investing public. Funds marketed to investing institutions generally require $25,000 to $1-million or more.

Even at a $2,500 minimum, most fund organizations say small accounts are money-losers. If 0.50 percent of a fund's assets are taken out each year to meet expenses, people in the business note, a $2,500 account contributes just $12.50 to cover costs that may run to $50 a year or more.

So, the argument goes, bigger investors in a fund wind up subsidizing the small fry by getting a slightly smaller return on their investment.

Then, too, there is the argument that people who can't come up with $1,000 to $2,500 maybe aren't ready to be investing in mutual funds, or at least not in stock and bond funds subject to market risk.

But no matter how convincingly you advance any of these cases, it would make sense for fund managers not to be too eager to increase their minimums. After all, small investors are the foundation on which they have built their success.

Funds have prospered precisely because they appealed to a mass audience that did not always find the welcome mat out at other types of financial institutions and securities markets. If the funds start to "outgrow" this constituency, they may be headed for trouble.

There is some evidence, anyway, that funds requiring big initial investments don't achieve noticeably better results than their lower-stakes competitors.

The Value Line Mutual Fund Survey recently studied performance over several time spans of a variety of stock and bond funds with minimums of $25,000 or more against those of $1,000 or less. "Neither group displayed marked superiority over any of the time periods considered," the service reported.

This suggests a heartening conclusion: Within the world of mutual funds at least, it appears that small customers don't get inferior service in comparison to the wealthier clientele.

"Obviously, funds have to be considered on their individual merits and characteristics," Value Line observed. "Some low-minimum families boast excellent performers, while some institutional funds are laggards.

"High-minimum funds are, in the aggregate, cheaper to run, and that conveys a slight advantage _ one that is most visible on the bond side.

"But beyond checking expense ratios, investors who can afford to do so should ignore entirely a fund's minimum and focus on more important issues, such as whether a fund is a good fit for their needs."