UK investors are being given the chance to make their fortunes or burn their fingers in the volatile Internet sector with the launch of the first European fund dedicated to Net shares.

NetNet's Paul Cook: "Never too late to invest"

The specialist investment manager Framlington has announced an opportunity to invest in the NetNet Fund, which launches on Monday with a three-week offer period.

The fund will initially mirror the NetNet Fund launched in 1996 in the US by Munder Capital Management, an investment house with a 49% stake in the Framlington Group.

US fund has tripled in value

The NetNet Fund has grown by more than 300% in less than three years with an average annual return of 106%. While it is possible to buy individual shares in US companies from the UK, investment in American mutual funds can be difficult for non-US residents.

Portfolio manager Paul Cook maintains there is still plenty of growth left in a sector which keeps hitting new highs.

"After the first quarter [in 1996], we started getting questions about whether or not it was too late to invest. We were up 30% and people thought they had missed it. So since then, we have had nothing but the same questions," he says.

"I really believe the Internet is only just starting to emerge. We are just starting to realise the advantages that go with this ubiquitous connection to one another."

Online and offline shares

He admits some of the shares can be overvalued: "There are times when these stocks get extended...we try then to rotate into other companies."

Thirty per cent of the fund is invested in what Cook describes as "pure-play" shares such as Amazon and Yahoo, which were created on the Web. The rest is made up of companies providing the underlying technology, such as Cisco Systems, and "offline brands" such as The Gap, which have potential for online sales.

He rates the most value at present to be in shares of companies providing the Internet backbone such as MCI WorldCom and Sun Microsystems. VerticalNet is also a favourite share: "It's trying to become the AOL of the business community."

While the shares in the Framlington fund will all be American listed, Cook says they will be looking at European-based investments.