Highlights and Commentary

By Roy Weitz

(Originally posted April 1, 2003) [Archive Table of Contents]
The mutual fund industry has a bad hair month: On March 12, the House Financial Services Committee held public hearings on the fund industry, and it might have been designated Dump on Mutual Funds Day.....In about four hours of testimony, John Bogle and a cast of supporting characters managed to raise just about every major issue that the fund industry wishes would go away.....Among the ideas floated at the hearing:*

• Increase the number of independent fund directors, and require the top director to be independent of fund management;
  
  
• Ban the use of "soft dollars," which essentially allows fund companies to subsidize their operating expenses through a rebate of investor-paid brokerage commissions;
  
  
• Disclose all fund transaction costs, including commissions and market-impact costs;
  
  
• Disclose how fund managers are compensated;
  
  
• Disclose manager holdings of fund shares;
  
  
• Restrict or ban the use of 12(b)-1 fees;
  
  
• Restrict or ban "revenue-sharing" payments, which are basically bribes that fund companies pay brokers in order to buy preferred status for their funds.

Many Congressional hearings generate headlines, but those headlines seldom translate into action.....The March mutual fund hearings have already generated some follow-up: The Representative in charge of the hearings (Richard Baker) has sent a four-page, 18-point letter to the SEC chairman, asking for comments on all of the issues noted above, plus several others.....The SEC has been asked to respond by June 11.....It looks like the SEC will have to go on the record about all of these sensitive issues, and we can hardly wait.
* Sara Hansard, InvestmentNews, March 24, 2003

[Read Baker's letter to the SEC, above, or view all of the March 12 hearing testimony]
(Adobe Acrobat Reader required for both)

There was another issue prominently discussed at the March 12 Congressional hearings, above: The total spinelessness of mutual fund directors when it comes to negotiating fund management fees.....Warren Buffett didn't testify at the hearings, but he had a lot to say about fund directors and fund fees in the 2002 annual report of Berkshire Hathaway Inc.....What follows is part of Buffett's letter to Berkshire Hathaway shareholders.....It's a lengthy excerpt, but well worth your time:

"These [mutual fund] directors and the entire board have many perfunctory duties, but in actuality have only two important responsibilities: obtaining the best possible investment manager and negotiating with that manager for the lowest possible fee. When you are seeking investment help yourself, those two goals are the only ones that count, and directors acting for other investors should have exactly the same priorities. Yet when it comes to independent directors pursuing either goal, their record has been absolutely pathetic. Many thousands of investment-company boards meet annually to carry out the vital job of selecting who will manage the savings of the millions of owners they represent. Year after year the directors of Fund A select manager A, Fund B directors select manager B, etc. … in a zombie-like process that makes a mockery of stewardship. Very occasionally, a board will revolt. But for the most part, a monkey will type out a Shakespeare play before an “independent” mutual-fund director will suggest that his fund look at other managers, even if the incumbent manager has persistently delivered substandard performance. When they are handling their own money, of course, directors will look to alternative advisors – but it never enters their minds to do so when they are acting as fiduciaries for others... ...Investment company directors have failed as well in negotiating management fees (just as compensation committees of many American companies have failed to hold the compensation of their CEOs to sensible levels). If you or I were empowered, I can assure you that we could easily negotiate materially lower management fees with the incumbent managers of most mutual funds. And, believe me, if directors were promised a portion of any fee savings they realized, the skies would be filled with falling fees. Under the current system, though, reductions mean nothing to “independent” directors while meaning everything to managers. So guess who wins? Having the right money manager, of course, is far more important to a fund than reducing the manager’s fee. Both tasks are nonetheless the job of directors. And in stepping up to these all-important responsibilities, tens of thousands of “independent” directors, over more than six decades, have failed miserably...

As usual, Buffett's aim is deadly accurate, and even Roy has taken a shot at this issue:*

"The publisher of FundAlarm.com, a website that monitors the mutual fund industry, says mutual fund directors have not been aggressive in negotiating lower management fees with fund advisers. ``I...did work for several mutual funds on the tax side when I worked for a large accounting firm, and I know from personal experience that those fund companies were merciless in getting our fees down,'' says Mr. Weitz, a lawyer based in Tarzana, Calif. ``I'd like to see that same kind of merciless attention paid to management fees. After all, it's the biggest fund expense, and it's the one [directors] have the most control over,'' he adds. "

Why don't more people focus on directors and fund fees?.....Because it's the equivalent of a nuclear bomb for the fund industry.....Imagine, for a moment, if the directors of every T. Rowe Price or Janus or Fidelity fund truly negotiated the lowest possible fee for investors, and were truly willing (or even required) to look beyond in-house managers to find the best investment talent.....In a competitive world like that, fund management fees could easily drop by 50% overnight, which means that the revenue of the fund companies would drop by a similar percentage, and the market values of the companies would plummet.....Under the current, collegial system, directors who aggressively stood up for fund investors would decimate the fund companies that invited them to be directors in the first place.....Fund directors will never become "shareholder-oriented" (Buffett's term) unless the SEC, or Congress, figures out some way to give them a firm, and lasting, kick in the pants.
* "Mutual fund fee growth sowing investor discord," Frederick P. Gabriel Jr., InvestmentNews, February 10, 2003


All of this talk about useless fund directors might seem a bit theoretical, so let's look at a recent, real-world example.....In January 2003, the directors of two First American funds -- IMMDEX and Core Bond -- approved a merger.....IMMDEX was the fund that the directors wanted to kill, even though it had a better one-, three-, and five-year performance record than Core Bond, and even though IMMDEX had a lower expense ratio.....The expense ratio shenanigans deserve a few words of their own: The proxy materials sent to IMMDEX shareholders made it look like the merger would raise expenses by 12 basis points (from 0.58% to 0.70%), which is bad enough for a bond fund, but the actual increase is much higher*.....That's because a fee waiver was in place for IMMDEX up until December 2002 (just a month before the merger was proposed), and the fund's expense ratio, prior to December 2002, was 0.48%.....Suspicious minds will assume that the fee waiver was abandoned in anticipation of the merger, so that the resulting jump in expenses wouldn't seem quite so outrageous, and that's almost certainly what happened.....In the end, the directors of IMMDEX approved (and recommended to their shareholders) a merger with an inferior fund, and a 46% increase in expenses (from 0.48% to 0.70%).....How's that for an exercise of fiduciary duty?
* Figures are for Class "Y" shares
Source: "Funds merge, fees get higher," Kathleen Gallagher, jsonline,com (Web site of the Milwaukee Journal Sentinel), March 15, 2003


Our BS Meter goes wild: Neil Hennessy -- or, more accurately, Neil Hennessy's computer -- runs Hennessy Cornerstone Growth, and the fund's investment strategy could hardly be simpler.....From a universe of about 9,700 companies, Hennessy's computer first performs a value-type screen, and identifies all companies with a price-to-sales ratio of 1.5 or less.....From the survivors of the first screen, the computer then screens for all companies that have shown a modest degree of earnings momentum (i.e., earnings this year are higher than earnings last year, which is a growth-type screen).....Finally, the computer identifies the 50 companies with the best relative strength over the past year (a.k.a., earnings momentum), it invests 2% of the portfolio in each of those names, and it holds them until the next annual rebalancing.....For these services, investors pay Hennessy a management fee of 0.74%, or 74 basis points, which last year put about $1,764,000 into the bank account of Hennessy's management company.....In addition to the management fee, fund investors pay 0.46% in other expenses, for a total expense ratio of 1.20%.....Is this expense ratio too high for a portfolio that's run entirely by computer, and is touched only twice a year?.....Here's what Hennessy had to say about his fund's expense ratio, from a recent interview:

"Managing the money of a mutual fund is the easy part. Managing the company for the benefit of shareholders is what takes a lot of time, effort and money. On top of that, with all of the new regulations that are coming up, you can’t help having more expenses, especially a small company, because the accountants and attorneys are costing an arm and a leg more."*

If you're confused by what Hennessy is saying, that's OK, because we are, too.....The only "company" that Hennessy manages is his management company (Hennessy Advisors, Inc.), and he doesn't run that company to "benefit" fund shareholders.....He runs Hennessy Advisors, Inc., now a public company, to make a profit for himself and the other owners....Hennessy Advisors, Inc. provides a stock picking service, period, and for virtually everything else (administration, distribution, professional services) the fund pays its own way.....And even if Hennessy is correct about all of the "new regulations that are coming up," and even if those regulations do increase the fund's expense ratio, how does the prospect of future regulations justify the current expense ratio?.....Hennessey clearly has the right to charge whatever management fee he wants, and the performance of this fund has been excellent....Still, something seems wrong when a stock-picking system that requires $50 of data, and maybe 100 hours of work per year, commands a management fee of 74 basis points.....Hennessy is totally honest when he says, "Managing the money of a mutual fund is the easy part".....How about replacing the rest of his muddled excuse with some more honest talk: "Investors let me get away with charging 74 basis points, so I do."
* "Everything we do is going to be formula-based" (interview with Neil Hennessy), Rick Miller, InvestmentNews, March 10, 2002


From the Web site of the Merriman funds:
(underline added)



Looks like that "automatic mechanism"
took a few years off:
(Percentage losses of the Merriman equity funds,
from fund peak through today (9/00 - 2/03))

Merriman Leveraged Growth: -37.87%
Merriman Growth & Income: -28.32%


Beginning July 1, 2003, mutual funds will be required to disclose all of their proxy votes, and it took a long, noisy battle to get there.....For those investors who still think that it was all sound and fury, signifying nothing, we present the recent case of Analog Devices Inc.....Analog, located in Norwood, Massachusetts, makes signal-processing equipment.....A labor union, which owns some Analog common stock, submitted a proposal for shareholder vote at the company's annual meeting, and the proposal would have required Analog to expense future employee stock options.....The proposal was ultimately defeated, with about 61% of Analog's shareholders voting against it, and that might ordinarily provoke a response of "So what"?.....The interesting part of this narrative is the role of Fidelity Investments......Fidelity funds own about 19% of the Analog shares that voted on the stock option proposal, and if Fidelity voted against expensing options, Fidelity was clearly the shareholder that sent the proposal down to defeat.....Oh, and we should also mention that Fidelity runs the Analog 401(k) plan and, if Fidelity did vote against the shareholder proposal, it would have been supporting the position of the company management that hired them.....As expected, Fidelity has refused to disclose how it voted on the Analog proposal, something that won't be possible, starting soon.
"Fidelity's vote on Analog shareholder proposal draws scrutiny," Phyllis Plitch, Dow Jones Newswires, March 12, 2003


Every time the SEC turns over the valuation rock, it seems as if some additional worms crawl out.....The latest squirmy mess could be stable-value mutual funds.....First, some background.....We wrote about stable-value funds last September, and here's part of what we had to say:

"The typical stable-value fund seeks to achieve a high level of current income while preserving principal and maintaining a stable net asset value (NAV) per share.....Stable-value funds are often compared to money-market funds: Like money-market funds, stable-value funds attempt to maintain a constant NAV (for example, $10 per share).....But stable-value funds also seek a higher return"... ..."Most stable-value mutual funds invest in fixed-income investments with relatively short maturities (say, two to five years).....But even short-term fixed income investments can fluctuate in value, so managers keep their fund's NAV constant by entering into "wrap contracts" (also referred to as "book value maintenance contracts," by those who really want to impress their friends and neighbors).....The wrap contract is basically a financial leveling device.....If a stable-value fund sells a holding at a loss, in order to meet shareholder redemptions, the party on the other side of the wrap contract (often an insurance company) must reimburse the fund for that loss.....Conversely, if the fund sells for a gain, it must hand over the profit to the other side of the wrap contract."

Since the wrap contract is a new type of financial instrument, the SEC seems especially interested in how fund companies are valuing those contracts on the fund financial statements.....As with any asset, an inflated value for a wrap contract could mean that fund NAV was overstated, while an improperly low value could mean the opposite (i.,e., NAV was understated).....In either case, some fund shareholders would have been shortchanged.....If the directors of stable-value funds were paying attention, the valuation issue should have been a huge, red flag, and the directors should have nailed it down from the beginning.....What are the chances that the directors got it right?.....Pretty low, we'd say, but we doubt that huge dollars are involved even if some wrap contracts have been improperly valued.....In any event, this is a good time for the SEC to investigate and set some standards.....This is also another opportunity to see if fund directors were earning their pay.
"Stable-Value Funds Face Look Into Their Valuing of Portfolios," Bridget O'Brian, The Wall Street Journal, March 27, 2003


Our BS Meter explodes: Remember Merrill Lynch, the firm that brought you the disastrous and ill-timed Internet Strategies Fund, and the equally disastrous and ill-timed Focus Twenty fund?.....Well, it turns out that Merrill was recently thinking about introducing a stable-value fund but decided to hold off, pending the results of the SEC investigation (above).....Here's a quote -- we're not kidding -- from an executive of Merrill Lynch, explaining the firm's decision to delay its stable-value offering:

	"We don't want to launch a fund that is at risk of tainting the firm's asset management business down the road."*
*"SEC Investigates Stable Value Fund," institutionalinvestor.com, March 27, 2003

HEY, BUDDY, GUESS WHAT? YOU ALREADY DID!


Briefly noted:

• After generating almost as much interest as Waldo, elusive former superstar manager Ira Unschuld has surfaced at his own Manhattan hedge fund firm, Brant Point Capital.....Unschuld, who posted a spectacular record as manager of Schroder Ultra (and merely a terrific record at Schroder U.S. Opportunity), is apparently feeling pretty confident about his prospects: He didn't return a reporter's telephone calls, asking for information about his new firm.
  "And now, for investor Ira Unschuld's next act," James Paton, Reuters, March 6, 2003
  
  
  
• These days, mutual fund information travels fast....If you need proof, consider this: When Ira Unschuld (above) left Schroder Ultra in December, the fund held about $160 million in assets.....By mid-March, after investors had digested the news of Unschuld's departure, the fund was down to about $10 million in assets.....Schroder is now asking for shareholder permission to merge Ultra out of existence, and Schroder U.S. Opportunities will absorb what's left.
  
  
  

• Sophia Collier		The Citizens fund group is in turmoil, and the major reason seems to be Sophia Collier, the firm's founder and chair, who reportedly has a difficult management style.....Ms. Collier, who was on leave from socially-conscious Citizens for three years, returned last July, and heads immediately began to roll.....First to go was then-president and CEO John Shields, followed (in no particular order) by the firm's chief operating officer, the director of institutional relationship management, the executive in charge of sales to foundations, the director of social research, the product manager, an equity analyst, and the manager of two funds (Citizens Emerging Growth and Citizens Small Cap Core Growth).....A representative for Citizens, which expects other companies to share information with investors, refused to spell the names or provide the job titles of executives who no longer work for the company.
  "Citizen Sophia remakes firm in her own image," Frederick P. Gabriel Jr., InvestmentNews, March 10, 2003

  
  
  
• More on the Breakpoint Bozos: A couple of months ago, we reported that many brokers have cheated their customers out of mutual fund breakpoints, and this month we have some additional information [what's a breakpoint?].....Securities regulators have looked at 43 brokerage firms, and found that almost all had problems applying the proper breakpoint discounts.....Outright cheating doesn't seem to be a major issue, but brokers do seem to lack the proper systems to ensure that customers get all the breaks they're entitled to.....(For example, brokers seem to be very bad at determining whether Mr. Customer holds shares of XYZ Fund at other firms, which many entitle him to a discount on his current purchase, and they're also bad at aggregating holdings of family members.....As one observer has noted, brokers have little incentive to inquire about such matters, since the more information they gather, the lower their commission is likely to be......To the people who created this system, and who are surprised at the initial findings of this investigation, we have this to say: Duh).....So far, it looks like the average botched breakpoint has cost investors about $360 per transaction.
  "Regulators Find Brokers Overcharge Mutual-Fund Investors," Judith Burns, Dow Jones Newswires, March 10, 2003
  
  
  
• There's another big reason for all these breakpoint problems (above): There's no uniformity among fund companies in their breakpoint policies.....If a brokerage firm sells, say, five different brands of mutual funds, the broker's computers, supervisors, and employees all must be trained to deal with five different sets of breakpoint rules.....Currently, there seems to be little push to standardize breakpoint policies, which would go a long way towards solving this problem.....Standardized breakpoint policies would also eliminate some fund firm practices that border on being a rip-off.....For example, at most fund firms, "B"-class shares convert to "A"-class shares when "B"-class shares finally lose their back-end load (usually in six to eight years).....For long-term shareholders of the "B" class, this can result in considerable cost savings.....However, at certain Eaton Vance bond funds, "B"-class funds never convert to "A" class, which means that "B" investors are stuck paying higher fees for as long as they own the fund.....At Merrill Lynch, shareholders of "B"-class stock funds can convert in eight years, while owners of "B"-class bond funds must wait an additional two years -- ten years in all -- before they can convert.....Even then, they must convert to a "D" class that is still more expensive than the "A" class, due to an ongoing "D"-class "service fee".
  "Less-Than-Friendly Bond Funds," Eric Jacobson, morningstar.com, March 19, 2003
  
  
  
• Speaking of unfriendly bond fund families: Expenses at six USAA bond funds have risen at least 20% since 2001, despite generally increasing asset bases..... Assets at Lord Abbett Bond-Debenture A have more than doubled since 1995, but it seems that nobody told the guy in charge of expenses.....Over the same period, the annual costs of owning this Lord Abbett fund have increased 26%.
  Jacobson article, above.
  
  
  
• It's easy to ridicule big, bumbling, mutual fund companies.....But what do you do when a big, bumbling mutual fund company comes up against a clueless and careless investor?.....Who do you root for in the resulting comedy of errors?....We'll let you decide: In 1965, Maurice Barron, of Randolph, Massachusetts opened a $500 Fidelity Magellan account in the name of Sean Barron, his infant son.....Four years later, the Barron family moved across town, and mailings for several other Fidelity accounts followed them, but nobody in the Barron household seemed to notice that the Magellan mailings had stopped (this is a family that has apparently never heard of the 1099 tax form).....Fidelity claims that it tried to locate Mr. Barron -- which obviously didn't include cross-checking its own customer files -- but to no avail.....In 1982, Fidelity turned over Barron's Magellan account to the state as abandoned property, and the state liquidated the fund holdings in 1988......Meanwhile, over at the Barron household, Sean Barron turned 21 in 1986, and his father gave him the Magellan shares, but it wasn't until 1994 -- eight years later -- that Sean thought to check in with Fidelity on the status of his account ("I held them. I watched and waited. My idea of a mutual fund is to try and forget about it." We told you that the Barron family had never heard of the 1099 tax form.).....The Magellan shares were gone, of course, so the state eventually paid Sean $104,000, which was the value of the account when it was liquidated, and Fidelity subsequently agreed to give him an additional $105,000, which was intended to reimburse Sean for what the account would have been worth when this mess was finally brought to Fidelity's attention.....Barron wasn't satisfied with his $209,000 settlement, so he sued Fidelity for $750,000 (where this number came from, nobody seems to know).....Last month, Barron's case against Fidelity was finally decided, and the ruling was almost as confusing as the facts: Fidelity was absolved of any additional liability for the account, but the fund company was required to pay Barron's legal bills, to be determined later by the judge....."It's a big step in the right direction," said Barron's lawyer, who sounds like she's itching to keep this thing going.
  "Man sues Fidelity for losing his nest egg," Associated Press, March 9, 1997; "Investor loses appeal, awarded legal fees, in Fidelity fund suit," Jon Chesto, businesstoday.com, March 10, 2003
  
  
  
• Meet Paul Kaplan, the second-most powerful bond-fund manager in the U.S......Huh?.....Who?.....Yes, it's true: Kaplan is the top bond guy for Wellington Management Co., subadvisor to several Vanguard bond funds, and that means the unknown Kaplan manages more fixed-income money than anyone other than Bill Gross at PIMCO, who is definitely not unknown.....Kaplan's biggest pool of assets is Vanguard Ginne Mae, which currently holds about $28 billion, and Kaplan is also responsible for about $7 billion of fixed-income assets within Vanguard Wellington.....Overall, Wellington manages thirteen Vanguard funds, and it controlled $303 billion of assets as of December 31, 2002, which makes Wellington slightly larger than Putnam ($284 billion), and over twice the size of Janus ($138 billion).....And if you know absolutely nothing about Wellington, which is still a private partnership, that's exactly the way they want it to stay.
  "Wellington's quiet success," Steven Syre, boston.com, March 6, 2003
  
  
  
• When the going gets tough, the tough get befuddled Amy Domini, social-investment guru, was recently asked why her eponymous fund firm had failed to take a position on the war in Iraq....."Maybe I've been asleep at the switch," said Domini. "I'm totally upset with myself. I'm going to hang up my phone and call the office and say, 'Why haven't I said anything?'"
  "Surprising silence on war in Iraq," Kathleen Pender, sfgate.com, March 23, 2003
  
  
  
• Somebody, please, get this company a public relations consultant: Lawrence Lasser, CEO of Putnam, has taken some well-deserved media heat for his $50 million of bonus payments in 2000 and 2001, years in which the average Putnam fund owner was lucky to break even.....Putnam, the company, has also taken some major heat, most recently for its decision (subsequently reversed) to stop disclosing the names of its individual fund managers.....Combine these two public relations disasters, and you'd think that Putnam would have been extra careful about reporting the details of Lasser's most recent bonus, for the year 2002.....Well, think again.....On March 14, Putnam's parent company (Marsh & McLennan) was in a hurry to beat an SEC deadline, so it filed proxy materials that didn't show any 2002 bonuses for Lasser or other top Putnam executives.....Reporters who follow Putnam filings were confused, with some of them reporting that Lasser received no bonus for the year, and others noting (correctly) that Marsh & McLennan would provide the bonus numbers in a later filing.....On March 17, after two days of unwanted attention, Putnam amended its filing from Friday, and reported that Lasser did, in fact, receive a $7 million bonus for 2002.....Result: Marsh & McLennan received double media attention for Lasser's bonus, an embarrassment that's bad enough when it's only covered once.
  
  
  
• Cedar Fair, which runs several amusement parks in the U.S., recently selected INVESCO to run its 401(k) plan.....Since other fund families are readily available, and some of them even have good, low-cost offerings, industry observers wondered why the undistinguished INVESCO family was selected for the job.....Now, we know.....According to FundAlarm sources, Cedar Fair liked the idea that INVESCO funds could be given nicknames that correspond to Cedar Fair rides:
  
  

  Fund	Nickname (corresponds to a Cedar Fair ride)
  INVESCO European	Big Dipper
  INVESCO Growth	Wild Slide
  INVESCO Endeavor	Falling Star
  INVESCO Growth & Income	Snake Pit
  INVESCO Telecommunications	Demon Drop
  INVESCO Small Company Growth	Winky the Whale

  
  
  
• Charles Mayer, who manages or co-manages several INVESCO funds, will reportedly leave the firm later this year.....Mayer's INVESCO responsibilities include Core Equity, Value Equity, Total Return, Advantage, and Balanced.....Mayer also co-manages ASAF INVESCO Capital Income and Maxim INVESCO Balanced.
  Aaron Lucchetti, The Wall Street Journal, February 28, 2003
  
  
  
• Jim "Blowhard" Cramer and Lawrence Kudlow run a blabfest on CNBC, and both of them were recently critical of Merrill Lynch.....In retaliation, Merrill has ordered its employees to stop watching CNBC in the office, and Bloomberg Television will now be Merrill's mandatory source for financial noise.
  mutualfundwire.com, March 11, 2003
  
  
  
• It's fun to pick on lawyers who argue dumb cases, and it's also fun to pick on people who refuse to accept responsibility for their own actions.....When the two come together, the result is an almost cosmic convergence of ridicule.....Consider the following situation: In February 2000, lawyer Sondra Beal received a solicitation for the Reynolds Blue Chip Fund, and included in the mailing was a fund prospectus, as well as a three-year old article from Mutual Funds magazine, touting the fund's manager and its investment performance.....A short time later, Ms. Beal invested $10,000 in this tech-heavy fund, then tech stocks headed for the deep south, and Ms. Beal received only about $3,200 when she finally sold this fund in January 2003.....Now, Ms. Beal is suing everybody in sight, including the magazine and the free-lance journalist who wrote the article that was included with the Reynolds fund mailing.....Should Ms. Beal have read the prospectus, and not relied on a magazine article for an explanation of the fund's investment strategy (as she alleges in her complaint)?.....Should Ms. Beal have been suspicious that the fund couldn't come up with a press clipping less than three years old?.....Should Ms. Beal grow up, stop whining, and find something better to do with her time (like reading some books and magazines about mutual fund investing)?.....Yes, yes, and yes/yes/yes.
  "First hot, then cold, then court," Chuck Jaffe, cbs.marketwatch.com, March 5, 2003
  
  
  
• Rumor has it that the Delaware and Pioneer mutual fund families are for sale.....Both are mid-sized fund groups, without any particular distinction, and both are located exactly in the sour spot of the market -- too large to act like boutique firms, and too small to compete with the giants.....Our best wishes to the eventual buyers.
  "Fund of Information," Erin E. Arvedlund, Barron's, March 10, 2003
  
  
  
• Knock, knock, knockin' on Van Wagoner's door: The SEC has "tentatively determined" to initiate "civil and/or administrative proceedings" against the Van Wagoner fund firm, for violation of federal securities laws.....Several years ago, the Van Wagoner funds held a large number of private placement securities in technology-oriented firms, and it's pretty clear that Van Wagoner failed to properly value those securities as the technology market was tanking....As a result, the net asset value of several Van Wagoner funds was overstated, which is something that makes the SEC very cranky.
  
  
  
• Matthew Fink, President of the Investment Company Institute (the mutual fund trade association) was reportedly paid a salary of $1.2 million in 2000*.....For those wondering what Mr. Fink does to earn that kind of salary, we have no idea.
  * "Fund of Information," Erin E. Arvedlund, Barron's, March 4, 2003
  
  
  
• Wait, maybe this is how Fink earns his $1.2 mil per year: The ICI mounted a pathetic effort against the SEC proposal to require mutual funds to disclose their proxy votes.....Now that the ICI has lost that battle, fair and square, the ICI has turned to a new strategy: The Sniveling Technicality.....In a letter to the U.S. Office of Management and Budget, the ICI argues that the SEC, in adopting the new proxy disclosure rules, failed to meet the requirements of the federal Paperwork Reduction Act [!].....The ICI is trying to have the SEC regulation withdrawn, pending completion of an "impact study".
  "Fund-Group Letter Seeks Withdrawal of Proxy-Vote Measure," John Shipman, Dow Jones Newswires, March 13, 2003
  
  Update: According to the Office of Management and Budget, the proxy-disclosure rule
  will stand. The ICI now says that its members "will abide by the rule."
  
  
  

  Thanks to Mark and his puppies

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