FundAlarm - Highlights & Commentary Archive

Highlights and Commentary

By Roy Weitz

(Originally posted September 1, 2005) [Archive Table of Contents]

In the FundAlarm world, a fund gets tagged as 3-ALARM if it has underperformed its benchmark over the past 12 months, three years, and five years.....On the way to 3-ALARM shame, a few 3-ALARM funds have had one or two benchmark-beating years, but their bad years ultimately outweighed the good ones.....Other 3-ALARM funds have never had a benchmark-beating year in the past five.....If you have a choice, you obviously don't want to own a 3-ALARM fund.....But even among 3-ALARM funds there's a pecking order, and a 3-ALARM funds that has never outperformed its benchmark seems to us the saddest of the sad (or, perhaps, "the most pathetic of the pathetic") .....The accompanying page lists 206 (of the 987) 3-ALARM funds in this month's FundAlarm database.....Every 3-ALARM fund on this list has underperformed its current benchmark for every single calendar year since 2000.....For good measure, every fund on the list is underperforming its benchmark again this year, through July 31.....Let's put this another way: If you own one of these funds, you haven't had a winning year since Bill Clinton was President -- and maybe not even then.

And now for something completely different: For the next 12 months, I'm going to invest $5,000 of my own, real money in a mutual fund market-timing program, and I'll report each month's investment results here in Highlights and Commentary.....Those of you who've followed FundAlarm for a while know that I've always been a boring, buy-and-hold investor.....I've never been a market timer and, in fact, I've always been deeply suspicious of market-timing schemes.....I remain deeply suspicious of market-timing, but I thought it might be interesting (and, perhaps, instructive) to get some personal experience with a real-world market timing program .....For example, I'd like to know if it's really possible to follow market-timing signals over the course of a year, exactly as they're given by the program sponsor.....Since I'm going to be playing with real money, I'd also like to know how it feels to be ordered in and out of the market by a black box, which I neither understand nor (as of now) have much confidence in.....Finally, and perhaps most importantly, I'd like to know if my gross return for the year matches up with advertised returns for the program, and I'd also like to understand the effect of real-world transaction costs and taxes on published returns.

There are hundreds, perhaps thousands, of market-timing systems, but for this test I'm going to follow the Intelli-Timer market-timing program (intelli-timer.com), which I first came across about a month ago in an article by financial journalist Chet Currier*.....Currier's article wasn't particularly flattering: Although the Intelli-Timer Web site describes its system as having been developed by "a team of physics PhDs" in the year 2000, Currier notes that the system's track record dates from early 1999.....Unless these "physics PhDs" are also experimenting with time travel, it's difficult to have a track record that's older than the system itself.....Currier also notes that Intelli-Timer's claimed annualized return since inception --- 100.5% -- defies belief.....For example, projecting a 100% return into the future, my initial stake of $5,000 would be worth about $5 million ten years from now.....But what the heck, if I'm going to do market timing, I might as well do it in a big way.....Indeed, it's the lure of these outsized (I'm tempted to say, "absurd") returns that seems to attract people to market-timing in the first place.....And, who knows, maybe I will earn 100%+ returns for myself (it's this irrational hope that also attracts people to market timing)......As the year progresses, some of my impressions and conclusions about the Intelli-Timer system will be applicable only to that system, while some will be applicable to market-timing systems in general.....I'll try to make clear which is which.

For the record, I have no business relationship with Intelli-Timer, or any other connection with them of any kind.....I approached them and requested a free subscription to their timing service, which they gave me, and that's the only thing I have received from them, or will receive from them (the service usually sells for $183 for a six-month term).....Intelli-Timer set no conditions on my use of their system, and I agreed to none, except that I promised to follow their timing signals as closely as possible for a full twelve months.....I informed the Intelli-Timer people that I'd be reporting my investment results each month in FundAlarm, and they seemed pleased with the potential exposure.....Which brings up another point: By selecting the Intelli-Timer system for this test, I am not recommending or endorsing it (that is "I am not recommending endorsing it," as in "I am not recommending or endorsing it").....As I indicated above, I know nothing about this system other than what I've read on the company's Web site.....I have no special insight into this system, or market timing in general, and anyone who follows me at this early stage, thinking otherwise, is being foolish.
"When All Else Fails in Investing, Ask a Scientist," Chet Currier, bloomberg.com, August 5, 2005

	Roy's Excellent Market-Timing Adventure Month One (through August 26, 2005): I Get Set Up, and Then Watch the Grass Grow

· I was subscribed to the Intelli-Timer system on August 16.

· Intelli-Timer doesn't take custody of customer funds, so I had to set up my own trading account. Although I have several Schwab accounts, I decided to open my market-timing account at Scottrade (see below for an explanation).

· Intelli-Timer's most recent trading signal was issued on July 10, 2005. However, Intelli-Timer recommends that new subscribers wait for a new signal, instead of hitching onto a signal that's already been issued. As of August 26, the cut-off date for this issue of FundAlarm, Intelli-Timer hadn't issued a new trading signal. Therefore, I still have the original $5,000 sitting in my account, plus a few cents interest, waiting for the starting bell to ring

· Since the beginning of 2004, Intelli-Timer has issued a total of 14 trading signals, with a new signal coming, on average, every 26 trading days (six days was the shortest interval between signals, and 59 days was the longest interval). So, by the next issue of FundAlarm (October 1), there's a good chance that I'll have received my first trading signal.

· When the Intelli-Timer signals do come, by e-mail, they are signals to go "long" or "short" the market (the signal currently in place is a "long" signal). Intelli-Timer recommends that its subscribers go long or short in one of two ways: I could buy and short the Nasdaq 100 Trust Shares (QQQQ), which is a stock, or I could buy ProFunds OTC Investor (OTPIX) and, when the signal comes to go short, exchange out of that fund into its inverse (ProFunds Short OTC Investor (SOPIX)). Since my interest is in mutual-fund timing, I've decided to execute the Intelli-Timer strategy with these two ProFunds . Intelli-Timer notes that its strategy also can be executed with similar Rydex funds. In the long run, Intelli-Timer says there's a negligible difference in return between either the QQQQ or mutual funds as timing vehicles.

· Setting up my trading account involved more time and work than I expected -- about three hours total, including a couple of hours research on broker Web sites. I was hoping to make my market-timing trades out of my personal Schwab account. But the Intelli-Timer system is likely to generate at least 10 mutual fund buy signals during the year, and an equal number of sell signals, and Schwab's mutual fund transaction fees are simply too high for that kind of activity. (Although ProFunds can be purchased from Schwab without a transaction fee, Schwab charges a redemption fee if ProFunds funds are sold within 180 days. Since it's highly unlikely that I -- or anyone else -- would ever hold ProFunds for more than 180 days, I would effectively end up paying Schwab $49.95 for each buy and sell that I made as part of the Intelli-Timer program, which would have made the trading program prohibitively expensive.) Among the major online brokers I looked at, Scottrade has the lowest mutual fund transaction fees ($17 for each online "exchange" of one fund into another, which is what I will be doing), no minimum holding period for ProFunds, and a $5,000 minimum investment for each of the funds I was interested in. With Scottrade, I'm probably looking at transaction fees of about $200 a year, or about 4% of my initial $5,000 investment, which is still a pretty ugly haircut. But it's a lot better than Schwab and, hey, you gotta spend money to make money, right?

· To be continued next month.....

Here's an interesting way of looking at the world (or at least a small part of the world): Let's say you decide to invest an equal amount in two mutual funds: One is an actively-managed large-cap blend fund, the other is an S&P 500 index fund.....The actively-managed fund comes with an expense ratio of 1.00%, while the index fund costs 0.20%.....In the first year that you own them, the actively-managed fund returns 10%, while the index fund returns 7%.....You might congratulate yourself for picking such a good actively-managed fund, and a relatively inexpensive one at that.....You might even kick yourself for not buying more of the active fund.....But now, try looking at the actively-managed fund from a different perspective: Let's say that the first 7% of the actively-managed return is merely the index return, which is worth no more than the 0.20% fee that you paid to own your index fund.....Therefore, all the rest of the actively-managed expense ratio (1.00% minus 0.20%, or 0.80%) bought just 3% additional return.....From that angle, the actively-managed fund might seem a bit less attractive.....Here's another way to frame your choice: If you invest in index funds, you don't need to pay high fees.....By definition, however, you'll never get better than the market return .....If you invest in actively-managed funds, there's a chance that your manager will beat the index return, but it's pretty much inevitable that you're going to pay a premium for that chance.....When you look at the investment world this way, you might decide that the active-management premium isn't worth it, and therefore tilt more of your investment dollars to the index side.....Even if you decide that the active-management premium is worth paying for, it still makes sense to get the most bang for your buck.....Instead of selecting an actively-managed fund that closely shadows its index benchmark, consider selecting a more aggressive manager who has a history of beating the benchmark by a relatively large margin (this is roughly what the statistical measure "alpha" refers to).....In many cases, a smart portfolio will look like a barbell with uneven weights: A large chunk of index funds at one end of the barbell, which buys you the market rate of return as inexpensively as possible, little or nothing in the middle, and a smaller chunk of aggressive, actively-managed funds at the other end, which gets you the most alpha for your active-management premium.
"A New Get-What-You-Pay-For View of Money Managers," Chet Currier, bloomberg.com, July 26, 2005

"We have experienced some damage
to the brand name..."

Putnam CEO Charles Haldeman, commenting last month on the lingering effects of the 2003 mutual fund scandals, in which Putnam played a prominent role. From a Wall Street Journal story, by Tom Lauricella ("Putnam Tries to Put Its House in Order," August 1, 2005).

"We have experienced some damage
to the Ferrari..."

[From wreckedexotics.com, a good site to visit
if you think you're having a bad day]

Since February 28, 2005, every new and updated prospectus* has been required to contain a narrative discussion of fund manager compensation.....There are no statistics on how many funds have already complied with this new requirement and, based on the normal cycle of updates, it will be a year or two until all prospectuses include a compensation discussion.....But we were able to track down about a dozen discussions of manager compensation that have already made it to print, mostly from smaller fund companies, and the results are pretty much what we expected: Enough detail to keep away the SEC enforcers, but not enough detail so that you can really understand how these people are paid.....(Congratulations to the fund company lawyers, for threading this needle in exactly the way that lawyers are paid to thread such needles).....Despite all the generalities and obfuscation, a few manager compensation disclosures do provide some unexpected insights.....Herewith, examples from four fund companies, all relatively small and well-respected:

At the Clipper fund, each fund manager receives an annual base salary, as well as a share of the management firm's profits. Note that the compensation of the Clipper managers isn't specifically tied to the performance of their fund, which is usually considered a negative for fund shareholders. Note, too, how the Clipper fund attempts to downplay the lack of performance-based compensation with the following argument (which we paraphrase): "Even though we don't base our manager compensation directly on long-term fund performance, we get the same result, since the profits of our management firm wouldn't be going up unless our funds were also performing well." Of course, there are plenty of fund management companies with rising profits and lousy funds, so this explanation is simply weak and self-serving.

Managers at Dodge & Cox receive an annual base salary and bonus, the latter described by D&C as follows (verbatim, underlines added by FundAlarm):

"Bonus payments are based on a number of factors including the profitability of Dodge & Cox and the member's long-term contributions to the firm. Dodge & Cox's principles emphasize teamwork and a focus on client needs, and bonuses are structured to emphasize those principles. All full-time employees of Dodge & Cox participate in the annual bonus program. Bonuses are not linked to the volume of assets managed or to measurements of relative or absolute investment returns."

On the one hand, the narrative states that Dodge & Cox's principles emphasize "teamwork" and a focus on "client needs", both of which are good, yet D&C also notes that bonuses "are not linked to....measurements of relative or absolute investment returns." This is quite odd, since what could better serve a "client's needs" than rewarding a manager's investment performance? Is it really possible that a Dodge & Cox manager could earn bonus points for "emphasizing teamwork" (perhaps a Kumbaya sing-along?), yet earn nothing for consistently outperforming his fund's benchmark? Apparently so, and we're surprised.

It looks like Calamos has recently cleaned up its compensation act. Since the first of this year, Calamos managers have been entitled to a base salary and a "discretionary target bonus." The bonus is based on "portfolio performance, as measured by risk-adjusted return," which is a nice, simple, and shareholder-friendly formulation. Prior to this year, bonuses for Calamos fund managers were also based on the following factors (get ready, and see if you can spot even one shareholder-friendly factor in this list):

"Advisory fee revenue, measured by growth in revenues compared to industry percentages; marketing effectiveness, as measured by growth in assets under management relative to industry percentages; operating efficiencies, as measured by operating margin relative to industry levels; and stock price performance."

If you can follow the discussion of the compensation plan at the Royce funds, give yourself two credits towards your future MBA degree. Royce is a partnership with two senior founding partners, several less-senior partners, and a base of grunts (who are apparently either junior partners or non-partner employees). Not surprisingly, the Royce compensation structure varies depending where you are in the hierarchy. All fund managers (except the managers of the Technology Value Fund) receive a base salary, as well as a performance bonus based on the firm's assets under management. The performance bonus is adjusted for the junior fund managers -- but not for the senior fund managers -- based on "a combination of 3-year and 5-year risk-adjusted pre-tax returns of [fund] accounts relative to all small-cap objective funds with three years of history tracked by Morningstar...and the 5-year absolute returns of [fund] accounts relative to 5-year U.S. Treasury Notes" (in other words, this is the only part of the "performance bonus" that fund shareholders should care about). All but the senior people get a share of the "partner's pool," which is based on quarterly firm revenue, while the senior people receive something called a "firm bonus," which is also based on quarterly firm revenue, but presumably more of that revenue (or a higher percentage of that revenue) than the "partner's pool" for the lower-level employees. Finally, the founding partners (Charles Royce and W. Whitney George) receive a bonus based on the firm's "retained pre-tax operating profit." Deep breath. So what does all of this mean to fund shareholders? If you invest in a fund like Royce Premier, which is managed by the most senior guys in the firm (Royce and George), you get two experienced, capable managers who (most likely) receive a very small percentage of their annual compensation based on the performance of your fund. If you invest in a fund like Royce Discovery, managed by a junior person (George Necakov), you get a manager whose income is probably much more dependent on the performance of your fund, but has nowhere near the experience or track record of the senior guys. So which compensation arrangement should make you feel better about your manager? In this case, the seniority of the management team would be more important to us, everything else being equal. Sometimes, you just want a senior manager, even if the junior manager seems to have more performance incentives.

* Technically, Statement of Additional Information (SAI), which is the oft-hidden part of the prospectus.

If you'd like to unearth your fund's compensation discussion on your own, you'll first need to find the Statement of Additional Information (SAI).....In the past, we've joked about how difficult it is to find the SAI and, in some cases, it remains a true pain in the neck.....But in general, it's quite a bit easier to find SAIs today than it was a couple of years ago, as more and more fund firms make SAIs available on their Web sites (a bit of favorable fallout from the recent fund scandals, perhaps?).....To find your fund's Statement of Additional Information:

Go to your fund's Web site. If an SAI has been posted on the site, the SAI usually resides on the same Web page as the fund's prospectus. Look for a link on the Home page that says "Prospectus," "Library," "Literature," or something similar. Go to that page, then look for a link to the SAI.
If you still can't find the SAI, use the Web site's "contact" link to request a copy by e-mail. One of these two steps should work most of the time.
Once you have the SAI file, open it and search for the word "bonus" or "incentive." This should take you right into the heart of the manager comp discussion, since we haven't seen a compensation deal yet that didn't have some kind of bonus provision.

While you have the SAI open, you might want to take a look at some of the newly-required information that usually surrounds the discussion of manager compensation.....Scroll up or down a bit, and you should be able to see the total amount of money that your manager runs (both in mutual funds and private accounts), the value of your manager's holdings in your fund, the value of director holdings in your fund, and details of fund director compensation.

It's an old story in the mutual fund business: Fund companies increase their assets under management, often dramatically, yet fund expenses also increase.....For example, consider the following table, which shows the change in assets and asset-weighted expense ratios between 1989 and 2004, for several of the largest fund companies:

Fund family	Net assets $ billion (1989)	Net assets $ billion (2004)	Expense ratio (1989)*	Expense ratio (2004)*	Percentage increase in:
Fund family	Net assets $ billion (1989)	Net assets $ billion (2004)	Expense ratio (1989)*	Expense ratio (2004)*	Assets	Expense ratio
American Funds	23	555	0.68	0.78	2,313	15
American Century	6	67	0.95	0.96	1,017	1
Franklin Templeton	44	173	0.56	1.02	293	82
Scudder	15	56	0.73	1.03	273	41
Van Kampen	16	60	0.79	1.21	275	53
American Express	17	56	0.73	1.22	229	67
Merrill Lynch	14	50	0.99	1.26	257	27
Putnam	24	97	0.86	1.27	304	48
Smith Barney	11	53	1.20	1.30	382	8
MFS	10	67	0.98	1.30	570	33
Oppenheimer	5	90	1.07	1.31	1,700	22
Morgan Stanley	17	35	1.34	1.46	106	9
AIM	3	68	1.03	1.51	2,167	47

* Asset-weighted
Net assets rounded to nearest billion
We see that every company has experienced an increase in assets, and in four cases (American Funds, American Century, Oppenheimer and AIM), assets have grown more than ten-fold.....Yet, in every case, fund expenses have also increased.....At Franklin Templeton, assets have almost tripled, yet expenses have almost doubled over the same period.....At AIM, assets have increased over twenty times, yet expenses have increased by almost half.....When confronted with a table like this, everyone who's ever heard about "economies of scale" engages in some serious head scratching, while the fund companies offer no explanation, or vague or BS explanations, for the increasing-expense phenomenon.
"Are fund expenses too high?," Paul B. Farrell, marketwatch.com, July 31, 2005

At some point, probably around age 50, everyone should think about preparing (or paying for) a projection of retirement income and expenses (by coincidence, this is the same age at which a first colonoscopy is usually recommended).....The typical retirement income-and-expense analysis projects the growth of your assets out to retirement age, and then projects a draw-down of your assets to meet your projected retirement expenses.....When it comes to retirement expenses, the vast majority of retirement planners (both human and computer-based) assume that they will begin at a certain amount (say, $4,000 per month), and then increase at an assumed inflation rate throughout your entire lifetime.....In some cases, retirement planners run multiple inflation scenarios, but the underlying principle is still the same: Retirement expenses always start out at a certain amount, and increase inexorably.

Ty Bernicke is a financial planner who's recently caused quite a stir among his colleagues by challenging the conventional retirement-expense dogma: According to Bernicke, it's inaccurate, unrealistic, and ultimately unfair to the client to assume that real (i.e., inflation-adjusted) living expenses will increase throughout retirement, and Bernicke has proposed something that he calls "reality retirement planning"*......Taking his cue from U.S. Bureau of Labor statistics, Bernicke says that retirement planners should assume that real retirement expenses will, in fact, rather steadily drop during retirement, and this assumption can have a profound effect on an individual's financial and investment decisions leading up to retirement.....Basically, if you assume that someone will have lower retirement expenses, and you keep all other assumptions the same, that person will need to save and invest less during their pre-retirement years.....Bernicke's thesis has been picked up by a few mainstream publications and journalists, and there's also been a bit of public reaction, including reaction on the FundAlarm Discussion Board......In general, most financial planners seem to disagree with Bernicke on a number of grounds (and, yes, there's clearly some professional self-interest here).....For example, planners point out that Bernicke doesn't factor in rising medical costs, and Bernicke also violates one of the key principles of retirement planning, which is to make your assumptions as conservative as possible (steadily rising living expenses being a more conservative assumption than steadily decreasing expenses)......Many non-professionals also seem to resist Bernicke's approach, which is surprising, since anything that helps lower the mountain of pre-retirement savings should be good news.

We think Bernicke's approach makes a lot of sense, and for many of the same reasons that financial journalist Scott Burns enumerated in a recent column:** Car payments typically disappear in retirement, and so do mortgage payments, furniture expenses, business apparel expenses, nights out at regular-price restaurants, and long, elaborate travel adventures (at least after a certain age).....If you're involved in financial planning for retirement, it's a good idea to include several decreasing-expense scenarios as part of your analysis.....Sure, it makes retirement planning more complex, but the goal is to get it right, not get back on the golf course as quickly as possible.
* "Reality Retirement Planning: A New Paradigm for an Old Science," Ty Bernicke, Journal of Financial Planning, June 2005 (http://www.fpanet.org/journal/articles/2005_Issues/jfp0605-art7.cfm?renderforprint=1)
** "Spending tapers off," Scott Burns, dallasnews.com, August 13, 2005

Briefly noted:

The following information could save you a lot more than the $18 you just sent to FundAlarm: Through November 16, it looks like broker Edward Jones is allowing customers to transfer from one mutual fund family to another without paying a sales load (this is usually referred to as an "NAV transfer").....It's not clear why Edward Jones is doing this -- perhaps as a result of its recent revenue-sharing scandal -- and there's no mention of NAV transfers on the Edward Jones Web site.....But FundAlarm reader Jim Greenwood (of Greenwood Financial, Baraboo, WI) has seen an NAV transfer at Edward Jones, and at least one mutual fund wholesaler has told Greenwood that the program exists.....If you're an Edward Jones customer and you own a fund that you're not happy with, an NAV transfer could be a great way to move to a better fund, in another fund family, without paying another sales load.....If you're interested, be sure to ask your Edward Jones broker, and please let us know what you find out.
We have a winner! For the past couple of months, we've been listing all of the father-son fund management teams that we (and our readers) could identify, but we haven't been able to come up with even one father-daughter management team.....Until now: Mutual fund journalist Jonathan Burton (marketwatch.com) informs us that Roger Newell runs Wells Fargo Advantage Dividend Income with his daughter, Jennifer Newell, and they've apparently been managing together for more than a decade.
It's called "smoke and mirrors": The Phoenix funds are a mess, the CEO knows it, and two-and-a-half years into his job he's finally starting to do something about it.....On the one hand, Phoenix CEO Daniel Geraci will try to improve the performance of the existing Phoenix funds, which is long, slow work.....On the other hand, Phoenix is launching six new funds, which Geraci pretty much admits are designed to distract investors and financial advisors while the existing funds try to get their respective acts together.....Geraci also acknowledges that the new Phoenix funds overlap some of the firm's existing funds, which means that somewhere down the road either the new funds or (more likely) the existing funds will be merged out of existence.....Phoenix also is looking to acquire outside funds that have already developed a track record (for example, in March, Phoenix acquired two funds managed by Vontobel that had briefly been slapped with the Janus name).....Geraci looks to these acquisitions to build "instant credibility," which is apparently now available in a powdered concentrate, along with "instant investment ability" and "instant integrity."
"Fund assets drained, Phoenix targets advisors," Frederick P. Gabriel, investmentnews.com, July 25, 2005

The following item appeared in the November 2002 Highlights and Commentary:

The SEC regularly audits the internal operations of mutual funds, and 85% to 90% of those examinations result in a "deficiency letter," which means that the fund has failed to comply with one or more SEC rules (some of the infractions are minor, some are not ).....If you're wondering why you've never seen a deficiency letter, it's because the SEC never releases them.....And if you're wondering why the SEC never releases deficiency letters, a senior SEC compliance official says that secrecy is necessary because funds "might be less willing to cooperate" if they knew that audit findings would be made public*.....Think about this pathetic statement for a minute -- the cop is worried about antagonizing the potential wrongdoer -- and you realize how far the SEC still has to go until it becomes an effective investor advocate.

About a year after this item appeared, the SEC was burned by the mutual fund scandals, and it has become somewhat more effective at policing its beat.....But the SEC still doesn't release its deficiency letters, which made a lot of people take notice when a deficiency letter recently surfaced involving the Bjurman Barry mutual funds.....The letter popped up in the course of a lawsuit involving Bjurman Barry, and it also helps that the letter makes Bjurman, and the Bjurman fund trustees (directors), look really bad.....According to the deficiency letter, Bjurman Barry was entitled to take up to 0.25% of assets annually from its funds, as part of a 12b-1 plan (this is quite routine).....However, for a couple of years, Bjurman took several hundred thousand dollars more from the funds than it was entitled to, and Bjurman didn't bother repaying its interest-free loans until the end of the funds' fiscal year (this is definitely not routine).....According to the SEC, Bjurman Barry "placed its interests ahead of those of the [funds] and, therefore, breached its fiduciary duty".....As for the trustees of the Bjurman funds, the SEC says that they "did not conduct meaningful reviews" of the fees being disbursed by the funds they were supposed to be overseeing.....Bjurman has since figured out how to take the correct amount of money from its funds, the trustees have increased their intake of No-Doz, and fund investors now understand a little better why deficiency letters typically don't see the light of day.
"A Rare Glimpse at an SEC Rebuke of a Money Manager," Tom Lauricella, The Wall Street Journal, August 25, 2005

Back in April, we reported that Fidelity was setting up a new division solely to manage institutional money (pension plans, college endowments, foundations, and the like).....The new division finally has a name -- Pyramis Global Advisors -- and at least one fund observer has suggested that Fidelity faces a difficult human resources dilemma: How will the most talented analysts and managers be allocated between Pyramis and traditional, retail-oriented Fidelity?.....There's no reason these two divisions couldn't compete fairly for investment talent, but it's also easy to see how Fidelity could allow Pyramis to skim the cream.
"Fidelity Trolls For Bigger Fish," Aaron Pressman, businessweek.com, August 15, 2005
Speaking of Fidelity: Marketwatch.com (Kathie O'Donnell) reports that Microsoft Corp. has pulled Fidelity Magellan from its employee 401(k) plan, the result of chronic, lackluster performance.....Lowe's Companies, the home improvement retailer, also has dropped Magellan, after offering the fund in its 401(k) plan for more than 15 years.....Overall, investors pulled a net $7.6 billion from Magellan in the first half of this year, up from an outflow of $3.8 billion for the same period last year.....(To put this in perspective, the amount pulled from Magellan this year is larger than Fidelity OTC in its entirety).....And what is Fidelity's reaction to the grim news about Magellan?.....Why, the usual, of course:

"What, me worry?"