Mutual Funds - General Discussion

Top 584. Dec 3, 2003 4:40 AM

» Q_out - Putnam Assets Dwindle

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Last week Putnam assets under management dropped $2 billion as California Public Employees’ Retirement System (CalPERS), the biggest U.S. pension fund, and the Oregon Investment Council —fired Putnam as manager, jointly pulling about $1.7 billion in assets. Wal-Mart also pulled employee 401-K assets out of Putnam’s New Opportunities or International Equity funds.
http://www.msnbc.com/news/996641.asp?0dm...

This week Unilever's British pension fund fired Putnam as manager of it's 3.5 billion-pound ($6 billion) Unilever fund.
http://quote.bloomberg.com/apps/news?pid...

Eyeing the fence

Ireland's National Pensions Reserve Fund will decide this month whether to retain Putnam for 237 million euros ($285 million) in assets.

Edinburgh's City Council decided to put off until next year a decision of whether to continue to use Putnam to manage 70 million pounds ($121 million) in U.S. stocks for the Scottish municipality.

Putnam assets under management fell 12 percent last month.

<img src="/files/mysites/qout/bhoestarts.gif" width=53 height=34 align="left">
Q_out
DISCLAIMER: My words and observations are general in nature, and are not meant as specific investment advice. Individuals should consult with their own advisors for specific investment advice.

-- posted by Q_out

Top 585. Dec 3, 2003 10:23 AM

» lcha - Re: Putnam Assets Dwindle

In response to message posted by Q_out:

Putnam assets dwindling is a great thing to see. The loss of management fees associated with all this money being pulled out of Putnam will dwarf the SEC fines that were levied. So much for not admitting any wrongdoing huh. smile

I won't personally be happy until they are put out of business. Now THAT would send a message! Accounting firms have sure straightened up a bit since Aurthur Anderson went belly up.

-- posted by lcha

Top 586. Dec 3, 2003 10:43 AM

» lcha - Our Ethical Erosion

Our Ethical Erosion

By ARTHUR LEVITT JR.and RICHARD C. BREEDEN

From the neighborhood flea market to the New York Stock Exchange, markets rely, more than anything else, on trust. Market participants must trust -- and be able to verify -- that the goods offered are what they are supposed to be; that their offer is being considered without prejudice; that their orders are being processed fairly; and that the market isn't rigged to their disadvantage.

Since Enron filed for bankruptcy two years ago this week, it has become clear that investors' trust was taken for granted and abused not just in one company or one sector, but across the breadth of our market system. High standards of integrity and character seem to have slipped to dangerous lows at many firms.

Recently, investors have learned that this ethical erosion also has infected the mutual-fund industry, apparently to a widespread degree. For 95 million mutual-fund investors, mutual funds represent the best vehicle for these individuals to access our markets and to build wealth to send their children to college, buy a new home and save for retirement. Yet, the mutual-fund industry has taken advantage of the attractiveness of mutual funds to ordinary investors:

• Investors are misled into buying funds based on past performance, even where that record actually may be very poor.

• Investors are left in the dark about the level of most fees, and about the effect that fees, expenses, sales loads and trading costs have on their actual investment returns.

• Fund directors either are stretched too thin, or are otherwise uninterested or unable to exercise effective oversight.

• Most shockingly, fund management in many instances has offered pricing and trading prerogatives to hedge funds and other large investors, with some sponsors indirectly sharing in the profits from improper trading practices. Deals of this kind, at best, turn individual investors into second-class citizens, and, at worst, into sheep to be fleeced. Apparently, $80 billion in annual fees is enough to induce a bad case of ethical myopia.

The time has come for a real clean-up. Cosmetic policy changes and compliance reviews or image campaigns won't do it. The mutual fund industry's reach and its importance to the livelihoods of millions of Americans demand not just singular enforcement actions, but a much broader overhaul of the industry itself. Anything less than swift, comprehensive action risks causing long-term damage to an investment vehicle that is important to the industry, to our markets, and to our economy as a whole.

First, we need a coordinated effort by the state attorneys general and the SEC to expose illegal activity and to prosecute it vigorously. The New York attorney general has performed an outstanding public service with his success in the Canary Capital case and in exposing other wrongdoing. But the strength of our markets rests on a national system, not on piecemeal state standards. For the future, investors need both state and federal authorities to work together in a genuine partnership to root out abusive practices, as part of a coherent and effective national effort.

Second, through legislation and regulation, Congress and the SEC should underscore the simple but critical fact that fund sponsors and directors alike have a fiduciary duty to fund investors. Fund companies are not selling soap, but a relationship based on millions of investors trusting these companies with their savings. Duties of care and loyalty are as essential in the fund industry as they are in the rest of corporate America. The first loyalty of fund-company management and directors must be to the task of enhancing the returns of ordinary fund investors, not the profitability of the fund sponsor.

Third, the SEC needs to intensify its dealings with the fund industry and improve its own capacity to be an effective overseer. It must act quickly to stop late trading, seriously curb market timing and clean up other shady practices. Today the Commission is scheduled to begin that process. More generally, fund managers must understand that the time for compliance reviews is before, not after, improper conduct occurs. For the worst offenders, sanctions need to imperil the flow of fees, and fund sponsors who believe they are above ethical concerns should see the regulatory roof cave in. When it comes to the mutual fund industry, more than a few heads need to be cracked, and the Commission shouldn't be afraid to do it.

The SEC is not waiting for a legislative prod to adopt better rules to curb market timing. If exchange limits, minimum redemption blackouts, or significant redemption fees are not adequate to stop these practices cold the agency can find other devices to allow after-hours real time pricing. The bottom line is that where a fund tells investors that they do not allow market timing, the SEC should insist that they make good on that promise.

Fourth, we must make the oversight of independent directors an effective check on mutual- fund abuses. The SEC should require fund companies to have an independent chairman without ties to the fund sponsor. That is one of the best ways to improve accountability for management practices. The SEC should also act to assure independence and competence among fund directors. Too many independent directors aren't really independent. Many directors are stretched far too thin and have served far too long.

Independent fund directorships are not supposed to be sinecures for those who won't challenge powerful fund sponsors. All fund boards should have term limits, and independent directors should have professional resources to help them develop their own independent information on fund-management performance and other issues. The SEC should increase the number of independent directors to all but one; and require that boards justify to their bosses -- the shareholders -- the choice of investment adviser and fees charged.

In egregious cases, fund sponsors could be required to appoint to their boards an investor ombudsman; or they could lose their ability to participate in nominating new fund directors or to renew advisory contracts for a defined period of time. Fund sponsors should take seriously the need to adopt meaningful governance reforms within their own organizations, not merely cosmetic trifles.

Fifth, mutual-fund companies need to show leadership in reforming themselves. Reforms may be encouraged by regulatory action, but ultimately only mutual-fund companies themselves will win back investors' trust. We need them to be a steady and loud voice for meaningful, pragmatic change. To that end, mutual-fund companies should end misleading hype and proactively ban deceptive performance advertising. Advertising should fully reflect the effect of direct and indirect fees and taxes on fund performance, as well as periods of poor and good performance.

Finally, mutual-fund companies also need to help clean up the brokerage system through which more than 80% of investors purchase their shares. Revenue sharing, sales contests and higher commissions for selling home-grown funds all damage investor interests and have no place in the industry. If they exist at all, "soft dollars" should be disclosed so that investors have a clear understanding of the relationships their mutual-fund companies and brokers have, and they should inure solely to the benefit of fund investors, not sponsors. Furthermore, Congress should consider revisiting the safe harbor it granted soft-dollar arrangements shortly after it abolished fixed brokerage commissions in 1975.

For years, mutual funds boasted that they were investors' best friends. For the health of the markets and our economy, it's time for them to prove it.

Mr. Levitt was SEC chairman from 1993-2001; Mr. Breeden was SEC chairman from 1989-93.

Updated December 3, 2003

-- posted by lcha

Top 587. Dec 3, 2003 5:00 PM

» Normxxx - Re: Re: Putnam Assets Dwindle

In response to message posted by lcha:

Accounting firms have sure straightened up a bit since Aurthur Anderson went belly up.

Were that only so... I have seen no evidence of it, quite the contrary. It seems that now that the "big five" have become the "big four," the various Government watch dogs are busilly looking the other way as far as major accounting firms are concerned, lest the "big four" become the "big three." Or, the "big two." Or, the "big one." Or, "..."

-- posted by Normxxx

Top 588. Dec 3, 2003 5:53 PM

» reynosa - Re: Re: Putnam Assets Dwindle

In response to message posted by lcha:

Has there been any bad news about my fund co. Vanguard?

-- posted by reynosa

http://news.morningstar.com/doc/article/...

Top 589. Dec 4, 2003 2:41 AM

» litab16 - Re: Putnam Assets Dwindle

In response to message posted by reynosa:

Vanguard has not been attached to any of the controversy. Morningstar is doing an excellent job of covering the scandal:

I would be shocked if any of this touched Vanguard. It is the only mutual fund company that is truly a mutual company, owned by the shareholders of its mutual funds. Unlike all other mutual fund companies, Vanguard or its parent company is not sold on the market as a stock, so therefore it does not have to answer to the needs for profit of stock shareholders as well as its mutual fund shareholders.

Most of the mutual fund companies that got involved in these questionable trading deals had to meet profit goals to keep their stock holders happy during the downturn when other revenues were down. Mutual fund shareholders play second fiddle in many of these companies.

-- posted by litab16

Top 590. Dec 4, 2003 6:41 PM

» dija - Re: Re: Re: Putnam Assets Dwindle

In response to message posted by reynosa:

reynosa asked: "Has there been any bad news about my fund co. Vanguard?"

No, and there won't be, either. Only those companies who charge sales loads, 12b-1s, and spend fortunes marketing themselves so their funds become bloated with assets, will be involved in these scandals.

Funds like Vanguard, Clipper, Longleaf, Masters, Muhlenkamp, IPS, Hussman, Wasatch, Dodge and Cox, Harbor, Mairs and Power, Oak Associates, Oakmark, T. Rowe Price, Royce, TIAA-CREF,Third Avenue, Torray, Tweedy Browne and Weitz will NOT be involved.

How do I know? Common sense.

-- posted by dija

Top 591. Dec 7, 2003 5:33 AM

» litab16 - Re: Morningstar on Janus

In response to message posted by Kirk:

Yes, Janus is a huge disappointment. I pulled everything out of Janus as soon as I saw Spitzer's charges. Only one of the Janus funds I was holding actually got caught up on that scandal, but I wasn't going to trust them with my money.

Janus to this day has not responded in a way that I think is appropriate to regain trust of investors.

-- posted by litab16

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http://biz.yahoo.com/ifunds/031105/20031...

Top 592. Dec 11, 2003 1:23 PM

» radiodude - Vanguard ETF's almost ready

I've said it before and I'll say it again --- I LOVE ETF's.

(I don't use them for DCA, and I plan to hold the stuff forever, so they are good for me)

Here is the list of new ones: (looks similar to what i-shares has, but that's okay)

Value Index Fund
Growth Index Fund
Mid-Cap Index Fund
Small-Cap Index Fund
Small-Cap Value Index Fund
Small-Cap Growth Index Fund
European Stock Index Fund
Pacific Stock Index Fund
Emerging Markets Stock Index Fund

Energy Index Fund
Materials Index Fund
Industrials Index Fund
Consumer Discretionary Index Fund
Consumer Staples Index Fund
Health Care Index Fund
Financials Index Fund
Information Technology Index Fund
Telecommunication Services Index Fund
Utilities Index Fund

-- posted by radiodude