Mutual Funds - General Discussion

Top 594. Dec 23, 2003 8:42 PM

» 2win - Re: Vanguard ETF's almost ready

In response to message posted by radiodude:

I've been looking at ETF's lately. Can you give the ticker symbols for the funds listed?

This link includes some top regional ETFs:
http://quote.bloomberg.com/apps/data?pid...

Indonesia Fund - IF
Turkey - TKF
Thailand - TTF
China - CHN
Morgan Stanley India - IIF
India Fund - IFN
Brazil iShares - EWZ
Brazil Fund - BZF
Brazilian Equity Fund - BZL

On the above Bloomberg page, the funds can be sorted for performance by several different time periods: YTD, 1 week, 1 month, 3 months. Some of these are really hot!

Dave J.

-- posted by 2win

http://money.cnn.com/1999/01/15/zweig_on...

Top 595. Jan 28, 2004 10:33 AM

» SteveT - He's not picky--he'll take whatever is wounded

This is an old article but has some timely comments.

Ted Aronson is not your average money manager, and that's only half the story. Listen in to Jason Zweig's eye-opening conversation with him.By Jason Zweig

Jason Zweig, MONEY's mutual funds columnist, conducted a lively interview with iconoclastic money manager Ted Aronson for the magazine's February issue. Here is a complete transcript of their conversation:

Over the years, I've interviewed enough portfolio managers to fill a couple of Boeing 747s, and it's gotten to the point where there's very little that any of them can say to surprise me. Then I met Ted Aronson. He runs Aronson + Partners, a firm that manages more than $2 billion for big investors like Ameritech, the Florida Retirement System, the MacArthur Foundation and New York University. You normally need a minimum of $25 million to invest with Aronson, but he and his partners, Kevin Johnson and Martha Ortiz, also manage a mutual fund, Quaker Small-Cap Value, which was launched two years ago and holds just $11 million in assets (minimum investment: $10,000).

Aronson, 47, has been managing money since 1974. He works out of a converted duplex apartment in an old building in downtown Philadelphia. Unlike most money managers' offices, it's not decorated with giant abstract paintings and stiff mahogany furniture. Instead, there are plenty of soft places to sit, and dozens of bulls and bears made out of glass, ceramic, wood, papier mache' or plush. Everywhere you turn -- even lining the walls of the office bathroom -- are antique stock and bond certificates to remind you that many of the most popular investments of the past turned out to be terrible failures. Aronson's biting humor even extends to the office postage meter, which stamps outgoing mail with the slogan, "Don't confuse brilliance with a bull market."

Ted Aronson can barely open his mouth without challenging conventional wisdom. In fact, he's so blunt and provocative that even if you have no interest in his mutual fund you can become a wiser investor simply by hearing what he has to say.

Q. You've said that investing in an actively managed fund (as opposed to a passively run index fund) is an act of faith. What do you mean?
A. Under normal circumstances, it takes between 20 and 800 years [of monitoring performance] to statistically prove that a money manager is skillful, not lucky.

Q. Hold it. Did you say 800 years?
A. That's right. To be 95 percent certain that a manager is not just lucky, it can easily take nearly a millennium-which is a lot more than most people have in mind when they say "long-term." Even to be only 75 percent sure he's skillful, you'd generally have to track a manager's performance for between 16 and 115 years. Now let's say you finally get to the point, after 20 years or something, where you can say to us, "OK, Ted, Kevin, Martha, you're it, you're great, you really do have skill." Then the whole thing changes. I retire, Kevin loses his mind, Martha becomes an alcoholic, we sell our firm to United Asset Management and take on $10 billion when we can only manage $2 billion.

Q. You're kidding, I hope.
A. I'm kidding about our firm, but retail investors need to know how the money management business really works. It's a stacked deck. The game is unfair.

Q. You make it sound as if picking a good fund manager is completely hopeless.
A. Not completely. Start by looking for a very low fee structure. Then ask whether there's a finite amount of assets that the manager can run in his style and whether he's committed to limiting the fund to that size. Also, if the firm has an edge, ask why it should endure. If their money-making machine is inside one person's head, your risk is that person's lifespan -- or the chance that he'll get recruited away to another company.

Q. Over the past ten years, the U.S. stock market has returned 19.2 percent annually. What do you foresee for future returns?
A. They will be lackluster, and you don't have to posit a crash. The numbers just don't add up. Even if you buy all the "new paradigm" crap about how technology investment will lead to unheard-of levels of productivity, stock prices are so high that you can't get anywhere near decent returns over the next 10 or 20 years without taking valuations to levels that would be double or triple the all-time highs. Let's say real economic growth gets up to 3.5 percent, and you can get real earnings growth of another 1.5 percent. Add to that 1 percent to 1.5 percent for dividends and you come up with a long-term-bond-like return-not much higher than 5 percent or 6 percent. And that presupposes that valuations stay at least as high as they are now. People are compounding recent rates of return, at which money doubles every couple of years, into the indefinite future-and it just doesn't compute.

Q. But haven't stocks returned somewhere between 9 percent and 11 percent annually over the long run?
A. I love equities, I'm not a weirdo and I don't live in a bomb shelter. But in a very real sense, the compounding of stock returns over long periods is a fraud. It really is. No one has ever gotten those returns. Prior to the birth of index funds 25 years ago, the man on the street had no reliable way to earn the stock market's average return. I actually know someone who bought Microsoft at the IPO, although he sold most of it on the way up. There are people who have hit the mother lode like that-but not many. The rest of us mere mortals are lucky if we can hang on to the same mutual fund for 20 years. I recently went to my best friend's father's 80th birthday party and heard him musing about how much stock $10,000 would have bought when he was born. I said, "Equities have compounded by 11.5 percent since then. No wonder your son is smiling-because that $10,000 is now worth $60.5 million and you're getting old!" It's ridiculous. He's worth nowhere near that much.

Q. Prof. Jeremy Siegel of the Wharton business school says stocks have returned an average of 8.5 percent annually ever since 1802.
A. In 1802, the total value of all the stocks in Jeremy Siegel's market index was around $3.5 million. If you compound that at 8.5 percent annually for 196 years, you get $30.8 trillion. Yet the total value of the U.S. stock market today is only $11 trillion. So where did the other $20 trillion go?

Q. You tell me.
A. It went up in smoke. People bought good stocks that later went bankrupt, like the Philadelphia Guano Co. that's helping to paper the wall in our bathroom here. They bought bad stocks that never were included in any index. They took money out of stocks when they needed cash. They spent their dividends instead of reinvesting them. They sold everything during market panics, and they didn't get back into the market until after it had gone back up. They didn't buy and hold, they bought and sold-so commissions and bad stock picks and taxes (in the 20th century) ate away at their wealth. That's why this religious belief that stocks return 9 percent or 10 percent or 11 percent over the long run is just. . .guano.

Q. Prof. Siegel says much of the difference comes from the lack of dividend reinvestment.
A. He's absolutely correct. And that's why it makes no sense to assume anyone will earn that kind of return in the future. You have to subtract from the historical averages any portion of the return-fees, taxes, dividends-that isn't reinvested.

Q. So stocks are a bad idea?
A. Absolutely not. I think over the very long term -- ten years or more -- stocks will outperform bonds, and bonds will outperform cash, and all will be right in the universe. But the next five or ten years will be very different from the past five or ten; I could see flat returns for up to ten years. What I'm saying is that it's a bad idea to assume future stock returns will resemble those of the past.

Q. What's your investment philosophy?
A. There's a cartoon from The New Yorker that shows two lions on a hilltop, and one says, "I'm not picky -- whatever's wounded." Over time, I think the typical stock that's wounded -- that's out of favor in the market -- will outperform.

Q. Why don't more funds beat the market?
A. Because they can't.

Q. Why not?
A. Costs. Funds charge annual expenses of 1 percent or so; then it costs them another 1.5 percent to 2 percent to buy and sell their stocks each year. And there's something else: After three or four years of this water torture [lagging the S&P 500], active managers haven't gotten smarter. If anything, I think they've gotten stupider. They're scared. They're like cowering dogs. It's very hard to imagine them doing anything but just following the crowd -- because if they don't mimic the index, they'll get beaten by it again. A lot of people think active managers will outperform again when small stocks do better than the S&P 500, but there's nothing written in the Scripture that says it can't go on like this for our natural lifetimes.

Q. Doesn't history prove that small stocks outperform large stocks over time?
A. That's a crock. Small-caps don't outperform over time. When all is said and done, the returns [of small and large stocks] are very similar. Sure, the long-run numbers show small stocks returning roughly 1.2 percentage points more than large stocks. But those historical averages are a crock. The costs of buying and selling small stocks are a lot higher, and the averages don't reflect that. The extra trading costs easily eat up the entire extra return -- and then some! So over the long term, small stocks may even underperform. I'd like to think, on balance, they're a breakeven. But with a "whatever's wounded" investment philosophy, you should look at small stocks today precisely because they're so out of favor.

Q. When might they come back in favor?
A. Compared with large stocks, small stocks haven't been this cheap since 1973. That doesn't mean they can't get even cheaper -- but in 1998, the S&P 500 stocks outperformed the Russell 2000 [small stocks] by roughly 30 percentage points. Are the S&P's fundamental business prospects really that much better? Not by a mile -- not by a mile. These things really do go in cycles, and at some point small will be beautiful again. I wish I knew exactly when.

Q. What's a quant?
A. Someone (like us) who relies only on information that can be reduced to numbers. We think we can find an edge over a lot of other smart investors by crunching a lot of numerical information.

Q. Do you think your fund, Quaker Small-Cap Value, can beat the market?
A. Yes. What quants do is to identify what has worked and what is working. We can really drill down to the sources and causes of return. It works.

Q. Among your fund's largest holdings are companies like Allegiance, Keane and Mariner Post-Acute Network. What can you tell us about their businesses?
A. Nothing whatsoever. I don't know what their products are. In fact, I don't even know the names of their CEOs.

Q. Excuse me?
A. A lot of money managers make a big deal out of kicking the tires and meeting company management, but we've got a few problems with that. Company executives don't always tell the truth. More often, they themselves don't know what the future holds. Finally, when you talk to them, they're good salesmen. They can make you believe their PR even when they don't. We see no point in gathering information from unreliable sources.

Q. So you know nothing about these stocks?
A. I didn't say that. I said I don't know anything about their products. Our numerical analysis tells us oodles of things about the value of a stock relative to its peers, as well as what top management is doing with its own money (through insider trades) and the company's money (through share buybacks, etc.). We look at more than a dozen factors that measure value, management and Wall Street's sentiment. We want only the cheapest stocks by these measures -- whatever's wounded.

Q. What do you charge to run the fund?
A. Our normal management fee is 0.9 percent. But we can only earn that rate in a year when we beat the Russell 2000 [small-stock index] by three percentage points. If we return more, we earn more [up to 1.5 percent]; if we return less, we earn less [down to 0.3 percent]. It's a direct way to align our interests with the shareholders'. Obviously, if more assets hurt our performance, that will lower our fee. So we won't let the fund get too big.

Q. But according to Lipper, Inc. only 106 out of 5,190 U.S. stock funds charge performance-incentive fees. If they're so good, why are they so rare?
A. How many of those funds outperformed their benchmarks?

Q. Not very many, I'm afraid.
A. It's obvious. If those fund managers got paid better only when their performance was good, that would decrease their income.

Q. Do you invest in your fund?
A. All of my family's retirement money is in the fund. But because the fund trades a lot, it's not suitable for taxable investments. So all of our taxable money is elsewhere.

Q. Where?
A. In Vanguard index funds. I've owned Vanguard Index 500 for 23 years.

Q. You're an active fund manager who has nearly all his money in index funds?
A. Once you throw in taxes, it just skewers the argument for active management. Personally, I think indexing wins hands-down. After tax, active management just can't win.

Q. Your fund did very well against the Russell 2000 index in 1998. Why?
A. I wish I could say it was because we are geniuses. The truth is almost embarrassing. We got inflows of cash [from new investors] in the extreme down-markets of April, July and August [1998]. When the market is down, any cash sitting in the fund from the night before makes you look like a star. If no cash had come into the fund, we would have lost almost 5 percent for the year [vs. an 8 percent loss for the Russell 2000 index]. Thanks to the cash alone, our performance for the year was flat-five percentage points better than it would have been if no money had come in.

Q. You're saying that you performed so well not because of what you did but because of what your customers did?
A. Customers can distort funds' performance records in major, major ways. When you look at a fund's returns you're not just looking at what the manager has done in isolation. You're also looking at a mirror -- maybe even a circus mirror. Depending on when it comes in and out, the public's money can make a fund look dramatically better (or worse) than it really is. That can really gum up the works, and it tilts the whole goddamn game.

-- posted by SteveT

Top 596. Jan 28, 2004 10:50 AM

» allancoleman - Re: He's not picky--he'll take whatever is wounded

In response to message posted by SteveT:

appreciate your digging this up steve . and you're right , this has timely comments .

-- posted by allancoleman

http://story.news.yahoo.com/news?tmpl=st...

Top 597. Feb 11, 2004 1:37 PM

» SteveT - SEC Orders Mutual Funds Disclose Expenses

SEC Orders Mutual Funds Disclose Expenses

By Kevin Drawbaugh

WASHINGTON (Reuters) - U.S. market regulators on Wednesday ordered mutual funds to begin disclosing more about fund expenses borne by shareholders, in one of several moves to tackle the scandals engulfing the $7.4-trillion fund industry.

The Securities and Exchange Commission (news - web sites) voted 5-0 to require that reports to fund shareholders will have to disclose the cost in dollars to each investor for an investment of $1,000 in the fund based on the fund's actual expenses for the period.

To help investors compare costs of different funds, reports will also have to include cost figures for a $1,000 investment adjusted for a hypothetical, 5 percent annual return.

SEC staff said that requiring cost disclosures itemized for individual investor's account -- which some investor activists have sought -- would be too costly to the fund industry.

Amid continuing government probes of questionable fund share sales practices, the SEC also proposed barring funds from channeling brokerage business and commissions to Wall Street brokers that do the best job of selling the funds' shares.

This practice -- known as directed brokerage -- is widespread and "ought to be prohibited because of the conflicts" of interest it poses, said SEC Investment Management Director Paul Roye at an open meeting of the commission.

The SEC voted 5-0 to put the proposed ban out for public comment for two months, along with other proposed new limits on how fund companies may use marketing charges, known as 12b-1 fees, that investors incur. A final SEC vote will come later.

At the request of SEC Chairman William Donaldson, the proposal will seek comment on whether the 12b-1 rule, stemming back to 1980, should be killed entirely. Donaldson called 12b-1 "a rule that maybe has outlived its usefulness."

Originally meant to help funds cover their marketing and distribution costs, the rule today imposes fees that substitute for reduced sales loads, or charges, with the revenues coming in often involved in directed brokerage, SEC staffers said.

"Rule 12b-1 fees and directed brokerage quietly generate a lot of money for people in the fund and broker-dealer industries, and unlike some of our other proposals, this one is going to hit them where it hurts," Donaldson said.

The SEC voted 5-0 at its meeting to propose that mutual funds be required to explain in shareholder reports any decisions to hire, or recommend hiring, investment advisers.

The proposal follows criticism that boards often merely rubber-stamp the hiring of advisers from fund management companies. The SEC said it hopes "to encourage fund boards to consider investment advisory contracts more carefully."

The proposal will go out for a public-comment period of about two months, with a final SEC vote afterward.

The commission further voted 5-0 to amend its disclosure rules so that funds would have to include more information about fund performance in annual reports to shareholders.

In addition, the SEC ordered that mutual funds disclose their complete portfolio holdings quarterly to the agency, and summaries of their holdings semi-annually to investors. (Additional reporting by John Poirier)

-- posted by SteveT

Top 598. Mar 5, 2004 4:34 PM

» mitelo - Primecap and Capital Opportunity Closed

News Center
March 04, 2004

Vanguard closes two equity funds
The Vanguard Group has closed Vanguard® PRIMECAP Fund and Vanguard® Capital Opportunity Fund to new shareholders, effective immediately. The funds' existing shareholders may make additional purchases of up to $25,000 annually.

Vanguard decided to close the two funds after consulting with the funds' investment advisor, PRIMECAP Management Company of Pasadena, California. PRIMECAP has managed the $23 billion PRIMECAP Fund since its inception in 1984 and the $7 billion Capital Opportunity Fund since 1998. PRIMECAP Fund, which is Vanguard's second-largest actively managed equity fund, and the Capital Opportunity Fund were among Vanguard's top performers in 2003, posting total returns of 36% and 48%, respectively.*

(Note: Past performance—and especially short-term past performance—cannot be used to predict future returns. Share prices of the funds will fluctuate, so investors could lose money if they sell shares when prices have fallen. To obtain current performance, which may be lower or higher than the performance data quoted, visit the Funds area. Performance figures assume the reinvestment of dividends and capital gains distributions; the figures are pre-tax and net of expenses.)

"While the funds' asset levels and cash flows are currently manageable, the likelihood for rising cash flows is clearly high, given the funds' strong performance," said Vanguard Chairman John J. Brennan. "Our responsibility lies with the funds' current clients, so we are taking these steps to preserve PRIMECAP Management's ability to employ its distinct investment strategy and pursue competitive long-term returns going forward."

Vanguard has a long history of acting preemptively to restrict cash inflows and maintain fund assets at reasonable levels to protect existing shareholders, employing measures such as closing funds, raising their minimum initial investment amounts, and imposing redemption fees. In fact, Vanguard has closed both of these funds in the past: PRIMECAP (1995 and 1998) and Capital Opportunity (2000). Two other Vanguard® funds are currently closed: Vanguard® Precious Metals Fund and Vanguard® Global Equity Fund.

-- posted by mitelo

Top 599. Apr 15, 2004 12:49 PM

» Normxxx - Greedy Mutual Funds

Greedy Mutual Funds
Mutual Funds Force Investors to Hold Their Shares!

Since the mutual fund scandals broke six months ago, mutual funds have been quick to take advantage of the situation. Investigators incorrectly described the scandal of the funds allowing their largest customers, mostly hedge fund managers, to trade after the market for other investors had closed, as 'market-timing'. So while awaiting whatever rules Congress or the regulators might impose to stop the practice, some funds began changing their 'market-timing' rules for ordinary investors (who were not part of the problem), to gouge more profits from them.

It appears that, to stop the illegal after hours and overnight trades of hedge funds [which the hedge funds allegedly compensated the mutual funds for allowing], the SEC is considering requiring investors in some types of funds to hold for at least 5 days after buying the fund, or face a redemption fee. Some mutual funds jumped to take advantage of the situation for their own benefit by instituting redemption fees, of as much as 2%, on investors who do not hold their fund shares for at least three months, and in some cases six months. Not only is this using the situation (of hedge funds paying to be allowed to trade after hours), to gouge more profits from ordinary investors for no reason, but it will significantly affect investors' willingness to get out of the way when the market turns against them. Many won't be willing to deliberately pay that extra 2% to exit even when they expect the market could perhaps tumble into a bear market. Business Week quotes the president of an Ashville, NC money-management firm as saying, "It's the little investor who will get squeezed, while big investors who want to time the market can reap profits that far exceed the 2% fee."

How much has the situation spread? Lipper Inc. says that already 1,140 mutual funds have imposed redemption fees, mostly set at 2%, when investors don't hold their funds for periods as long as a minimum of six months. Vanguard imposes the most onerous fees, 2% on shares redeemed in less than one year, and 1% on redemptions in less than four years.

As Business Week puts it; "For years, funds have had the right to impose redemption fees, but many didn't because the charges would put them at a competitive disadvantage. Now that they're getting the green light from the SEC, funds are seizing the opportunity."

Jumping into the situation as a means of cutting the costs of services they provide, a growing number of employers are assessing redemption fees of 1% to 1.5% in some mutual funds in their employee's 401K plans, if the employee wants to exit the fund in less than a minimum period. It is a reminder of the problem faced by Enron employees who were not allowed by the company to sell the Enron stock that was in their 401K and retirement plans, and had to watch their savings collapse.

Several brokerage firms, including discount brokerage firms have also begun to impose fees of their own on their customers for 'early' withdrawals from mutual funds purchased by investors through their brokerage accounts.

Too bad that just after this generation of investors, particularly those in Nasdaq stocks, learned from the bear market that buy & hold doesn't work long-term, and have taken up shorter-term holding periods, forces are piling up to compel them to hold when they may not want to do so.

One way around the problem of mutual funds imposing redemption fees is of course to use Exchange-Traded-Funds (ETFs) instead of end-of-day priced mutual funds. Not only is the problem of redemption fees eliminated, but other problems like front or back-end loads, and having to wait for end of day prices also go away. And numerous advantages step in, like being able to buy them at their minute by minute price at any time during the trading day, through any brokerage firm, at minimum commissions, hold them for as long or as short a period as desired, being able to buy them on margin if leverage is desired, and at some brokerage firms being able to sell them short.

The problem is that so many individual investors, the very ones most likely to be squeezed by the redemption fees and other expenses of normal mutual funds, do not understand ETFs.

As reported in this week's Barron's, in a recent survey conducted by Ameritrade, 70% of respondents said they agreed with the statement "Buying stock is a sound investment"; 40.8% said "Stocks and mutual funds are worth buying"; but only 1.6% said they thought ETFs are "good vehicles for long-term investing."

No wonder then that in spite of the many advantages of ETFs over standard mutual funds, there are only 135 listed ETFs, while there are more than 12,000 end-of-day priced mutual funds.

Disclosure: The only mutual fund I own is a small investment (in an IRA account) in Hussman's Strategic Growth Fund.

-- posted by Normxxx

http://news.yahoo.com/news?tmpl=story&u=...

Top 600. Apr 22, 2004 5:44 PM

» SteveT - Templeton Funds Manager's Earns Up 58 Pct

Templeton Funds Manager's Earns Up 58 Pct

Thu Apr 22, 9:57 AM ET

NEW YORK (Reuters) - Franklin Resources Inc. (NYSE:BEN - news), manager of the popular Templeton mutual funds, on Thursday reported quarterly earnings rose 58 percent, and said it would take a pretax charge of $60 million to cover costs related to probes into improper trading.

The company said net income in the fiscal second quarter ended March 31 was $172.8 million, or 68 cents a share, up from $109.6 million, or 43 cents a share, a year earlier.

The consensus estimate of 11 analysts was 71 cents a share, according to Reuters Research, Reuters Group Plc unit.

Offsetting part of the after-tax charge of $45.6 million was an insurance recovery valued at $18.3 million, after taxes, related to the Sept. 11, 2001, attacks.

Assets under management, a key driver of revenue at money managers, rose to $351.6 billion, up from $336.7 billion in the previous quarter and $252.4 billion a year earlier. Revenue rose 43 percent to $874.6 million from $613.1 million.

Franklin is under regulatory investigation for market timing and late trading of its mutual funds. Calpers, the largest U.S. pension fund, has placed the company on its watch for possible termination and Morningstar Inc. has urged investors "proceed with caution" regarding Franklin.

-- posted by SteveT

http://moneycentral.msn.com/content/inve...

Top 601. May 10, 2004 3:00 PM

» SteveT - 4 funds that deserve the heave-ho

Fund Spy
4 funds that deserve the heave-ho

When should you bail out on your fund? Here’s a strategy to help you make your decision -- and four funds you should definitely sell if you have them.

By Russel Kinnel, Morningstar

One thing mutual fund investing has in common with stock investing is that selling is much more difficult than buying. Investors often make the mistake of overreacting and hastily selling on a little bad news. Alternatively, investors can also suffer from a paralysis that prevents them from selling a money-losing investment because of their reluctance to admit they made a mistake -- as well as a desire to recover the dollar amount of their original investment.

Nevertheless, making the decision whether to sell an investment is a lot easier if you’ve written down why you bought it in the first place and what role it’s playing in your portfolio. Putting your investment strategy in writing helps you stay committed to a disciplined investment plan and on track for achieving your financial goals.

With mutual funds, I’d suggest starting your decision-making process anywhere but year-to-date performance. You might begin by examining the expense ratio to see if it has changed. If it has gone above 1.25% in a stock fund or 0.80% in a bond fund, then you should hold the fund to an extremely high standard. If it isn’t one of the very best funds in its class, throw it back.

Next, look at the fund’s portfolio to see if it is still accomplishing what you bought it to do. Say you own a fund for its small-cap exposure, and it’s your only small-cap fund. If it moves most of its assets to mid caps, you should consider selling or adding a true small-cap fund so that you won’t lose that exposure.

Finally, go ahead and look at returns. If the fund's relative performance for the trailing three- or five-year period is in the bottom quartile of its category, take a long hard look at why that has happened. If you’re confident the reason is that the fund follows a strategy that is out of favor, then it might be worth holding. For example, Clipper fund (CFIMX) looked sluggish for the trailing three years at the end of 1999 because it's a deep-value player that focuses on absolute returns. In this instance, it was simply out of favor. However, you should be darn sure that market trends, not more serious investment-specific risks, account for such a low ranking.

With this in mind, I’ll help you along the way with four funds you ought to get rid of now. These are funds we recently added to our pans list.

Gabelli ABC
Gabelli ABC (GABCX) is an example of a fund that might not be fulfilling the mission shareholders thought it would when they bought it. Its strategy is to buy merger targets in order to gain a nice return when the target is acquired. Over time, the fund has served as a good diversification pick by delivering returns that aren’t in sync with the markets. When the bear market slowed mergers to a crawl, management shut the fund’s doors because it couldn’t find many opportunities. The fund's cash stake currently stands at about 75% of assets, though; as a result, it looks suspiciously like a money market fund with little upside potential. If the fund had remained closed, I’d cut it slack. After all, it doesn’t control the M&A market. However, the fund is reopening to new investment despite its huge cash hoard and that means current shareholders will see their investments further diluted. The last thing this fund needs is more cash.

Phoenix-Engemann Balanced Return A
Phoenix-Engemann Balanced Return A fund's (PABRX) expenses are on the rise, and it’s tough to justify why investors should stick with it. Shrinking assets led expenses to rise from 1.30% in 2001 to 1.50% in 2003. Considering that roughly half the fund is invested in Treasuries, which require almost no research, that’s a huge price to pay. To be sure, the stock half of the portfolio has a large-growth bias, which has been decidedly out of favor, but even last year returns were unimpressive. I don’t see any reason why large growth should lag over the next five years, but you’d be much better off creating your own mix with a moderately priced large-growth fund and a dirt-cheap Treasury fund.

ING Emerging Countries A
ING Emerging Countries A (NECAX) is a clear example of how poor performance and high expenses can feed off each other. High expenses make it hard to produce good performance, and poor performance leads to shrinking assets -- and that keeps expenses steep. No fund is worth this fund’s 2.37% expense ratio. Performance has been consistently weak, though the lowlight was management’s 20% bet on developed-market stocks that backfired when emerging markets rallied.

Strong Balanced
The Strong Balanced fund (STAAX) fails the performance test. It’s working on its fifth straight year of underperformance. The big worry, however, is the cloud that continues to hang over Strong Funds. Nearly all the big firms that were implicated in the fund scandal have come in from the cold. They’ve instituted reforms and cleared out some or all of the people who crossed the ethical line. But not Strong. They’re still in the bunker. The company is not saying much except that it's up for sale. So you’ve got an added layer of uncertainty. Who needs the grief?

-- posted by SteveT

http://www.cross-currents.net/monthly.htm

Top 602. May 14, 2004 1:09 PM

» Normxxx - 2000 Redux?

-- posted by Normxxx