Funds fine with ICI board recsFrom The Wall Street Journal -- subscribers only
reports the unsurprising news that mutual fund companies welcome the ICI's recommendations to strengthen independent directors. The ICI's board will vote on the recommendations, which are nonbinding "best practices" for the industry, July 7. The paper claims that most fund company officials favor the reforms, even though many also claim that the current systems works just fine.
Fleet's Ash mulls Web shares and forming bank alliancesFrom The Boston Herald
Fleet and BankBoston are merging their $33 billion fund families (the Columbia and Galaxy funds respectively) mutual funds under Fleet's Robert Ash. According to the article, Ash is "a sales guy and former criminal justice professor who has beaten cancer, traveled widely in Asia and breakfasted with Kissinger." He is not afraid of the unorthodox. Ash is reportedly selling E-shares through the Web (the shares are now broker sold) and charging separately for advice. "If you don't consider that, you die," Ash is quoted as saying. He is also willing to form alliances with other banks to sell each other's funds.
How the Internet Fund became too successful to be soldFrom TheStreet.com -- subscribers only
The Internet Fund offers the rare example of success -- not failure -- bringing down a fund manager, writes Joe Bousquin. Ironically, the fund's strong sales may have smashed up the sale of the fund to Lepercq, de Neuflize. Why was the number one fund of 1998 for sale anyway? TheStreet.com reports that the management fee collected by Kinetics for managing the fund was just $26,884 in 1998. The fund had started the year with $200,000 in assets and closed the year with $22 million. By June this figure had swelled past $600 million. The hyperbolic growth was bad news for Kinetics, though, as it had to build an expensive back office. Its expense ratio soon swelled to 3.08% of assets by the end of 1998, causing it to look for a buyer. When Lepercq and Kinetics agreed to a price last March 12 (it was unanimously approved by Kinetics' directors) the fund had $150 million in assets. Over the next three months the assets quadrupled and so did disagreements over the price. The article quotes Jeff Lovell, managing director at Putnam, Lovell, de Guardiola & Thornton, estimating the current fair price of the fund at about $47 million, or five times the cash generated by the annual management fee.
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