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Rating:Oakmark Adds Redemption Fee Not Rated 3.0 Email Routing List Email & Route  Print Print
Monday, August 09, 1999

Oakmark Adds Redemption Fee

Reported by Hayley Green

Harris Associates, the Chicago-based investment advisor of The Oakmark Family of Funds is instituting redemption fees after months of trying in vain to identify market timers and keep their hot money from racing in and out of its funds -- according to the company, they're now welcome to do as they will, but they'll have to pay.

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  • As of August 16th, investors wishing to hold an Oakmark fund for less than three months will be penalized with a 2% redemption fee. The fee is not subject to those investing before August 16 or to Oakmark's flagship large cap fund and its equity and income fund.

    "The larger cap funds can handle the more frequent trading," Kelly Arnold, assistant director of marketing at Oakmark told MFWire.com. She said the goal of the redemption fee is to prevent frequent traders from disrupting the fund.

    "The fee is not supposed to drive away investors but cover the expense of transaction costs," Kelly said. "Oakmark Select holds about 20 to 30 stocks which makes it difficult to run if people are trading."

    As reported by MFWire.com, Oakmark launched a new value-focused global fund, on August 4, co-managed by Michael Welsh -- co-manager of the firm's Internal Fund and International Small Cap Fund -- and Greg Jackson, senior investment analyst for domestic equities. This new fund will be subject to redemption fees immediately.

    "We believe the most effective way to prevent the exploitation of our long-term shareholders is to charge an appropriate fee to short-term traders," says Bill Nygren, portfolio manager of The Oakmark Select Fund. "The fee, in effect, reimburses the fund for the costs short-term traders create."

    Redemption fees are a growing trend for funds that want to get a handle on market timers. In a related story, fund activist Phillip Goldstein recently sued the Scudder New Europe Fund and its investment manager Scudder Kemper Investments. Goldstein had been trying to separate two issues involved in the open-ending of the fund, the conversion itself and the imposition of a 2% redemption fee for those shareholders cashing in shares within the first year after the conversion.

    A federal judge ruled on July 16 that the two issues were "inextricably intertwined" -- one vote was taken that included the open-ending and the redemption fee.  

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