SEC Debuts Fee Calculator
From the Wall Street Journal
The SEC's new fund fee calculator gains the attention of the WSJ's
fund column today. Of interest is a quote by Don Phillips, president of Morningstar
to the effect that he does not expect the calculator to be widely used. He is probably right. Phillips calls for a "truth in advertising" rule like the "truth in lending" rules for mortgages. Yet we doubt this would be widely used either. Bottom line: fees will not be a major issue in funds as long as people believe they are getting value. Value is a competitive return, both on an absolute basis and on a relative basis against other funds.
Other coverage of SEC fee calculator appeared in:
New York Post
New York Times
San Francisco Examiner
Schwab is Now a 'Net Stock
From the Wall Street Journal
Today's Heard on the Street
column in the WSJ
says that Schwab has become an Internet stock rather than a brokerage stock in the eyes of traders. The result is shares that trade at 88 times projected earnings and 125 times trailing earnings. The article also warns to watch for a stock split announcement coming from next month's shareholder meeting. Also revealed was that Schwab saw outflows in its fund business in February as investors appeared to switch to trading stocks -- an action that creates more revenues for Schwab. Not explored by the article are the implications of the steep stock price. As recently as last fall, rumors that Schwab would be taken over by a bank were running rampant. At this point Schwab is valued at more than $40 billion -- a price that no bank would likely want to pay. Of course, this means that Schwab no has its own "Internet funny money" with which to make acquisitions. Look for Chuck Schwab and David Pottruck to put together a shopping list.
Salomon Targets Disenchanted Fund Investors
From the Washington Post
Salomon Smith Barney is trying to cash in on fund investors disappointed with products that underperform the indices. The brokerage firm is recommending a group of 15 stocks for investors to buy as a way to replace their fund holdings. The list includes: BankAmerica Corp. (BAC); Cisco Systems Inc. (CSCO); CNF Transportation Inc. (CNF); Compaq Computer Corp. (CPQ); LM Ericsson AB (ERICY); Fluor Corp. (FLR); Intel Corp. (INTC); Masco Corp. (MAS); McDonald's Corp. (MCD); Pfizer Inc. (PFE); Philip Morris Cos. (MO); Promus Hotel Corp. (PRH); Raytheon Co. (RTN/A); Schlumberger Ltd. (SLB); and Temple-Inland Inc. (TIN).
N/I Numeric Investors Reopens Fund
From the TheStreet.com
On May 17 N/I Numeric Investors
will open the doors of its heretofore closed Micro Cap and Growth funds. The funds had been closed when they hit the $100 million mark in assets under management. Today Micro Cap has $96 million and Growth has diminshed to $62 million. TheStreet.com
quotes Lynn Wickwire
, N/I Numeric's director of mutual fund marketing as saying that the two funds will close again when they hit $125 million in assets. He added that the funds saw "moderate" redemptions after John Bogle, Jr.
left Numeric two months ago.
Oakmark Fund Leaks $2.3 billion
From the SmartMoney
Yet another value manager is discovering that investors are still asking "what have you done for me lately." "I’m a bird at the end of a branch, and all my friends are gone," SmartMoney
quotes Robert Sanborn, manager of the Oakmark Fund as saying. "They’re all day traders now." The article says that his fund has seen $2.3 billion fly out the door in the last nine months -- half of this amount leaving in the first quarter. What the article does not discuss is how Oakmark fighting to keep customers. Periods such as this are what separate fund companies with marketing smarts from the flashes in the pan.
Funds in the Black?
From the InvestmentNews
The trade paper for advisors reports that black Americans are becoming more interested in investing. Perhaps so. Unfortunately the Profit Value Fund
, the fund chosen as the stories hook, doesn't seem to be benefiting from the trend. After three years in operation the fund has just $3.5 million in assets. Ariel Mutual Funds
, the Chicago-based heavyweight in the niche, isn't taking any chances. It is working closely with Schwab to market its funds.
Another Roth IRA Wrinkle
From the Boston Herald
This week we covered a survey from American Century that reported slow adoptions of the Roth IRA. Today's On State Street
column in the Boston Herald reports on another negative wrinkle with Roths -- a penalty in the form of taxes on interest created by conversions from regular IRAs to Roths.
Small Caps Woes Hit Managers
From the USA Today
Small cap fund managers have turned to gallows humor, writes David Henry in his column. "We joke that we come to work without shoelaces and belts so no one hurts themselves," he quotes one analyst as saying. He adds that the analyst takes a different route home every night so the firm's brokers can't discover were he lives.
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