Quantcast
The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:Monument to Split Internet Fund Not Rated 3.0 Email Routing List Email & Route  Print Print
Wednesday, October 13, 1999

Monument to Split Internet Fund

Reported by Hayley Green

Investors in the Monument Internet Fund will be the "beneficiaries" of a three-for-one stock split effective October 29, 1999, the Bethesda, Maryland-based fund company said today.

Related Links
Monument Funds
On InvestmentWires
  Monument Hires New Sales Head
Sep 15 1999
Monument Fund Drooling over Jacob s Departure
Jun 29 1999
  Monument Erects Sector Fund
May 25 1999
The Monument Internet Fund has returned 154.57% from its inception in November 1998 through September 30, 1999, after the deduction of a maximum sales charge of 4.75%, heady numbers to potential investors. But the NAV has obviously climbed as well, and the price per share makes it harder to attract the same small investors as at the fund's inception. Thus the decision to lower the share price via a split.

Monument Funds Group president David Kugler referred to the "numerous requests (received) from shareholders and financial advisers who missed our fund when it was originally priced in the $10.00 per share range" as the reason for the decision to split the fund's shares.

Of course the value for existing shareholders remains the same, but potential investors see a lower intial price hurdle. Most industry experts seem to be in agreement that fund companies simply split shares for marketing reasons. What it all boils down to is the investors' perception of "what's a low enough price?".

"There is no advantage to the shareholder," said Marvin Appel, CEO, Appel Asset Management, an RIA with $110 million under management. "The Internet (stocks have) been doing well and maybe they didn't want the price going way off the charts."

"From our point it does not change the perception at all. It does make the statement more confusing," Appel said. "I've never had a client contact me about the price of a mutual fund share. Nobody has ever said, 'gee this seems like an expensive fund.'"

A study done at The Wharton Financial Institutions Center by Fernando, et al. on the relationship between share price and the marketability of mutual funds does seem to show that at some level investors are affected by price. The study shows an increase in subsequent inflows and number of shareholders after a split. In the study most mutual fund managers believe that a lower share price adds to the attractiveness of a fund, bringing it into a "preferred trading range."

Shlomo Benarzti, a professor of behavioral finance at UCLA said, "I've never figured out why the heck they do share splits in mutual funds. I have no idea why. I hear stories that they want the price in the right range. I'm not even sure the investor knows the price per share."

Early in 1999, ProFunds reverse split its ProFund Bear and five others one-for-five, because the fund's NAV, shorting the exploding market, had gotten too low causing, among other things, rounding issues. One of the other five funds split was the ProFund Bull, tracking the same index as the Bear.

Louis Mayberg, president of ProFunds said the split, "took the fund up to a high NAV level. We had a lot of investors that found it too high. People felt they couldn't afford to buy it, investment advisors as well." In reaction, ProFunds subsequently split two of the funds four-to-one, bringing the NAVs down to a $40-$45 range.

"The NAV financial reasoning is meaningless," Mayberg said. "Psychological marketing can make many people happy as long as you don't do anything to impune your integrity." 

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE

3.0
 Do You Recommend This Story?



GO TO: MFWire
Return to Top
 News Archives
2020: Q4Q3Q2Q1
2019: Q4Q3Q2Q1
2018: Q4Q3Q2Q1
2017: Q4Q3Q2Q1
2016: Q4Q3Q2Q1
2015: Q4Q3Q2Q1
2014: Q4Q3Q2Q1
2013: Q4Q3Q2Q1
2012: Q4Q3Q2Q1
2011: Q4Q3Q2Q1
2010: Q4Q3Q2Q1
2009: Q4Q3Q2Q1
2008: Q4Q3Q2Q1
2007: Q4Q3Q2Q1
2006: Q4Q3Q2Q1
2005: Q4Q3Q2Q1
2004: Q4Q3Q2Q1
2003: Q4Q3Q2Q1
2002: Q4Q3Q2Q1
 Subscribe via RSS:
Raw XML
Add to My Yahoo!
follow us in feedly




©All rights reserved to InvestmentWires, Inc. 1997-2020
14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
Privacy Policy :: Terms of Use