Distributions Still in the News
From Detroit News
Distributions from funds are again in the news. Once again an article points out that many fund investors are facing both a loss on their funds and a substantial capital gains tax. The article also points out that the Vanguard 500 fund, up only one percent this year, has not seen a loss in exactly a decade. Since 1995, it has compounded at a 22 percent annual rate. Technology and Japanese stock funds are the ones that are most likely to provide shareholders the double whammy of a loss in NAV and a capital gain tax hit, the article says.

Pension Fund Manager Shut Down
From Wall Street Journal
Jeffrey Grayson, the principal of Capital Consultants LLC, is being accused of defrauding investors if up to or more than $150 million. The management firm claimed more than $1 billion in assets under management, mostly for union defined benefit plans high-net-worth investors in Oregon. Grayson faces civil complaints from both the Securities and Exchange Commission and the Department of Labor. The entities filed the papers on Sept. 21 in federal court, claiming that Grayson and his firm committed fraud and self-dealing involving $231 million of client funds through a $160 million soured loan to a Oregon entrepreneur and a "Ponzi-like scheme" involving another $71 million to cover up the bad loan.

Heartland Becomes an Example
From Wall Street Journal
T Heartland is being used as an example of the less-apparent risks contained in fixed-income mutual funds. The paper reports that Heartland fund investors were not told that bonds in the fund had experienced "technical" defaults. It adds that Heartland was under no obligation to make such a disclosure. Heartland also footnoted that six of the funds holdings had defaulted in its June 30 semiannual report. The fallout may reach other bond funds since the SEC is rumored to be investigating whether Heartland should have made more disclosures. Any action undertaken by the SEC could effect the practices of other fund complexes.

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