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Rating:Despite Flagship Fund Woes, Waddell Keeps Flows Positive Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, July 28, 2010

Despite Flagship Fund Woes, Waddell Keeps Flows Positive

News summary by MFWire's editors

The giant Ivy Asset Strategy fund faltered last quarter, but Waddell & Reed still maintained positive flows across all three of its distribution channels. This morning the Overland Park, Kansas-based brokerage and asset manager revealed earnings of $0.40 per diluted share for the second quarter of 2010, missing analysts' estimates of $0.41 (according to Thomson Reuters) and dipping slightly from $0.42 in Q1 2010 but rising almost 50 percent from $0.27 in Q2 2009.

Waddell brought in $731 million in net inflows in Q2 2010 (including positive inflows in all its channels: advisor, institutional and wholesale), a significant drop from $2.823 billion in net inflows in Q1. Waddell chairman and CEO Henry Herrmann acknowledged that "weak performance" from Asset Strategy, its biggest mutual fund, contributed to the tougher quarter.

"As of June 30th, year-to-date performance of our funds has been mixed. Almost two-thirds of our mutual funds outperformed their peer group, but performance of our two largest funds remains relatively weak," Herrmann stated.

In May, FBR Capital Markets analyst Matt Snowling commented on the cloud he saw Asset Strategy casting a cloud over Waddell due to Waddell's concentration of sales in that fund (see The MFWire, 5/27/2010). Also in May, Reuters tied some of Waddell's index futures trading to the May 6 flash crash, a charge Waddell quickly responded to (see The MFWire, 5/14/2010). Waddell's earnings report notes that the firm suffered "an investment loss of $1.6 million, which was largely the result of $2.6 million in losses incurred in our mutual fund trading portfolio during the quarter."

And yesterday Reuters again brought up Waddell's flash crash and Asset Strategy woes, noting that the $21.5 billion fund suffered $362.5 million in net outflows in May and June, according to Lipper and underperformed 88 percent of its peers, according Morningstar.

"Deep underperformance may have gotten investors' attention," Lipper analyst Jeff Tjornehoj told Reuters. 

Edited by: Neil Anderson, Managing Editor


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