Administration December 3, 2005

SEC: Many Funds Still Not Doing 'Fair-Value' Pricing

March 24, 2004 (PLANSPONSOR.com) - Despite the fact that market regulators have urged the mutual fund industry to rely on a "fair-value" pricing scheme to help combat market timing, many US funds still aren't doing so.
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Nearly a third of 960 mutual funds surveyed by the U.S. Securities and Exchange Commission (SEC) hadn’t used “fair value” pricing in the 20 months ended last September, the SEC said, according to a Reuters news report. In fact, the SEC survey found that half the funds said they had only used the pricing method five times or fewer over the same period.

The SEC estimated that market timers – taking advantage of discrepancies that “fair value” pricing might have eliminated – reduced the assets of about 15% of the funds surveyed by 2% or more annually per fund.

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“Fair value” pricing calls for funds to adjust their net asset values (NAV) more frequently based on estimates of the impact of certain market development on the values of underlying shares.

Probes showed timers profited by trading in stock fund shares whose prices – or NAVs – hadn’t been adjusted for the key market developments. This method of timing exploits a fund industry practice of setting funds’ NAVs only once daily, when the U.S. markets close.

The $7.5 trillion fund industry continues in the throes of a federal/state abusive trading investigation focusing on market timing, late trading, and certain sales practices.

Investing December 2, 2005

Funds Roar to Life in October

December 2, 2005 (PLANSPONSOR.com) - US stock and bond mutual funds enjoyed a healthy $27.5 billion asset inflow in October, according to Financial Research Corporation's (FRC's) report of October 2005 Estimated Mutual Fund Net Flows.
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That was considerably ahead of September’s $15.9 billion showing, FRC said. International/Global Funds led the way in October with a $12.7 billion infusion, followed by Domestic Equity funds at a $11.8 billion net intake, FRC reported in a news release.

Drilling down by Morningstar Category, Moderate Allocation led the way with a $15.7 billion inflow in October, followed by Foreign Large Blend at $4.3 billion, Large Growth at $3.3 billion, Intermediate Term Bond at $2.8 billion and small blend at $2.7 billion.

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John Hancock Funds had the top seller’s spot taking in $15 billion in October, followed by American Funds at $5.38 billion for the month, ahead of the $5.31 billion from Barclays Global Investors Funds, and the $2 billion from The Vanguard Group.

SPDRS was the top selling portfolio in October at $2.7 billion, followed by American Funds’ Growth Fund of America at $1.47 billion and iShares Russell 2000 Index with an infusion of $1.12 billion.

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