The Naughty Fund Family List
If you think most fund families have been involved in late-trading or
market-timing investment malpractices, you're wrong. Of the roughly 400 mutual
fund families in the open-end fund universe, only a small fraction of them
have participated in such practices.
Ever since last September---when the first story broke about a hedge fund's
alleged illegal market-timing and late-trading practices surfaced---the amount
of ink attributed to the shenanigans in the open-end fund world has been
enough to give the impression that the entire mutual fund industry was ripe with
thieves and robbers all more than happy to steal from the little guy's mutual
fund investment. In reality, however, of the nearly 400 mutual fund families
around (not hedge funds but open-end mutual fund families), less than 20 have
been included in this crisis of investment confidence.
"There's just no evidence of it (market-time or late-trading problems) as
being rampant within the industry, " says Andrew Clark, a senior research analyst
at Lipper, Inc. "There's no proof of that."
As of late February, about 17 fund families had been included in late-trade
or market-timing scandal. And according to Clark, Lipper research suggests
there may be another 20 families to come. If the latter proves true, that would
bring the tally to roughly 40 fund families---or about 10 percent of the fund
family universe. As the numbers stand today, the rats only represent about 5
percent.
For investors uncomfortable with owning shares of a family indicted of
investment malpractice charges, or subject to those allegations, Clark says: "If you
feel that you cannot work with a firm that has been found guilty, or, you
think will be found guilty of some of the malpractices that they've been accused
of, take your money out. Then, put it somewhere else. But be aware of the tax
consequences of doing so."
Great advice---especially the "tax consequences" part.
Here's an alphabetical listing of the fund families that have been named in
the industry's late-trading and
or market-timing scandal: Alger;
AllianceBernstein; Columbia: Excelsior; Federated: Franklin: Heartland: Invesco: Janus:
MFS; Nations; One Group: PBHG: Putnam: Scudder: Seligman: and Strong.
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