Mutual Funds Fight Disclosure Reforms
Saturday June 26, 9:13 am ET
By Mark McSherry
CHICAGO (Reuters) - Sorry seems to be the hardest word to say for the scandal-tainted $7.4 trillion U.S. mutual fund industry.
In fact, facing a raft of reform proposals, fund bosses at one of their biggest annual meetings in Chicago this week gave the impression they were being unfairly attacked.
Some money managers would view demands for more disclosure on their compensation as "harassment," said Robert Pozen, nonexecutive chairman of MFS Investment Management. The pressure is making the industry feel like "the only bear in captivity," he added.
Calls by conference organizer Morningstar Inc., an investment research firm, for more disclosure on fund managers' compensation and to what extent they are invested their own group's funds obviously touched a raw nerve.
A major fear in the industry is that such disclosure would cause some portfolio managers to leave mutual funds and join hedge funds, which face fewer regulations.
"If we disclose, managers will ask for more (money). Some of them will get more money and some will just leave," said Pozen, in one of the most heated sessions at the Morningstar Investment Conference here.
"Talented investment people are going to say there has to be an easier way and move to the private world ... hedge funds," added Charles Haldeman, chief executive of Putnam Investments.
The responses came despite arguments by Mercer Bullard, founder of shareholder advocacy group Fund Democracy, that such disclosures were clearly in shareholders' interests.
About half of U.S. households are invested in mutual funds.
"Obviously it is a bone of contention," Morningstar Managing Director Don Phillips told Reuters. "It is interesting the sparks that fly on this issue."
New York Attorney General Eliot Spitzer launched investigations into mutual fund trading abuses last September, triggering a barrage of legal actions, probes by the U.S. Securities and Exchange Commission (News - Websites) and a wave of regulatory reforms.
Some fund firms were found to have allowed certain investors to rapidly trade mutual fund shares for quick gain at the expense of long-term shareholders.
MFS Investment Management is a unit of Canada's Sun Life Financial Inc. (Toronto:SLF.TO - News), and Putnam Investments is a unit of insurance broker Marsh & McLennan Cos. Inc. (NYSE:MMC - News). |
