Fund industry's preparation keeps records safe in disaster

Your Funds

September 16, 2001|By CHARLES JAFFE

THE MORNING after what has now become known as the "Attack on America," a television correspondent was talking about the scene, about how amid the ash and rubble there was paper everywhere.

He held up a sheaf of documents that had accumulated around his feet, which he identified as account reports, ledger statements and message slips.

There were so many more important things to worry about that day. But now, as America prepares to start its recovery, you might be mildly concerned about your investment records.

Rest assured: Everything should still be there. While this wasn't the disaster the fund industry was expecting, preparation for catastrophe has long been a big, unseen part of the fund business.

"Fire, flood, earthquake or anything that could jeopardize the safety of mutual fund documents was dealt with long before this incident," says Michelle A. Smith, managing director of the Mutual Fund Education Alliance.

But that doesn't mean that investors won't worry.

Take the case of the Oppenheimer funds, for example, where the offices were housed in 2 World Trade Center, the first building attacked Tuesday.

Oppenheimer services shareholder accounts in Denver, so the fact that the headquarters office was a total loss had no impact on shareholders.

The system in Denver has backups, too. If something happened in Colorado, from a blizzard knocking out power to much worse, Oppenheimer's operations would be switched to a different facility and investors most likely would not notice.

Most fund companies hire out their back-room and accounting functions. The firms that do this kind of servicing - as well as the fund giants that do it themselves - tend to have multiple stations. Think about calling, say, Fidelity, where you might talk to a representative in Cincinnati on one call and Salt Lake City the next.

In the event of a problem in one part of the country, everything gets switched over from one center to the next, so that operations keep running and no data is lost.

"Investors in mutual funds might worry about a lot of things," says Steven Wynne, executive vice president of PFPC Inc., one of the largest firms handling the fund industry's back-room operations. "Having your account disappear on account of some disaster isn't one of them."

The loss of David Alger

It may seem inappropriate to discuss selling a fund when its manager dies, but that was how the e-mail went within hours of word that David Alger of the Alger funds was among the missing after last week's deadly attacks.

Alger was well-known for his frequent speeches and television appearances. He managed or co-managed 17 funds, mostly through Fred Alger Management Inc., but also as an adviser for other firms.

The loss of Alger and most of his investment team puts shareholders in an odd place. It's not the normal manager-quits, assistant-takes-over scenario.

Fred Alger is taking over the firm he founded and ran until handing the reins to his brother more than a decade ago. Offers of help reportedly have poured in from around the industry; several star managers at Janus funds are Alger disciples.

The advice for Alger investors: Hang in and see what happens next, at least over the next two quarters. Any short-term decline will be a function of the market, not of the manager change. The funds deserve enough time to prove that a new management team can meet the standards of the old.

Chuck Jaffe is mutual funds columnist at The Boston Globe. He can be reached by e-mail at or at The Boston Globe, Box 2378, Boston, Mass. 02107-2378.

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