Fund Companies

MUTUAL FUND companies have learned how to sleep with the enemy.Even T. Rowe Price Associates Inc. succumbed this year when it started selling competing mutual funds to its customers through its discount brokerage operation.Price now offers more than 700 of its competitors' mutual funds through T. Rowe Price Mutual Fund Gateway.Customers can sift through offerings from Scudder, Janus, Dreyfus, INVESCO and dozens of other companies."We have all the big names," said Ed Bernard, president of T. Rowe Price investment services.

Mark E. Stoeckle has been named CEO of Baltimore-based Adams Express Co. and Petroleum & Resources Corp., replacing Douglas G. Ober, who last year announced his intention to retire. Stoeckle, 56, has been the chief investment officer of the U.S. Equities and Global Sector Funds for BNP Paribas Investment Partners, a Boston investment management firm. "With his outstanding record of achievement, he has the leadership ability and experience that are ideally suited to lead our portfolio management team and the companies," said Daniel E. Emerson, the lead independent director for the two companies, in a statement.

BOSTON -- The number of U.S. mutual fund companies requesting protective lines of credit from banks is up about 50 percent from a year ago, according to bank officials."

If you own mutual funds outside a retirement account, you likely have heard from the investment companies asking you to choose your math. The companies want you to select the method they should use to calculate your "cost basis" — how much you paid for the shares. What you decide can make a difference in your tax bill when you sell. The fund companies are acting on legislation passed in 2008 that requires brokerages and investment companies to report cost-basis information to the Internal Revenue Service when securities are sold.

A LARGE mutual fund company can cast thousands of proxy votes annually on behalf of shareholders, and for years those votes have remained secret. Not much longer. By the end of this month, fund companies will have to disclose how they vote each year on issues arising at companies they invest in, such as executive compensation and the election of directors. This means investors will be able to find out whether their fund always sides with management or votes against over-the-top executive pay or anti-takeover measures that may not be in shareholders' interest.

Seventy-five years and more than $5 trillion after the modern mutual fund was born, the fund industry is finally showing signs of age.For the first time in a decade, Americans' net new investment in stock funds declined last year from the previous year, industry data show.While mutual funds over the past decade may have been the greatest democratizing force in the history of Wall Street -- allowing investors with modest sums to ride the spectacular 1990s bull market -- the industry faces increasing competition for its mountain of dollars.

Rocked by late-trading and market-timing scandals in 2003, the embattled mutual fund industry faces a regulatory overhaul this year. "It's not easy to guess what's going to come out the other end after all is said and done, but clearly it's going to be a more open, more shareholder-oriented industry," said Russ Kinnel, director of funds research at Morningstar Inc., an independent fund research and analysis company in Chicago. Though influential industry officials have resisted past attempts to reform the $7.2 trillion mutual fund business, 2004 will be different, analysts said.

The pending change at the top of the Securities and Exchange Commission is raising mutual fund companies' hopes for a slowdown in new regulations - and perhaps a more forgiving view of industry practices that are under a spotlight. That worries investor advocates, who say that the SEC has yet to deal with a number of important questions involving how funds operate and whether shareholders are treated fairly. The $8 trillion fund industry, which has seen its once-pristine reputation tarnished by a series of scandals over the past two years, is looking to SEC Chairman-designate Christopher Cox for a timeout of sorts.

If you own mutual funds outside a retirement account, you likely have heard from the investment companies asking you to choose your math. The companies want you to select the method they should use to calculate your "cost basis" — how much you paid for the shares. What you decide can make a difference in your tax bill when you sell. The fund companies are acting on legislation passed in 2008 that requires brokerages and investment companies to report cost-basis information to the Internal Revenue Service when securities are sold.

CHICAGO - Morningstar Inc., whose U.S. mutual fund research is used by more than 3 million investors, plans to raise as much as $100 million in an initial public offering. Softbank Finance Corp., Morningstar's second-biggest shareholder with a 20 percent stake, might sell stock in the transaction. Morningstar might use the proceeds to make acquisitions and invest in joint ventures, according to a filing with the Securities and Exchange Commission. Morningstar, which tracks more than 15,700 U.S. funds, has been unprofitable for four of the past five years, the SEC filing said.

New York -Critics have long complained that mutual-fund fees are too high, wrongfully enriching Wall Street at the expense of ordinary Americans. Yesterday, the U.S. Supreme Court said it would take a crack at the explosive issue. The court agreed to hear a case in which individual investors have accused their fund company of charging excessive fees. At issue is the legal standard that small investors must meet to bring lawsuits against fund companies. The court will determine whether a ruling last year sets too high a bar for investors to challenge the annual levies.

You can't blame investors for being a bit paranoid about fund management, thinking that the brass always puts shareholder interests last. The problem with that line of thinking is that it's tough to figure out those times when management really is out to get you. That's why some investors took the release of the largest-ever study on mutual fund proxy voting as a sign that fund firms are in the pocket of Corporate America, while others suggested the...

Dear Fund-Company Honchos: In this season of giving -- at the time of year when investors are realizing that many of your issues will be paying out big capital gains and generating nasty tax bills on mediocre performance for 2007 -- you should be getting shareholders a little something special. I'm not talking performance here, as results are not a gift but rather a promise to the people who entrust you with their money. Instead, it's my holiday wish list. If you're like most of your shareholders, you're feeling the economy's pinch this year, so I've made a list that requires nothing more than energy and effort.

When investors discuss mutual funds and wonder "What have you done for me lately?" their focus always centers on performance. But beyond the numbers, fund companies do a lot for consumers, providing education to make them better investors. To that end, I had fund firms send me their educational freebies, so that I could pick the best available items. Some 30 fund companies swamped my office with more than 320 goodies; all had to be available in printed versions - not just online - and had to be free, whether you are a shareholder or not. Last week, I focused on some hand-held cardboard slide-rule calculators and more.

If you buy a computer, the "quick-start guide" helps you get the equipment up and running without forcing you to learn many of the fine points that may or may not someday be useful information. The powers behind the mutual fund business want you to get the same kind of jump-start when it comes to their products. Paul Schott Stevens, president of the Investment Company Institute - the trade association for fund companies - called for big changes in fund disclosure last week, suggesting that investors would be better served by ditching the traditional prospectus in favor of a jump-start user's manual, along with instructions on how to access the true prospectus on the Internet.

Each year at this time, I predict the big fund-industry stories of the coming 12 months, the kinds of issues that will be newsworthy. Since I started making prognostications in 1995, five calls out of seven have typically turned out right, with one forecast being a bit too early and the other being flat-out wrong. I am confident that we'll see the following in 2007: More bad guys - and more outrage - from the most-recent industry scandal. In 2006, Bisys Fund Services - which provides backroom operations for more than two dozen small fund families - revealed that it had been paying kickbacks to some of those funds in order to get and keep the accounts.

T. Rowe Price Associates Inc., the large Baltimore-based investment company, today unrolls its most ambitious TV ad campaign yet, with spots on several cable channels.Like other mutual-fund companies, Price spends most of its ad dollars on print publications -- newspapers and magazines, especially personal-finance periodicals.But even as mutual-fund investors help push the stock market to new highs, research shows that people are relatively unfamiliar with even the biggest fund companies, said Meredith Callanan, Price vice president and marketing manager.

When you watch cable television news programs, you are probably used to being pitched fast-food hamburgers, cars, beer and other consumer staples. But mutual funds?Within the past few years, the fund industry has indeed taken its pitch to television, but its reaction to the medium has been mixed.The big companies are in the game, and "a lot of the smaller complexes are testing the waters now," said John A. Jelilian, vice president of Competitrack, a firm in New York that tracks advertising spending by funds, brokerage firms and other financial services companies.

I've made my list and checked it twice, and because picking on the naughty is always so nice, here is the second installment of the 2006 Lump of Coal Awards. Lumps of Coal go to mutual fund managers, executives, firms, watchdogs and others who deserve nothing more than an inky chunk of carbon in their Christmas stocking this year. They earned that distinction in 2006 as a result of action, attitude, performance or behavior that is offensive, disingenuous, duplicitous, reprehensible or just plain stupid.

December typically brings cold weather, warm greetings and some of the least-worthwhile "common-sense" mutual fund advice known to investors. This year looks to be no exception, as the early estimates show that 2006 will test investors' knowledge of how capital gains taxes are applied to mutual funds and how they should react. The rule of thumb in question starts out well enough, but goes wrong in the execution. It goes something like this: Never buy a fund in December if it is making a big capital gains payout.