29 July, 2010 - The Securities and Exchange Commission wants to overhaul the ongoing sales charges that mutual fund investors pay, called 12b-1 fees. The fees are part of the overall costs investors pay, reflected in a fund's expense ratio — its cost of doing business, expressed as a percentage of assets.

The 12b-1 fees are separate from any one-time sales charge, known as a load, that investors may pay up front when buying a fund, or after selling their shares. Funds can use 12b-1 fees for a variety of purposes, including paying commissions to brokers who sell funds; fund marketing; and providing investment advice and mailing fund disclosures to shareholders.

The five SEC commissioners on July 21 voted unanimously in favor of 12b-1 changes recommended by the agency's staff. After a 90-day public comment period, the SEC will vote on the final changes.

Here's a look at the key changes in the proposal, which runs 278 pages:

—Broker competition: Brokers would be allowed to compete on pricing, rather than being stuck with the commission that the fund company sets for them. Brokers could offer varying levels of service, geared toward fee levels.

—Fee disclosure: Funds would have to clearly show investors the ongoing sales charges they may be paying, and separate them from fees covering marketing and shareholder services. Disclosures must include totals for "ongoing sales charges" and any "marketing and service" fees.

—Fee caps: Marketing and service fees would be capped at 0.25 percent of the fund's assets per year. Anything above that would be considered a sales charge. Ongoing sales charges would be capped so that the total paid over several years couldn't exceed the amount the investor could have paid had they chosen to pay upfront. For example, a fund that charges a 4 percent sales load could deduct no more than 4 percent over time from an investor. Under current rules, long-term investors who buy class C shares can sometimes end up paying more, essentially subsidizing short-term investors.

source: www.cnbc.com

29 July, 2010 - NEW YORK (AP) - Total money market mutual fund assets rose by $3.57 billion to $2.802 trillion for the week, the Investment Company Institute said Thursday.

Assets of the nation's retail money market mutual funds fell by $2.37 billion in the latest week to $980.36 billion.

Assets of taxable money market funds in the retail category fell by $870 million to $770.65 billion for the week ended Wednesday, the Washington-based mutual fund trade group said. Retail tax-exempt fund assets fell by $1.5 billion to $209.71 billion.

Assets of institutional money market funds rose by $5.94 billion to $1.821 trillion for the same period. Among institutional funds, taxable money market fund assets rose by $7.55 billion to $1.688 trillion; assets of institutional tax-exempt funds fell by $1.62 billion to $133.27 billion.

The seven-day average yield on money market mutual funds was unchanged in the week ended Tuesday at 0.04 percent, said Money Fund Report, a service of iMoneyNet Inc. in Westboro, Mass. The 30-day average yield was also flat at 0.04 percent, according to Money Fund Report.

The seven-day compounded yield and the 30-day compounded yield were unchanged from the previous week at 0.04 percent, Money Fund Report said.

The average maturity of the portfolios held by money funds was 39 days, up from 38 days, said Money Fund Report.

The online service Bankrate.com said its survey of 100 leading commercial banks, savings and loan associations and savings banks in the nation's 10 largest markets showed the annual percentage yield available on money market accounts was 0.21 percent as of Wednesday, unchanged from the week earlier.

The North Palm Beach, Fla.-based unit of Bankrate Inc. said the annual percentage yield available on interest-bearing checking accounts was flat at 0.13 percent.

Bankrate.com said the annual percentage yield was 0.38 percent on six-month certificates of deposit, down from 0.39 percent the previous week. Yields were 0.67 percent on 1-year CDs, down from 0.68 percent; 1.06 percent on 2 1/2-year CDs, down from 1.07 percent; and 1.99 percent on 5-year CDs, up from 1.98 percent.

source: www.canadianbusiness.com

JULY 28, 2010 - DOW JONES NEWSWIRES

Long-term mutual funds had an estimated $6.91 billion of inflows in the latest week due to strength in bond and hybrid funds, which again more than offset outflows from equity funds, according to the Investment Company Institute.

Bond funds have thrived, as they typically do in a lower-interest-rate environment, while equity funds have failed to consistently attract new investment for more than a year despite 2009's sharp rally.

For the week ended July 21, ICI reported that equity funds had outflows of $1.32 billion, compared to the $3.19 billion of outflows a week earlier. U.S. equities had $1.53 billion pulled from them while $204 million was added to foreign funds.

At the same time, bond funds took in $7.86 billion, up from $6.14 billion the previous week, said ICI. Taxable funds had inflows of $6.87 billion and municipal ones added $992 million.

Investors also put $371 million into hybrid funds, compared with prior-week inflows of $430 million. Such funds can invest in both stocks and fixed-income assets.

source: online.wsj.com

You've probably never heard the name Bernard Klawans. For four decades, the 89-year-old former aerospace engineer has managed a mutual fund single-handedly. Klawans has never had any formal training in money management or finance, yet he has been able to outperform some of the greatest minds in the fund business. The aptly named Valley Forge fund has weathered some of the worst market climates since its launch in 1971.
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Over the past 10 years, Valley Forge has returned almost 6 percent on an annualized basis. That lands it in the top 5 percent of all large-cap value funds during that time period. The S&P 500, by comparison, has lost almost 1 percent.

[See U.S. News's list of The 100 Best Mutual Funds for the Long Term, and use our Mutual Fund Score to find the best investments for you.]

"Valley Forge fund has made the pros look like chimps over the last decade," says John Rekenthaler, Morningstar's vice president of research. "It's a useful reminder that investment insights don't always come with one type of resume. His is an unconventional resume, but he's certainly beaten almost all of the Harvard and Stanford MBAs over the last decade."

Klawans doesn't believe formal training is necessary to become a mutual fund manager. In fact, he's helped others start funds—32 to be exact. "I'm just a good businessman, that's all," he says. "I've got a lot of discipline."

While he was working at General Electric in the '70s and early '80s, Klawans applied to become a registered investment advisor. He says he was only the 12th person ever to do so in the United States. To get started, he put $25,000 of his own money into Valley Forge. That amount has grown to about $1.6 million, all of which is still invested in the fund, he says.

Klawans' investing style is quite conservative. He says he only invests in well-known names, such as his former employer GE. If he believes the market is headed south, he's not afraid to pull money out. At times, Klawans will move upwards of 50 percent of the fund's assets to cash. When the financial crisis hit in 2008, he virtually abandoned the stock market. "The market stunk, so I got to 64 percent in cash," he says. "I lost a couple of shareholders that said, 'You're not doing anything,' and I said, 'It's because the market stinks.' While the average large-cap value fund and the S&P 500 index each plummeted about 37 percent that year, the Valley Forge fund only lost about 20 percent.

Klawans says his stock-selection process is simple. "If you buy them low and sell them high, you make money," he says. "I'm pretty conservative, so I only deal with the big stocks." Currently, the fund holds 28 stocks, according to Morningstar. The rest of the fund's assets (about 21 percent) are invested in cash. About a quarter of Valley Forge's assets are in the consumer goods sector, in companies like Kimberly-Clark and Coca-Cola. The fund's largest holding is 3M.

Valley Forge's assets are approaching $15 million (the highest ever), according to Klawans. In the past, he didn't do any advertising for the fund. "It was a play-toy for me," he says. Last year, he hired some outside help to aid in marketing the fund, but he still makes all the buy-and-sell calls himself. He estimates that the fund is now seeing inflows of about $500,000 per month.

In the '70s and '80s, says Rekenthaler, lots of one-man shops sprouted up in the mutual fund industry because average investors wanted to manage their own money. (It was also a lot cheaper to get started back then.) "Most of these other funds, either the performance was poor and they got tired of running the fund and they merged it out of existence, or the guy who founded it passed on," he says.

Klawans' investing style worked well during the last decade. It paid to be conservative in the 2000s because the returns of the broader stock market were low over that 10-year period. Klawans sticks to well-known, blue-chip companies, and he stays away from some of the more growth-powered names that can be found in sectors like technology. "He looked really old-fashioned in the '90s with huge cash positions and no technology and got left far behind," Rekenthaler says. "The last decade has been something of a redemption for him."

"It's a very grounded fund," Rekenthaler says. "Grounded works both ways. ... When everything is bouncing around, you want to be grounded. On the other hand, it doesn't fly when others fly."

source: money.usnews.com