FPA Lauds Disclosure of Fund Conflicts, Urges NASD to Expand Disclosure: The Financial Planning Association has lauded a rule that was proposed by the National Association of Securities Dealers to expand disclosure of sales incentives by stockbrokers in the sale of mutual fund shares, but said that it doesn’t go far enough.
The NASD proposed disclosure to brokerage customers that a broker/dealer is paid by fund companies for “shelf space” to list funds for sale, and that stockbrokers may receive higher commissions in the sale of some of those mutual funds. However, the proposal would only require brokers to disclose that they may receive “different rates of compensation,” and not the dollar amount, so consumers would have to go to at least two different disclosure statements to see fee expenses and brokerage costs, which would be confusing, according to the FPA.
“The NASD should expand its disclosure requirements to the sale of all stocks to retail investors, not just the 20 percent that are held in mutual funds. Principal trade conflicts should be next in line,” said FPA president David Yeske.
Newell Associates Out at Vanguard: The Vanguard Group said that it had reallocated the assets of its Equity Income Fund among two investment advisors already overseeing portions of the fund, and added a new advisor to the fund.
Vanguard said that Newell Associates, which served as an advisor to the $2.6 billion fund since its inception in 1988, will no longer manage a portion of the fund’s assets. Newell previously oversaw 50 percent of the fund’s assets. Wellington Management Co., which previously oversaw 30 percent of the fund’s assets, will now oversee 50 percent of the assets. John A. Levin & Co. will continue to oversee 20 percent of the fund’s assets, while Vanguard Quantitative Equity Group will now oversee 30 percent of the fund’s assets.
The $330 million Equity Income Portfolio of the Vanguard Variable Insurance Fund, which Newell Associates managed since its inception in 1993, is now managed by Wellington Management Co. (60 percent of assets) and Vanguard Quantitative Equity Group (40 percent of assets). Vanguard said that the change in managers is expected to have a beneficial impact on the funds’ expense ratios because Vanguard Quantitative Equity Group provides advisory services to the funds at cost.
Nationwide expands 401(k) options beyond
selected fund line-up: Nationwide Financial said that its plan sponsors can let participants choose funds outside of their designated plan investments without additional fees within the participant’s Nationwide account.
The company said that the fund window was created in response to participant requests for more choice in investment options. The company also rolled out the Nationwide Financial Fund Evaluator, an online tool that lets participants sort investment options using criteria that they establish with data from Morningstar and Nationwide Financial.
Fidelity Adds exclusive Equity Fund: Fidelity Investments has added a flexibly managed equity fund to its offering of funds that are available exclusively through advisors.
The Fidelity Advisor New Insights Fund, managed by Fidelity veteran William Danoff, is designed “for investors seeking a fund that is not constrained by any particular investment style,” according to the firm. The new fund is patterned after Fidelity Contrafund and will use the S&P 500 as its benchmark.
Closed Funds Still Charging 12b-1 Fees, Says S&P: Some domestic mutual funds currently closed to new investments are continuing to charge 12b-1 fees - fees paid out of assets to cover distribution expenses and shareholder service expenses - to investors even though there’s no longer a need to market the fund, Standard & Poor’s funds research reported.
As of July, S&P said that 139 funds with a total of 232 share classes were charging an average 12b-1 fee of 0.62 percent, with 74 funds charging the maximum rate of 1 percent.
The top five fund management companies (based on the total number of funds under management) charging a 12b-1 fee on funds closed to new investments were Idex Mutual Funds, Invesco Funds Group, ING Investments, Dreyfus Corp. and General Electric Investment Corp., S&P reported.
Equity funds represented the highest percentage of closed funds still charging a 12b-1 fee.
