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S&P Issues Statement on Issues of Market Timing and Late Trading of Mutual Funds
NEW YORK, Oct. 27 /PRNewswire/ -- Standard & Poor's, a leading provider of
independent investment research, ratings, and indices released today the
following statement on the issues of market timing and late trading of mutual
funds:
When the current issue of market timing and late trading of mutual funds broke,
mutual fund analysts from Standard & Poor's cautioned investors to wait for
further information before taking any action. Even given the fact that the
situation has obviously evolved, much still remains to be learned about the
breadth and depth of this investigation -- we may for example learn more about
any role played by intermediaries and distribution channels -- and we remain
committed to our initial position.
Clearly, advantaging one set of investors over another is wrong and should not
be excused. Changes in the industry are already being widely discussed. While
trade associations and regulators will encourage these changes, Standard &
Poor's strongly believes management of the fund sponsors must lead these
changes. Only by demonstrating rapid and decisive leadership will fund sponsors
restore the public's confidence in their products and services. Some early signs
are encouraging. The president of Bank One, sponsor of the One Group of funds,
has issued two releases outlining specific steps being taken to remedy the
situation. More importantly, he appears to be supporting these releases with
actions. At the same time, the recent news associated with a member of the Alger
group of funds is disappointing.
Standard & Poor's believes that more information needs to be made available
before coming to conclusions on any specific family or fund. We will be looking
to the actions taken by the fund sponsor, the specific funds affected by these
actions and the sources or causes of the activities. Until these facts are
known, it is difficult to draw specific conclusions.
Standard & Poor's believes that each fund should be judged on its own merits and
circumstances. For example, many fund sponsors hire other independent money
managers who do not have direct relationships with the sponsor's portfolio
managers and analysts and may not be affected by any issues relating to the
sponsor. In addition, in-house management teams at some fund firms may also
operate largely independently from one another, so that an issue with a family's
growth funds may not affect its value funds, or vice- versa. As a result, it
would be difficult to paint both sides of such an operation with the same brush.
Sweeping generalizations and impulsive decisions about fund sponsors may result
in an unbalanced portfolio and inadequate asset allocation decisions for
investors, or may lead an investor to move from one fund family to another based
on incomplete information, only to find that he or she has moved from a fund
that was not affected to one that was.
Investors should always closely consider several important factors when
evaluating the merits of a fund. The quality of the sponsor is an important
factor but other factors, including the experience of the portfolio manager, the
adherence to a stated style, the consistency of a performance track record and
the fund's expenses must also be accounted for. Investors must be afforded
sufficient transparency on each of these issues in order to gain the confidence
necessary to invest. Investing based on a single point of information can lead
to ill-advised judgments. Rather, the sum of these factors must be taken into
account in order to reach an informed conclusion.
Standard & Poor's will continue to closely follow the actions taken by fund
sponsor's management and factor this into its decision-making.
About Standard & Poor's
Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the
world's foremost provider of independent credit ratings, indices, risk
evaluation, investment research, data and valuations. With 5000 employees
located in 20 countries, Standard & Poor's is an essential part of the world's
financial infrastructure and has played a leading role for more than 140 years
in providing investors with the independent benchmarks they need to feel more
confident about their investment and financial decisions. For more information,
visit http://www.standardandpoors.com/.
DATASOURCE: Standard & Poor's
CONTACT: David R. Guarino
Standard & Poor's
+1-212-438-1471
Web site: http://www.standardandpoors.com/