Mutual-Fund Scandal Clouds Bottom Lines
How much is the mutual-fund scandal going to cost mutual-fund companies?
Before it's all over, the bottom lines of mutual-fund companies could be in for some larger hits than are widely expected at this point. One reason is that investigators are focusing on how much "dilution" shareholders suffered in their fund holdings as a result of the short-term trading. That figure could end up totaling many hundreds of millions of dollars -- money that regulators are likely to try and take out of the coffers of mutual-fund companies.
For now, with investigations into abuses involving the trading of fund shares still far from complete, it is impossible to put a price tag on the biggest scandal to hit the fund industry in decades. A first stab at estimating the cost for just one company was taken by Bank of America last week, which said it was setting aside $100 million to pay for legal fees and other scandal-related expenses, as well as an undisclosed amount in restitution for fund shareholders
Janus Capital Group, another fund group mentioned prominently in the scandal investigation by New York Attorney General Eliot Spitzer, also has given an early figure on at least some of its expected costs. The firm pledged to pay fund investors all the management fees it earned on the money from rapid-trading hedge funds, a figure that Wall Street analysts peg at about $1 million.
Even so, add it up and the damage to mutual-fund companies from the share-trading scandal so far has been largely contained to tarnished reputations and a few lost jobs. Individuals have been indicted or pleaded guilty to wrongdoing, but no mutual-fund company has been charged with a crime nor paid any fines. Indeed, much of the attention on the expenses stemming from the alleged trading abuses -- such as higher trading commissions and costs linked to disrupting the management of portfolios -- involve figures that aren't particularly large for an industry that generates fees from overseeing $7 trillion in total fund assets.
Of course, there are other costs to the firms ensnared in the scandal, most notably the impact of fund redemptions by investors. Janus, along with funds run by Bank of America, Bank One and Strong Capital Management -- all of which were mentioned in Mr. Spitzer's complaint -- suffered investor withdrawals in September totaling $7.9 billion, or about 1.85% of their total assets, according to Lipper Inc. And in the case of Janus, there is also the battering inflicted on the company's stock, which has fallen just over 21% since the investigation was unveiled Sept. 3.
But dilution is likely to be the primary issue when it comes to reimbursing shareholders. It is a complex and unfamiliar term to most investors, but it boils down to a simple notion: The profit made by short-term traders of mutual-fund shares known as market timers is often money lost by long-term shareholders. Because money placed in a fund by a short-term trader was often just held as part of the portfolio's cash holdings and never invested in the market, there's a very close correlation between the market-timer's profits and the precise amount of money skimmed out of shareholder's accounts, investigators say.
"The fund companies take the position that there were no transactions costs since the timers did it all out of the cash holdings and there was no disruption," says David D. Brown IV, an assistant attorney general in New York involved in the state's fund investigation. "But if a timer goes in and out of a fund in a day or two and makes a million dollars, where's that money coming from? In that case his profits can be exactly equal to the dilution."
That notion has supporters among academics and some fund-industry leaders. "Even if the portfolio manager says they are not being disrupted, there is going to be the dilution," says Paul Haaga, chairman of the Investment Company Institute, the industry's main trade group, and an executive vice president at Capital Research & Management, which oversees the American Funds group.
The trading in question is a rapid-fire form of buying and selling of mutual funds known as market timing. These timing trades seek to take advantage of short-term dislocations between the price of a mutual fund's shares and the value of its underlying securities. Market timers often focused on international funds because the prices on the stocks held by those funds are generally hours out of date when funds set their share price at 4 p.m. Eastern time and would typically own only a few funds for a few days.
Here's an explanation prepared in 1997 by the Securities and Exchange Commission illustrating how dilution hurts long-term investors of a mutual fund. Assume that an international stock fund in the U.S. holding Asian stocks has starting assets of $50 million and five million shares outstanding, resulting in a share price, or net asset value, of $10. A hedge-fund trader sees that Asian stock prices declined 10% in the latest day's trading, meaning that the international mutual fund is likely to reduce its share price by a similar amount to $9 when it sets its next NAV at 4 p.m. Eastern time.
But the trader also sees that since Asian markets closed hours earlier, some positive news has come out that is likely to boost Asian stocks when they reopen for trading tomorrow. So the trader spends $10 million to buy 1.11 million fund shares at $9 each today. If the Asian shares revert to their starting level the next day, the portfolio will have assets of $60 million and the trader can sell his shares at the new NAV of $9.82.
That gives the trader proceeds of $10.9 million on his $10 million investment. Meanwhile, other investors in the fund who didn't trade any shares would see their NAV drop by 18 cents, or a total reduction in their portfolio value of $900,000. The money gained from short-term trading "comes dollar for dollar at the expense of fund shareholders," says John C. Bogle, founder of Vanguard Group.
No one yet can put a final number on the dilution suffered by shareholders in funds where certain investors were allowed to carry out timing trades but other investors weren't. But investigators say it is possible to get a fairly accurate measurement on the amount of dilution that shareholders of individual funds have suffered.
For example, investigators have done some rough calculations on a mutual-fund family that had an arrangement with a market-timer to permit short-term trading of one of their funds. Neither the fund family nor the timer were identified by the investigators but they said over a three-month period, the timer made eight short-term trades. The fund kept about 3% of the portfolio in cash and the timer was allowed to trade up to 1% of the fund's assets. Because the timer's money was only in the hands of the fund for a few days and essentially became part of the portfolio's cash holdings, that money was never invested.
During this period, the timer made an estimated $1.1 million in profits, money that came directly out of the cash holdings of the portfolio and thus investors' pockets, the investigators contend.
The concept of dilution is nothing new. Minimizing shareholder dilution was at the heart of rules governing fund-share pricing in the Investment Company Act of 1940, the legislation that essentially created the mutual-fund industry as it exists today. In 1968, the SEC made adjustments to fund-pricing rules, aiming to minimizing dilution. In 1997, the SEC examined the impact market timers had on international stock-fund shareholders following the collapse of the Asian stock markets. The SEC example on how to calculate dilution was part of an effort by the agency to encourage funds to make greater use of so-called fair-value pricing -- a tool to eliminate the stale prices that make market timing profitable.
基金丑闻代价知多少
共同基金丑闻会给共同基金带来多大负面影响呢？
在这一切结束之前，共同基金业绩受到的打击可能会比人们预想更为严重。原因之一就是，调查人员关注的是股东在持有基金头寸的过程中因短线交易蒙受了多少“稀释”损失。最终的数据可能是数亿美元，而监管机构可能会试图要共同基金拿出这么多钱来作为赔偿。
目前，有关不正当的基金股票交易的调查仍然远未结束，涉及基金行业最大丑闻的赔偿金额可能会对该行业造成数十年的打击。上周美国银行率先估计了成本，预留1亿美元用作法律费用和其他与丑闻有关的费用，此外还提取一定数额用于对基金股东进行赔偿，但未透露具体金额。
纽约州司法部长埃略特?斯皮策(Eliot Spitzer)的丑闻调查中特别提到的另一家基金集团Janus Capital Group也给出了至少部分预期成本的初步数据。该公司承诺向基金投资者支付从快进快出对冲基金交易中赚得的所有管理费，华尔街分析师预期这一金额将达到约100万美元。
到目前为止，基金股票交易丑闻对共同基金公司的损害还主要限于名声被玷污以及数量不多的裁员。一些个人被起诉或者已经服罪，但还没有共同基金公司被指控有罪或者支付任何罚款。事实上，人们最担心的是有关滥用交易的指控可能带来的支出，例如，交易佣金的增加以及因干扰投资组合管理产生的费用等，但对一个通过管理总计7万亿美元基金资产来获得收费的行业来说，这些支出可能并不算很大。
但当要对股东进行赔偿时，稀释可能会成为一个最重要的的问题。对多数投资者而言，这是一个复杂而又不熟悉的术语，但它可以归结为一个简单的概念：那些对共同基金股票进行短线交易的交易员所获得的利润通常是长线共同基金股票持有者的损失。调查人员称，由于短期交易员记入基金的资金通常作为投资组合中的现金部分存在，从未向市场进行投资，因此短期交易员的利润与基金股票持有者的帐户所遭受的损失之间有密切的联系。
纽约州参与基金调查的司法部长助理大卫?布朗(David D. Brown IV)称，由于短期择时交易使用投资组合中的现金，基金公司充分利用了交易的零成本。但如果一项短期交易在1或2天内从一项基金中赚取了上百万美元，这些利润又从何而来？在这种情况下，利润恰好就是稀释的损失。
一些学术界和领先的基金公司都支持这一观点。基金业主要的交易集团美国投资公司学会(Investment Company Institute)董事长保罗?哈佳(Paul Haaga)表示，即使投资组合经理称他们的投资组合没有被打乱，也将出现稀释。哈佳同时也是管理著American Funds集团的Capital Research & Management的执行副总裁。
被调查的交易行为是共同基金快进快出的所谓择时交易。这些交易试图利用短期内共同基金股票价格和其所包含证券价值间的差额来获利。进行择时交易的交易员通常关注国际基金，原因是这些基金所持有的股票价格在美东时间下午4点各基金制定其股票价格时通常有几个小时的时差，而且，他们通常在几天内持有很少的几只基金。
以下是美国证券交易委员会(Securities and Exchange Commission)1997年对股票稀释如何影响共同基金长期投资者的解释。假设一家美国国际股票基金持有亚洲股票，起始资产为5,000万美元，流通股为500万股，股价或净资产价值因此为10美元。一位对冲基金交易员发现亚洲股票价格在过去一个交易日下跌了10%，意味著该国际共同基金在下一次美东时间下午4点制定其□资产价值时，其股票价格也有可能下跌相同的比例至9美元。
但该交易员也发现，由于亚洲市场早了几个小时收盘，一些盘后有利的消息有可能在第二天开盘时推高亚洲股市。因此该交易员支出1,000万美元，以每股9美元买进了111万股基金股票。如果亚洲股市第二天开盘上涨，则投资组合的资产将为6,000万美元，该交易员也将以9.82美元的□资产卖出其持有的股票。
该交易员因此可以从其1,000万美元的投资中获得1,090万美元的收入。同时，没有交易股票的该基金其他投资者则会发现其□资产下跌了18美分，相当于投资组合价值下跌了900,000美元。Vanguard Group创始人约翰?柏格(John C. Bogle)表示，短期交易所获得的利润来自于基金股票持有者的亏损。
如果基金中的某些投资者可以进行择时交易而其他投资者却不可以，则没有人能具体指出基金股票持有者所遭遇稀释的损失。但调查人员表示，能够对独立基金的股票持有者所遭受的稀释损失进行比较准确的计算。
例如，一家共同基金集团允许择时交易员对一只基金进行短期交易，调查人员对此进行了大概的计算。调查人员没有具体指出该基金集团和择时交易员的名字，但表示在3个月的时间里该交易员进行了8次短期交易。该基金投资组合的3%为现金，而该交易员可以对基金资产的1%进行交易。由于该交易员的资金只能为该基金拥有几天，并最终成为投资组合中的现金部分，这些资金没有用来投资。
调查人员表示，该交易员在此期间估计获利110万美元，而利润直接来自投资组合的现金部分，也就是说来自于投资者。
稀释并不是一个新概念。1940年投资公司法(Investment Company Act)管理基金股票定价的核心规定就是将股东股票的稀释最小化。该法案最终成立了现在的共同基金行业。1968年，美国证券交易委员会对基金股票定价规则进行了调整，目的也是将稀释最小化。
1997年，亚洲股市遭遇了金融风暴后，美国证券交易委员会调查了择时交易对国际股票基金投资者的影响。该机构计算稀释的例子正是其鼓励基金充分利用所谓的“合理定价”所作的努力。这一方法消除了价格差这一择时交易的利润来源。
