Investment Committee
Money Market Melt Down; Lessons for Fund Directors - March 2009 Print E-mail
Written by By Anthony Aveni, CFA, President Capital Metrics LLC and Meyrick Payne, Partner, MPI   

In September 2008 two well-known and respected money market mutual funds (MMF) imploded.  In the case of the first, The Reserve Primary Fund, the problem was due to credit quality issues, stemming from its ownership of Lehman Brothers commercial paper. In the case of the second, Putnam Prime Money Market Fund, credit quality seemed to play no role. The Putnam Fund held no AIG, Washington Mutual or Lehman paper. Putnam’s predicament was due to the fear of a credit quality problem that precipitated a run on the fund. Keep in mind that both funds operated entirely within the confines of the existing regulations for money market funds, principally Rule 2a-7.

Read more...
 
Securities Lending: What Fund Directors Should Consider - June 2008 Print E-mail
Written by By Jay Keeshan and C. Meyrick Payne   
In recent years the topic of securities lending has become an important issue for mutual fund directors, in large part due to advances in technology, which have made the lending process more streamlined and allowed significant profits to be earned. These, in turn, mean higher returns for fund shareholders.  In fact the total profits earned by US mutual funds from securities lending in 2006 was $760 million, up from $510 million in 2005.  Whether a fund is currently lending its shareholdings or not, it is important for fund directors to stay current with this rapidly changing element of the fund industry.
Read more...
 
Are Performance Fees a Solution or a Problem? Print E-mail
Written by C. Meyrick Payne   

In a bear market, mutual fund directors often ask themselves if a management fee based on performance is a good idea. This MPI Bulletin addresses this perennial issue. In earlier Bulletins, we have addressed the issue of what fund directors can do in response to poor investment performance. Certainly performance fees are a direct and understandable response. However the decision to implement one is not simple. This Bulletin argues both sides.

Read more...
 
Mutual Fund Directors' Response to Poor Performance Print E-mail
Written by C. Meyrick Payne, Senior Partner, Management Practice Inc.   

Mutual Fund directors often wrestle with what should be the appropriate response to poor investment performance in one of the funds that they govern. Some incorrectly describe the range of tools available to directors as "a feather or a sledgehammer". These critics believe that the directors can only mildly chastise the management company or alternatively lift the advisory contract. Nothing could be further from the truth, particularly as the troublesome fund is usually part of a larger complex where there are a variety of organizational alternatives. Invariably the top executives of the management company are just as anxious to correct poor performance as the independent directors. The purpose of this article is to enumerate some effective alternatives, which generally fall into three categories; organizational, fee-related and structural. Each of these is discussed below.

Read more...
 
Keeping the Pressure on Portfolio Managers: A Tangible Benefit of Fund Trustees Print E-mail
Written by By Jack Treynor, Independent Trustee, Eaton Vance Funds   

(Mr. Treynor has long argued that portfolio managers should do what they are paid to do - trade based on their skill rather than wait for their luck.)

The true style of your fund group's portfolio managers runs much deeper than simply understanding if they are growth or value disciples. Beyond their apparent investment acumen, portfolio managers' mindsets often determine when, how and why they trade a fund's portfolio. A fund trustee needs to understand the portfolio manager's frame of mind.

Assessing fund performance and the quality of your group's portfolio managers is a key part of your overall responsibilities. But how can you tell -- really tell -- what motivates your funds' portfolio managers to action or restrains them from taking any action? A fund trustee can often peel back the layers and get a glimpse of the "real" managers at the helm.

Read more...