All Reports & Bulletins
Profitability Benchmarks for Contract Renewal - April 2009 Print E-mail
Contract Committee
Written by By C. Meyrick Payne and Sara Yerkey of Management Practice Inc.(MPI)   


The most important function performed by mutual fund trustees is the annual review of investment management arrangements.  One of the most complex and potentially confusing factors in this review is the analysis of the investment manager’s profitability. In the past year the Jones vs. Harris case has perplexed many a mutual fund lawyer in that it may change the way in which the contract renewal process has been conducted for the past 25 years. However, there has been no final resolution and, until the case is decided by the US Supreme Court, the assessment of the advisor’s profitability remains a necessary step in the contract renewal process.

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Fund Director Compensation Virtually Flat in 2008 - April 2009 Print E-mail
Board Compensation
Written by By C. Meyrick Payne and Jay Keeshan of Management Practice, Inc.   

Management Practice Inc. (MPI) has just completed its sixteenth annual “Survey of Mutual Fund Director/Trustee Compensation and Governance Practices”, with data covering 2,140 directors from 411 fund families. Copies of, and specific comparisons to, the survey detail are available from MPI.

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Working to Improve a Fund Stewardship Grade - March 2009 Print E-mail
Governance Committee
Written by By C. Meyrick Payne and Jay Keeshan of Management Practice Inc. (MPI)   

Most fund directors are aware that Morningstar assesses the governance and ethics of mutual funds by assigning a Stewardship Grade. This process was started about five years ago but has recently been rejuvenated and reemphasized. Morningstar’s overall intent with the grades is to “shine a light on better/best practices.” They have currently rated about 1,000 out of 7,000 funds representing about 30% of all fund assets.

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Money Market Melt Down; Lessons for Fund Directors - March 2009 Print E-mail
Investment Committee
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.

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Comparing the Cost Effectiveness of Service Providers - February 2009 Print E-mail
Contract Committee
Written by C. Meyrick Payne of MPI & Simon Collier of Sondent Group   

     One of the difficult tasks that a fund director faces involves assessing the reasonableness of the fees charged by either an affiliated or independent service provider. The most frequent services are (1) transfer agency, which typically represents about 20% of fund expenses and is the largest fund expense other than investment advisory fees and distribution fees, (2) fund accounting, which may represent about 5% of fund expenses, and (3) administration, which might represent about the same.  A considerable part of the difficulty is that some tasks might be included under any of the three services, thereby making comparisons tricky. Another difficulty is that the contracts, although reported on a fund-by-fund basis, are typically negotiated on a complex-wide basis.

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