Fund Times: Oakmark Plays It Cool with Hot Money

Oakmark Funds is trying to stem the tide of money into some of its offerings.

The fund family's advisor, Chicago-based Harris Associates, said  Oakmark International (OAKIX) and  Oakmark Global (OAKGX) will close to new investors buying shares through certain broker-dealers and third-party intermediaries at the close of business on Dec. 15. Existing shareholders of the funds and new participants in existing retirement plans that include the offerings may continue to purchase additional shares. Oakmark Funds also will continue selling the funds directly to investors.

Strong recent performance has swelled the funds' asset bases through appreciation and attracted new money. The more than $1 billion Oakmark Global was up 43% and the $3.3 billion Oakmark International was up 32% for the year through Dec. 9.

Harris Associates also said it will impose 2% redemption fees on shares held 90 days or less on the  Oakmark Fund (OAKMX) and  Oakmark Equity & Income (OAKBX). The firm imposed similar fees on five other Oakmark funds in August 1999.

"While we had not imposed a redemption fee on these two funds because they are less susceptible to successful market-timing, this change makes our redemption fee policy consistent across our fund family, and we believe it is in the best interest of our long-term shareholders," said firm president John Raitt.

AIM Small-Cap Fund to Close
 AIM Small Cap Equity  (SMEAX) will close to new investors Dec. 19, because the fund has reached an asset size where "it has become increasingly difficult to satisfy the Fund's investment objective and guidelines," according to an SEC filing.

In one of the fund's share classes, AIM Investments also will reduce 12b-1 fees, which are normally used to pay for fund marketing and distribution, while the offering is closed, according to the filing. The fee for the Class A shares will be reduced from 0.35% to 0.25%. The fee for Class B, Class C, and Class R shares will not be reduced during this closed period.

The nearly $500 million fund gained 39% this year through Dec. 9, beating 55% of its peers.

Manager of Hot Small-Cap Fund Jumps Ship
 MTB Small-Cap Growth  manager Giles Knight has left the fund's advisor for Gartmore Global Investments, where he will be vice president and senior portfolio manager and, for now, will manage some off-shore accounts.

Knight built a strong five-year record at MTB Small Growth with an aggressive, rapid-turnover style. For example, this year he has been willing to bet on very small stocks with little or no history of earnings. The fund has flourished in 2003, with a 47% year-to-date gain through Dec. 9, which beats 84% of its peers. Its style can produce explosive results in speculative rallies, but it is also fraught with risk.

Alliance, Janus See Outflows
A couple of fund families tangled in the mutual fund trading scandal leaked more assets in November.

Alliance Capital Management (AC), which has dismissed a number of executives and employees for setting up improper market-timing relationships with certain large clients, said its AllianceBernstein stock and bond funds saw $790 million in outflows in November.

That no doubt stings, but the firm's overall assets under management, which includes hedge funds and institutional and private accounts, increased by $3 billion, or nearly 1%, to $456 billion during the month. Even the company's total retail assets under management increased by $871 million, or 0.6%, during November due to market appreciation and inflows into cash management and variable annuity accounts.

Meanwhile Janus Capital , which was one of the first firms accused of allowing market-timing in its funds, said its assets under management fell 1.5% in November to $147.5 billion.

Scandal Snares MFS Funds
The Securities and Exchange Commission could take enforcement action against Massachusetts Financial Services Company, the fund company's parent, Sun Life Financial Services  (SLF), said this week.

Sun Life said the SEC alleges that the disclosure in certain of MFS' fund prospectuses concerning market-timing was false and misleading, and a breach of fiduciary duty.

MFS acknowledged that it hadn't monitored market-timing in 11 of its mutual funds, but contended it didn't think the trading in those funds would harm fund performance. MFS said it is cooperating with the SEC, and that the SEC notice contains no allegations that any MFS employee was knowingly involved in either late trading or inappropriate personal trading in MFS funds. News reports said the New York attorney general and Massachusetts securities regulators also are investigating trading at MFS.

Bank One Still Cleaning House
Bank One  reportedly fired two more executives connected to improper mutual fund trading and its One Group family of funds. The company recently dismissed Gary Young, a fund administration manager at the company's Columbus, Ohio, office, and institutional sales executive Thomas Macior from its New York office, according to media reports. Bank One also reassigned Michael Wible, a lawyer in the fund division, to another position in the company's investment-management business, reports said.

In October Bank One forced out Mark Beeson, president of One Group, and John AbuNassar, head of the institutional asset-management group. The firm was one of four fund companies mentioned in New York Attorney General Eliot Spitzer's initial mutual fund market-timing and late-trading complaint against Canary Capital in early September.

Regulators Charge Prudential with Late Trading
Massachusetts state regulators charged the former Prudential Securities with "widespread" late trading to benefit favored hedge-fund customers, Dow Jones Newswires reported.

According to Dow Jones, state regulators allege that between January 2001 and August 2003, brokers at the firm's Boston office allowed more 1,212 illegal late trades, with a total value of more than $162.4 million. The civil charges, filed Thursday by the Massachusetts Securities Division, are among the most serious to date in an ongoing state and federal investigation of alleged improprieties at the brokerage house.

(Prudential Securities merged in July with Wachovia Securities, LLC. The joint entity is now majority owned by Wachovia  .)

Etc.
Valley Forge, Pa.-based Vanguard Group said this week that Hotchkis and Wiley Capital Management, LLC, has been added to the management team of  Vanguard Windsor II (VWNFX). Los Angeles-based Hotchkis and Wiley, which will oversee about 5% of the fund's assets, joins four other investment advisors in managing the $25 billion large-cap value fund. The other managers include James Barrow of Barrow, Hanley, Mewhinney & Strauss; Gus Sauter of Vanguard; Melvin Tukman of Tukman Capital Management; and Ronald Ulrich of Equinox Capital Management.

Baron Asset Management plans to launch a new large-cap fund called Baron Fifth Avenue. According to SEC filings, the fund seeks capital appreciation through investing in the stocks of larger-growth companies; specifically, according to the prospectus, "securities that the advisor expects could increase in value 100% over five years." The manager of the fund has not yet been named, and the proposed expense ratio is 1.50%.

Strong Capital Management said effective Dec. 31, class A, B, and C shares of $2 billion  Strong Advisor Small Cap Value  will be closed to new investors. In addition, Class Z shares will no longer be available for purchase by certain institutional investors purchasing more than $1 million of Class Z shares, according an SEC filing.

Chicago-based William Blair Funds is closing $400 million  William Blair Small Cap Growth  (WBSNX) to new investors, effective Dec. 31, according to a filing with the SEC.

Correction
To clarify an item on Federated Investors (FII) in the Nov. 26 Fund Times, the firm says that late trading and market-timing occurred in its funds, but it has not said that stale price arbitrage took place.