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Fund Times

Fund Times: Mutual Fund Board Changes at Fidelity

Plus, TIAA-CREF to hike fees, Gabelli controversy, and more.


Fidelity made some big changes to its mutual fund boards, the Boston Globe reported. Abigail Johnson, who had headed the fund group until earlier this year when she was moved to head the employer services group, resigned.

In addition independent director Marvin Mann will retire because he's reaching the mandatory retirement age of 72. The Globe reports that Mann will be replaced by former CIA director Robert Gates, who will likely become chairman of the funds board when the independent chairman rule takes effect.

Fidelity won't replace Johnson, thus putting the board in compliance with a pending SEC rule that would require most fund boards to be at least 75% independent.

TIAA-CREF May Backdoor Fee Hikes
Showing disregard for the will of fundholders, TIAA-CREF and its fund board plan to get a fee hike through one way or the other. Fundholders rejected a request to raise fees at the funds, so TIAA-CREF is asking them to vote again in January.

Should that vote fail, TIAA-CREF is launching new higher-fee mutual funds so that it can then merge the lower-cost funds into them. What's particularly striking about this is that even though owners of the TIAA-CREF funds rejected the fee hike in the first vote, the board of directors that is supposed to look out for the best interests of TIAA-CREF fundholders signed off on this backdoor approach.

Mergers would also require a shareholder vote, so they will have to successfully fend off at least two more votes in order to raise the fees.

Wall Street Journal Stirs Gabelli Controversy
The Wall Street Journal reported that fund manager Mario Gabelli was behind several small companies that won bids for cellular spectrum licenses that were later sold at a big profit. The bidders qualified for "very small business" status which entitled them to a 25% bidding discount and a low-interest loan. Gabelli affiliates owned 49.9% of most of the bidding firms, but they were able to qualify for the discounts because the rules required only that the majority owner be a "very small business." The deals are the subject of a lawsuit by a whistleblower who hopes to recover a portion of the money that he claims the government lost due to the discount and the low interest loans.

New Westwood Funds
Westwood funds has filed with the SEC to launch two new funds. WHG Income Opportunity Fund will invest in bonds and dividend-paying stocks. WHG SMidCap Fund will invest in stocks with market capitalizations between $500 million and $10 billion.

Good News, Bad News from iShares
Barclays Global Investors reports that not a single iShares fund distributed capital gains in 2005, thus protecting shareholders come April 15. On the downside, a recent filing shows that portfolio managers Carl Gilchrist and Lisa Chen owned no shares of the 22 regional iShares funds they manage as of the end of August 2005.

Bill Miller Takes It Down to the Wire
It looks like we won't know if Bill Miller has beaten the S&P 500 this year until it's really over on Friday, December 30.  Legg Mason Value (LMVTX) currently leads the S&P 500 by a mere 79 basis points. The fund is quite volatile, so it could easily gain or lose more than that against the index in a day.

Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.