Fund Times: Market for Closed-End Funds Still Growing

According to a recently released report from the Investment Company Institute, assets in closed-end funds have grown to $276 billion as of the end of 2005. While assets in these investment vehicles have grown over four consecutive years, recent growth represents an interesting change in direction toward equity funds. Although the majority of closed-end assets are housed in bond funds, "from year-end 2000 through 2005, assets in closed-end equity funds increased by $68 billion, or 186 percent, while assets in closed-end bond funds rose by $65 billion, or 61 percent," according to the ICI research statement.

Over this time period, the number of closed-end funds on offer has also increased dramatically, from 482 at the end of 2000 to 643 at the end of last year, a 33% increase overall. It is estimated that these funds are held by as many as 2 million households in the United States, making them an increasingly important segment of the investment marketplace.

Longleaf Funds Struggle with Fairfax Holdings
Southeastern Asset Management's  Longleaf Partners International (LLINX) and  Longleaf Partners Small-Cap (LLSCX) look to be struggling under the weight of exposure to  Fairfax Financial Holdings (FFH). Yesterday, Fairfax announced that it received "an additional subpoena from the Securities and Exchange Commission regarding the accounting of its nontraditional insurance contracts at its nSpire Re and  Odyssey Re  subsidiaries," according to Morningstar stock analyst Justin Fuller.

These regulatory troubles have been partly to blame for the greater-than-20% decline in Fairfax's stock price for the year to date through March 22, 2006. This decline hits the two Longleaf funds particularly hard, since they both hold positions in excess of 4.5% of net assets in each fund. Added to this, Small-Cap also holds a small position in Odyssey Re, Fairfax's reinsurance unit. Odyssey's stock price is down 15% for the year to date.

Fidelity Institutional Arm Hires New CIO
Pyramis Global Advisors, Fidelity Investments' institutional investment management division, announced on Wednesday the appointment of Young D. Chin, to serve as chief investment officer. Chin has 28 years experience in the investment industry, most recently serving as president and chief executive officer to Gartmore Global Investments, and co-global investment officer for equities, to the Gartmore Group. In 1978 Chin began his investment career at Harris Bank, in Chicago, where for eight years he served as director of the bank's quantitative investment consulting service. Later, from 1999 to 2001, he served as managing director and director of equity management research for Brown Brothers Harriman in New York.

Rainier to Close Fund to New Investors
Rainier Investment Management announced Wednesday it will close  Rainier Small/Mid Cap Equity  to new investors, effective March 31, 2006. With the fund's assets approaching $3 billion, of which $1.2 billion is held in small-cap stocks, the closure is aimed at maintaining flexibility in the small-cap arena. Investors as of the closing date may continue to invest in the fund, as can certain clients of investment advisors and employer-sponsored retirement plans that have existing arrangements with Rainier. With more assets possibly coming from these sources, we'll be watching to see how effective this closure will be in moderating capital flows into the fund.

Evergreen and RiverSource Fund Mergers
Evergreen Investments announced Wednesday that the board of Evergreen Funds has approved the merger of Evergreen Strategic Value  into Evergreen Disciplined Value . Should shareholders approve the merger, it is proposed to take place in late June 2006.

Minneapolis-based RiverSource Investments, the mutual fund arm of Ameriprise Financial (AMP), recently completed the merger of RiverSource Insured Tax-Exempt into  RiverSource Tax-Exempt Bond (INTAX). The similarity between the two funds' investment styles was cited as a major reason for the merger.

Former Fund Manager Fails in Bid for Nomination
James D. Oberweis, founder of Oberweis Asset Management and former manager of  Oberweis Emerging Growth (OBEGX), conceded the race for the Illinois Republican nomination for governor to Judy Baar Topinka, the state's treasurer. By Thursday morning, with 95% of precincts reporting results, Topinka held 38% of the vote to Oberweis' 32%, with the remaining 30% split among a few other candidates.

More Laptop Data Losses
According to The Boston Globe, Fidelity Investments announced yesterday that an employee's laptop computer containing sensitive information on 196,000  Hewlett-Packard (HPQ) retirement account customers was stolen. This breach in investor privacy and security comes only two months after Ameriprise Financial notified approximately 226,000 people of their private data being compromised, also through the theft of a laptop containing customer information.