Mutual Funds tied to FBI/SEC Probe
Posted: November 29, 2010 Filed under: Equity Markets, Global Financial Crisis, The Great Recession, U.S. Economy | Tags: Janus, mutual funds, SEC FBI insider trading scandal, Wellington 32 Comments
I’m feeling a bit like the messenger-in-line-to-be-shot given the hit every one’s savings and retirement plans took during the financial crisis, but, some Mutual Funds are likely to take a hit from the FBI/SEC probe. I figured that a lot of your probably have some Mutual Funds since it’s a typical vehicle for most middle class savers. You should probably watch this and your fund. I’m just assuming that you don’t want to incur any more unnecessary asset losses in this environment.
You may recall that the news from the investigation broke a week ago. It is possible that some of the funds are losing value now just based on the information floating around the financial circuits. Investors and fund managers listen to information, weigh it and consider the impact it will have on future value of the funds. No need for complete hysteria right now, just some cautious information gathering and staying on top of things.
There’s some information today on Bloomberg and if you have any funds managed by the investigated funds, you may want to look at them with a jaundiced eye right now. The worry is that with so many funds having lost investors that a continuation may bring down some of the major companies that are fund managers. That would be the worst case scenario and would, of course, lead to another possible tax payer bailout of another industry as these things tend to spread contagion to even healthy, well-managed funds. As the article mentions, damage to reputation is something that really impacts the value of a company and its ability to attract investors.
Janus Capital Group Inc. and Wellington Management Co. were among firms that received requests for information last week as part of an insider trading investigation involving hedge funds as well as mutual funds. None of the companies have been accused of wrongdoing. All this uncertainty is actually looking good for investing in silver 2016, read on, more details about this below.
The probe hits firms as they try to reverse $90 billion in withdrawals from U.S. stock funds since the beginning of 2009. Damage from the industry’s last run-in with regulators, a series of trading scandals in 2003 and 2004, took years to repair and led to more than $3 billion in fines against more than two dozen firms, including Bank of America Corp., Putnam Investments, Janus and MFS.
The insider information brokerage companies are now under active investigation and they are undoubtedly looking for folks to turn state’s evidence and pouring through client lists. You should follow this carefully if you have any mutual funds and make sure that your management company does not show up in any articles linking them to the scandal. This could very likely impact–at least in the short run–fund stability. Remember, mutual funds are not insured with an agency like the FDIC. You lose what you have invested should the fund run into trouble.
The focus on mutual funds is fairly recent so the market may still be catching up to the news. Many pension funds use these mutual funds and it takes a while to remove them from the plan or adjust contributions but institutional investors are usually bound by safety standards and they buy huge amounts of funds. If one or two of them bail, it can drive the fund price to a lower than NAV or Net Asset Value level if the fund is market-traded. The institutional investor may have to dump the fund based on its safety rating given its fund management rules.
Mutual funds were unscathed by the probes until last week, when Janus and Wellington were among a number of asset managers to receive information requests. Hedge funds Level Global Investors LP, Diamondback Capital Management LLC and Loch Capital Management had their offices raided by U.S. officials. Balyasny Asset Management LP, the Chicago-based hedge fund, said in a Nov. 24 letter to investors that they received a faxed subpoena from the government “requesting a broad set of general information for the last few years.” None of the firms have been accused of wrongdoing.
The mutual-fund companies that were contacted by federal prosecutors declined to comment when called by Bloomberg News on whether they use expert networks and what information they were asked to provide.
Janus, based in Denver, said on Nov. 23 that it received a request for “general information and intends to cooperate fully with that inquiry.” The firm, in a U.S. Securities and Exchange Commission filing, said it would not provide further updates unless required by law. Janus manages $160.8 billion in assets.
It’s a little early to tell exactly what impact all of this may have, but if your money is heavily invested in mutual funds, I would be watching this carefully. Anyway, just a heads up! Morningstar is a good source of fund information. I rely on their database when I have to do investment research. This link will provide you with a list of funds that are undergoing some changes at the moment also. They also have a blogger dedicated full time to funds. M*_RusselK has more thoughts and analysis here. These are my main go-to places for current fund analysis.
peej
Carissa
bostonboomer
ecocatwoman
mablue2
peggysue22
quixote
skydancingguestblogger
Mona (aka Wonk the Vote)
Sky Dancing 
I think that the Obama administration is aware that people are angry that those who committed fraud and brought down the banking system have not gone to jail. So now the DOJ wants to send a few small traders to court and look tough with front page headlines. Martha Stewart should have never gone to jail, but she was the perfect candidate for a front page headline.
I believe we haven’t had an honest market in years.
That’s why I didn’t want to do investments as part of my PHD specialities. I refuse to buy into “rational markets” hypothesis and spent all of my time in my doctoral investment classes writing papers looking at how to game the system. My investment professors were surprised I was less interested in making money than muckraking. I think the business is a snake pit and the big guys game markets much like breeders and jockeys game horse races.
Thanks for the ‘Heads Up” Dak…with all the leaky wikies in the news, something like this would be missed.
yw … I’m trying to protect my little nest egg. I finally got it in the black with a decent rate of return. Unfortunately, the state of Louisiana forces me into mutual funds so I found out with the Fidelty mess a few years ago, you gotta watch those guys!!! They pull crap all the time!!!
Scarecrow: Obama flunks economics with pointless federal wage freeze.
I thought about writing about that but it’s such an empty gesture and McScrooge kinda thing to do this time of year, I didn’t even want to touch it … glad some one did.
The Shrill One doesn’t like it either:
Freeze Frame
I don’t know what bizarre lessons Obama learned from the “shellacking”. Adopt the silliest Rightwing policies?
yeah, it’s a pre-emptive 11th dimensional chess strategy. Introduce and pass Republican policy before they get a chance to do it.
LOL!
did you catch this in the comments?
Yup, this is a socialist agenda, dagummit!!!
That’s the best comment of the week. No more entries will be accepted.
I saw that too, and it really sums it up, doesn’t it?
Now that he’s taking on the federal workers, like Reagan took on the air traffic controllers, Obama is hoping that people will see him as a tough disciplined frugal spender. The message he received from the 2010 election is that he needs to work on his image, not do a good job to get the economy working again.
Why-oh-why didn’t people take his talking up Reagan so effusively in the campaign seriously?
Those who followed Obama shared the same irrational perception, always dismissing anything that was negative, like being a Reagan admirer, and accepting anything that was good, like supporting women’s rights.
DDay at FDL has got a post up about folks chipping away–already–at the Dodd-Frank financial reform act.
bad news!
I think the theme generally is Battle Star Galactica between certain factions of the Upper Crust.They came together as one for”Operation Enduring Freedom from Clinton Presidents”…but now I believe we are seeing a failing out. N.Korea, the leaks and these $$ probes….seem like salvos in this civil war between the super duper rich…. imo.
That’s a very good statement. I think that’s why the elite is determined to keep the masses uneducated, in debt, and worrying about the next meal. When people are worried about making it from one day to the other, they don’t care about politics.
”Operation Enduring Freedom from Clinton Presidents.”
Heh! Lol! … Sob!
http://susiemadrak.com/?p=10532 Read thru to Howie. What a shitty President.
ouch!
Thanks for the heads-up, Dak. I read some of those links and turns out a couple of my accounts are either managed by or have been acquired by a couple of those companies named above. Yikes.
I think the federal worker wage freeze idea is just more making the small people pay for the rich people’s excesses.
I noticed Congress isn’t volunteering for a pay freeze yet and they will vote on this. Coincidence or just a conspiracy theory?
sheesh! my odd sense of humor has returned … it must be because wonk’s here and I’m feeling glad!
Read somewhere today that they voted to freeze their pay as of sometime in ’09. {{{hunts for link}}}
But they make around $174,000 a year, so I doubt they’re hurting much.
http://seattletimes.nwsource.com/text/2013548287.html
Yes, Obama is indeed working from a GOP playbook.
yup … and unfortunately, that’s nothing new …
obamacare=romneycare=dolecare
(pppsssstttt… pass it on!!!)
What we need is a good national strike. I’ll go! I’ll hold people’s picket signs. Heck, I’ll even picket my own business if it’ll help.
Isn’t this just great: s/
http://seattletimes.nwsource.com/text/2013548670.html
We don’t need no stinkin’ ideas from Wal-Mart!
I wish I could figure out a place to put my money that was safe and in no way involved in current financial sector. There’s no place. I hate that I’m forced to ‘buy’ their products despite my will.
I suppose I could put it in my mattress, but I don’t think the little red dog is going to be that thorough a guard (she’ll probably chew it all), and even only a couple tens of thousands in bills would be bulky and awkward. Not to mention the scrutiny withdrawing such from the usual places would bring from the Feds.
That’s the problem with oligopolies. There’s no place to go but THEM and what they offer usually is not that good.