You might prefer an eggnog or a gift card, but nothing says "happy holidays" like the chance to make fun of fund-industry miscreants. It's a holiday tradition...
You might prefer an eggnog or a gift card, but nothing says “happy holidays” like the chance to make fun of fund-industry miscreants.
It’s a holiday tradition called the Lump of Coal Awards, which today and again next week celebrate their 10th anniversary by sticking lignite lances into the fund world’s bad boys and girls, the ones who deserve inky chunks of carbon in their Christmas stockings. Lumps of Coal recognize managers, firms, watchdogs and others for actions, attitudes, performances or behaviors that are offensive, disingenuous, duplicitous, reprehensible or just stupid.
2005 Lumps of Coal go to:
• Management of the TIAA-CREF funds, for failing to take a hint.
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In August, TIAA-CREF sent retail shareholders a proxy noting management had been losing money running their funds. The firm threatened to liquidate the funds if investors wouldn’t approve a fee increase.
Low fees attracted core investors in the first place, so management could not have been shocked when the increase was defeated.
But after investors suggested they would rather see the funds liquidated than pay another dime in management fees, TIAA-CREF floated the question again, with investors paying the costs of the new vote.
• The BlackRock funds, for desecrating a treasure.
When BlackRock bought State Street Research & Management this year, it did the usual merge-and-consolidate.
In the process, it folded State Street Research Investment Trust — the nation’s second-oldest mutual fund — into one of its own issues, thereby murdering an eight-decade track record.
That’s both tragic and stupid because the State Street fund had an average annualized return of more than 12 percent, making it the ultimate, 80-year case study in how fund investing can work best. BlackRock could have merged the funds in a way that preserved the record and its marketing benefits.
This was like buying a house, finding a live dinosaur in the garage and shooting it to create a parking space for the minivan.
• Brandweek magazine, for its definition of loyalty.
When Brandweek announced its 2005 Customer Loyalty Awards, Putnam Investments won top honors among fund firms, and Janus tied for second.
Between poor performance and involvement in trading scandals, the two firms have topped the list of funds facing redemptions. Not classic “loyalty.” Maybe Brandweek thinks it’s amazing that these firms have any shareholders left at all.
• PowerShares Capital Management, for gimmickry unbecoming an investment company.
The king of goofy and trendy exchange-traded funds started PowerShares Lux Nanotech, PowerShares Water Resources and PowerShares Dynamic Food and Beverage.
Trendy funds make for good conversation but bad investments. Smart managers don’t create products that set investors up to fail.
Chuck Jaffe is senior columnist at CBS Marketwatch. He can be reached at firstname.lastname@example.org or Box 70, Cohasset, MA 02025-0070.