Mutual Funds May Have to Name Portfolio Managers
The Securities and Exchange Commission on Thursday proposed controversial rule changes to force mutual funds to identify their portfolio managers and performance trends, but the proposals will likely face an industry fight.
At an open SEC meeting, the commission suggested changes requiring funds to routinely issue reports to investors that would easily and clearly explain a fund’s previous performance and disclose the names of portfolio managers.
Many individual investors in the $1-trillion mutual-fund industry have been befuddled by the complicated and lengthy prospectuses that often accompany fund shares.
Critics also say many supposed tell-all share documents do not reveal certain vital information needed for decision-making.
But the proposals, which were put up for public comment and face final SEC approval, are expected to come up against a barrage of opposition from some of the industry’s 3,000 funds.
The mutual fund industry successfully fought SEC attempts to force publication of portfolio managers’ identities in 1972, 1982 and 1984.
SEC Chairman Richard C. Breeden said investment in the stock market by Americans these days increasingly includes “mutual funds as one component and some cases the sole component.”
He said the changes would “provide information that is meaningful and useful to investors.”
However, some mutual funds have argued that the revisions would only fatten annual reports after the SEC painstakingly ordered them simplified in 1983.
Some fund managers have also criticized the disclosure of portfolio managers because few funds are actually run by a single “star” manager.
One trade group has said the naming of names places undue emphasis on a manager’s personality and ignores the fund’s underlying performance.
But many individual investors, who have trouble tracking the whereabouts of their favorite portfolio managers, would like to see the proposed changes enacted because a portfolio manager is often a major factor in choosing a mutual fund.
