Wish List for the Investment Community

‘Tis the season for gift giving, and the investment community shouldn’t be left out. Here are some presents I would like to see placed under the trees of mutual fund companies, financial regulators, directors, investors and others:

For mutual fund companies that levy “loads,” or sales charges: More letters in the alphabet. With A, B, C, D and 13 other classes of fund shares, the industry is running out of letters. Each share class designates a different way to charge commissions, and provides a different way to confuse investors.

For the typical mutual fund manager: More experience in rough markets. The rest of us want to know if you really deserve those $100,000-plus salaries, or whether your performance so far stems mostly from luck. The average fund manager has been on the job less than three years, reports Morningstar Inc. of Chicago. But it has been five years since the market fell as much as 10%.

For the Securities and Exchange Commission: More financing and staff to better police the investment business. The SEC has only about 180 examiners to watch over more than 6,000 mutual funds. SEC Chairman Arthur Levitt acknowledges that the agency is not on the “front line” of defense against potential scandals.

For the federal government: A balanced budget, so that the SEC can keep the more than $300 million in “profits” it earns each year and use this for enhanced policing efforts. Currently, the cash generated by the SEC from fees and fines is used to finance other government operations yet hardly makes a dent in the nation’s overall deficit.

For the people who sit on the boards of mutual funds: Greater independence from management. Directors earn $41,000 a year on average and often in excess of $100,000 to safeguard the interests of shareholders, according to surveys by Fund Directions newsletter in New York. But considering that fund expenses usually don’t go down and laggard management teams are rarely dumped, one wonders if directors haven’t become too chummy with management. Directors are on the front line for policing the industry, Levitt says.

For investors: More faith. Nobody can prove that the stock market will go up tomorrow, next month or over the next five years, but the long-term trend points upward. Having the courage to see it through requires a gut optimism in the economy and country.

For brokers and financial planners: More enthusiasm for ethical sales practices. The trend here is encouraging. For example, American Express Financial Advisors has announced it will cease cold calling in January, and Dean Witter will begin to compensate brokers equally regardless of whether they sell Dean Witter funds or those from other groups, also in January. Dean Witter becomes the last major brokerage to adopt this practice.

For Fidelity Investments: Diplomatic status and, perhaps, a seat in the United Nations. With $450 billion in overall assets and nearly a 14% share of the fund business, this company is richer and more powerful than many nations.

For the Steadman Group of Washington: A graceful retirement. The company’s funds have been at the bottom of the performance charts so long that it’s time to concede defeat.

For the Templeton Vietnam Opportunities Fund: Some Vietnamese stocks in which to invest. Much has been made of Vietnam’s potential, but not much can be done before it has a stock market. Recent reports suggest it won’t happen until 1997 at the earliest.

For the Herzfeld Caribbean Basin Fund of Miami: Some Cuban stocks to buy. This nation also lacks a stock market. The transition from Fidel to Fidelity might take many years.

For the state of Florida: An income tax. That’s so Floridians don’t look so silly buying municipal bond funds that shelter them from both federal and state taxes. The Sunshine State has emerged as the third-largest market for muni funds that are exempt from both types of taxes. Fund groups may not be able to sell swampland in Florida, but they can sell an unneeded layer of tax shelter.

For all mutual fund shareholders: Another year like 1995 sometime in the near future, and a happy and healthy 1996.