Thursday, December 28, 2006

Is your fund manager deceiving you? Read on | | Tacoma, WA

Is your fund manager deceiving you? Read on Tacoma, WA:

"The final week of every quarter is known as “window dressing week.” It’s when
portfolio managers sell stocks that have done poorly during the quarter and
replace them with ones that did well.

The idea is to make themselves look good: Reports to investors include snapshots of major fund holdings at the end of the quarter. So packing the big winners into the fund makes the manager look like a great stock picker.

But if those winners were added to the fund at only the last minute, it was too late. Most of the gains came earlier – so your fund didn’t benefit. Moreover, the winners often are sold soon after the reporting period ends"

1 comment:

An Investor said...

I've been griping about this to anyone who'll listen for more than a decade. I'm certainly not alone (even fund managers -- many of whom probably do it themselves -- complain about everyone else doing it), but apparently no one who matters has seen fit to take on this issue (of course, the analyst conflicts of interest that resulted in the Global Research Analyst Settlement had been going on for just as long).

As the article points out, not only is it fraud (a crime itself) but it does cost "innocent" people money. It's kind of surprising that some class-action lawyer hasn't decided to tackle this. Maybe it's too much work or the dollars involved aren't big enough (although, I'd be inclined to think that after all these years the amounts involved would be huge).