In most circumstances, bad little boys and girls get lumps of coal in their Christmas stockings in the privacy of their own homes. In the mutual fund business, however, coal is delivered to bad actors in public. And right here.
It’s the 11th annual Lump of Coal Awards which, today and again next week, recognize managers, executives, firms, watchdogs and other fundies for action, attitude, performance or behavior in 2006 that was offensive, disingenuous, duplicitous, reprehensible or just plain stupid.
The 2006 Lump of Coal Awards go to:
This small fund has tried to reflect the strength and vigor that Teddy Roosevelt saw in the creature that became the namesake of the progressive political party he founded, and it has done reasonably well in its short history. But that didn’t draw assets, so management recently changed the fund’s name to Roosevelt Anti-Terror Multi-Cap; the investment objective is the same, except for an afterthought noting that the fund avoids “companies that have ongoing business relationships with countries that sponsor terrorism.”
Playing on fear, and implying that other funds might be “pro” terror, is small-minded; in this case, it turned an issue that was shaping up to be a solid fund into a gimmick.
In March, as part of a fund-family consolidation, the 61-year-old, $1.8 billion RiverSource Stock fund was merged into RiverSource Disciplined Equity, a fund that had one-tenth the assets and one-twentieth the history.
Clearly, the combined fund has more characteristics of the whale than the guppy, but that didn’t stop anyone from holding on to the better recent track record of the small fish, no matter how poorly it reflects the merged fund’s real potential or past.
Not wanting to take an unintended pay cut, management spent about $250,000 – thankfully, not money from shareholders – for another proxy vote to restore fees.
But just like the Black Pearl buccaneer ship in “Pirates of the Caribbean,” Landis’ moonlighting gig was all bones and no flesh.
His strategy for Black Pearl Long Short resulted in losses of nearly 20 percent in less than a year, at which point directors pulled the plug; Black Pearl Focus remains, and while it has been mediocre thus far, at least it’s not taking on water … yet.
Next week: Scandal-tainted coal burns hot, plus the Lump of Coal Mis-manager of the Year.
Chuck Jaffe is senior columnist for MarketWatch. He can be reached at jaffe@marketwatch.com or at Box 70, Cohasset, MA 02025-0070.
