Thumbs Down: Paying for Fund Sins

Physician's Money Digest, February15 2004, Volume 11, Issue 3

Even if your mutual fund isn'tembroiled in the scandal over latetrading and market timing, you'reprobably going to pay for the sins ofthose who are. Funds that were hitwith fines and orders for restitutionwill pay those amounts out of managementfees, but the added insurance,legal, and administrative coststhat are required of all mutual fundsin the post-scandal environment arelikely to come out of fund assets. Thatmeans shareholders will be footingthe bill for these costs, which includehiring compliance officers to monitorthe activities of fund managers.Smaller funds could be especiallyhard hit, with added costs of 0.05%to 0.10% of assets. Over several years,that additional cost will put a bigdent in returns.