Despite SEC Efforts, Accuracy in Fund Names Still Elusive

For many, the name (LMVTX Quote)Legg Mason Value Trust calls to mind the only stock mutual fund that beat the S&P 500 index in each of the past 10 years. For others, however, the fund's name is a harsh reminder of the elasticity of fund names and the concept of value investing.

The Securities and Exchange Commission, which has long been frustrated by funds with misleading names, adopted a rule this month that purports to ban them. The problem is that it contains some large loopholes and may not apply funds such as Legg Mason Value.

The Value in Fund Names

Notwithstanding its value moniker, Legg Mason Value invested and performed like a growth fund during the 1990s, when growth funds outperformed their value counterparts annually by an average of almost five percentage points, according to Morningstar. Legg Mason Value's performance placed it in the top 1% of all value funds, which made it look like a good choice for investors betting on a rebound in value stocks in 2000. ...