Firsthand Funds has told investors that beginning in June, it will wait two months before disclosing its funds' holdings, rather than the current one month. The move is counter to a small industry trend toward more frequent disclosure.
The San Jose, Calif.-based fund company says it is worried about "front-runners" -- speculators who anticipate a fund's moves and buy shares ahead of it, driving up the fund's costs.
"It's a concession to growing up," says Steven Witt, Firsthand's managing director.
Firsthand says it has not encountered any problems with front-running to-date. But "sometimes it may take a month or more to build a position in a stock," says Witt. "We don't want to give people that information if we're still building our position."
Firsthand's reversal was criticized by Davis Nadig, co-founder of the
, which runs the
, whose holdings are posted in real time on its Web site. He called the move a "regression" and said the less-frequent disclosure would do little to shield Firsthand's moves from view.
"The market reads the tape," he said. "People know when there's an elephant trampling through the garden."
Disclosure has been a hot topic in mutual fund circles recently. At an industry-wide meeting hosted by the
Investment Company Institute
in Washington earlier this month, several mutual fund players, led by MetaMarkets, presented ICI President Matthew Fink with a letter calling for more frequent disclosure of holdings. Fink referred the issue to an industry committee.
Securities and Exchange Commission
requires that fund companies tell shareholders what's in their funds only twice a year. A handful of companies disclose their holdings more frequently. (For more on fund disclosure, see
Fund Holdings: What's the Big Secret?)
Firsthand's new policy hardly puts it behind the curve on disclosure, given that many of the biggest fund companies, like
, release their entire portfolio holdings only twice a year, though the top-10 holdings see the light of day more frequently. It's been the smaller fund companies with a technology bent -- including Firsthand -- that have posted their funds' holdings more often.
releases its holdings monthly with no lag. Another online fund purveyor,
, home of the $3 million
fund, reveals its fund holdings daily.
Critics like Nadig say reducing disclosure is a disservice to investors. "When you delay the time period of what's in a fund, you make deciding when to get in and out of a fund hard."
Though Firsthand will now allow two months to lapse before disclosing its funds' full portfolio holdings, it will continue to release its funds' top-10 holdings on a monthly basis.
With just $6 billion in assets, Firsthand is not among the industry giants. But a year ago it had only $272 million. Its assets have mushroomed thanks to the success of its funds, run by tech specialist Kevin Landis.
In 1999, Firsthand's
Technology Leaders and
Technology Innovators earned returns of 190%, 153% and 212%, respectively.
Robert Markman, whose financial advisory shop in Minneapolis is a large shareholder in several Firsthand funds, applauded the move. "There are a handful of people in this industry that are considered to be on the cutting edge, and Kevin Landis is one of them," Markman says, "People want to know what he's thinking."
Markman also says that fund investors care much less about disclosure than they do about a fund's performance. "You make your decision based on the
net asset value at the end of the day," he says.
Still, in a volatile environment, portfolio managers should do as much as they can to soothe frayed nerves, say some investors. "I like to see holdings that are as current as possible," says financial adviser Mari Adam of Boca Raton, Fla. "In a market like this, I'm looking for trends."