won't be making headlines with its private-placement deals anymore. The Minneapolis-based mutual fund family is selling its mutual fund assets to Pittsburgh's
, the firms announced Monday.
Terms of the sale weren't disclosed, but Federated is picking up more than $400 million in assets from IAI's 11 mutual funds. (The firm still has $1.4 billion in institutional assets). The funds will be merged into Federated funds with similar investment mandates once they receive shareholder approval in September.
IAI's funds are sold directly to investors without a load, or charge, but Federated sells its wares only through brokers who charge a commission. Federated says that while IAI funds no longer will be no-load, the company will honor terms of the agreements with existing IAI shareholders.
Several of IAI's tiny funds faced criticism, and even legal challenges, over a few controversial private-placement deals. The company often invested in closely held, pre-IPO companies. The most recent flare-up occurred in March, when IAI closed its
Growth & Income fund to new investors while it resolved a lawsuit over one of its holdings,
The mutual fund purchased a stake in the Internet-software provider before its March 1 initial public offering. Months before the offering, IAI had entered into an agreement to sell the shares to another party. But as MatrixOne's stock price soared above the price laid out in IAI's planned sale, the transaction never went through.
The other party sued IAI, while IAI claimed the other party let the deal lapse. IAI closed the fund to new investors before the IPO to prevent speculation in MatrixOne's stock while it resolved the legal matter. Eventually, IAI settled the suit for undisclosed terms. The fund company has stopped buying illiquid securities and had been unwinding its existing positions in such holdings.
AIM Aggressive Growth Plans Stock Split
AIM Aggressive Growth will split its shares 3 for 1 on July 14.
That means shareholders will get three shares for every one they own. The move will not increase or reduce the value of shareholders' investment because each share's value will be reduced accordingly.
Although some investors might shy away from a fund with a high share price -- the $4 billion fund's Class A shares closed at $73.30 on Friday -- a fund's share price is neither a positive nor a negative for a fund. A fund's price is based on the underlying value of the stocks in the fund's portfolio. So, no matter what a fund's share price, a dollar invested at a low or high price will get the same return.
While some in the industry say a high share price or net asset value can discourage investors, it's a tough case to make. The $105.8 billion
Vanguard 500 Index fund, the largest fund in the nation, had a $135.30 share price as of Friday's close.
Although splits for shares don't have any bearing on a company's actual value either, there is a better argument for stock-share splits. That's because stocks often have to be bought in round lots -- reducing a stock's share price makes it more accessible to smaller investors. But because funds are sold in dollar amounts, not blocks of shares, this argument doesn't work for funds. For more on the argument against mutual fund share splits, see our
story on the
Monument Internet fund's share split last year.
The split will not be a taxable event.
ProFunds Rolls Out UltraSector Funds
is rolling out 17 leveraged "UltraSector" funds today, designed primarily for aggressive investors.
Like most of the $2.5 billion Bethesda, Md.-based firm's funds, these are designed to track an index, using leverage to seek 150% of each index's return. The firm's funds also allow unlimited exchanges, making them ideal vehicles for market-timers and other aggressive types most fund companies spurn with redemption fees and other limitations.
The 17 new funds will track
indices in the following broad sectors: basic materials, consumer cyclicals, consumer noncyclicals, energy, financials, health care, industrials, telecommunications, technology and utilities.
The seven other new funds track more specific Dow Jones indices in some hot subsectors: biotechnology, Internet, pharmaceuticals, wireless communications, semiconductors, real estate, and precious metals.
previewed the funds on April 27.
Munder Will Offer Three Funds to Retail Investors
is planning to offer new share classes of two growth funds and a financial-services fund, which have been out of retail investors' reach since they started two years ago.
On Friday, the Birmingham, Mich.-based firm filed paperwork for the
Munder Focus Growth
Munder Growth Opportunities
Munder Framlington Global Financial Services
funds with the
Securities and Exchange Commission
. The firm is probably best known for its popular $10.3 billion
Munder NetNet fund, which is closed to new investors.
The funds already have share classes dating back to their 1998 inception, but haven't been available to individual investors. None of the funds is listed on the firm's Web site for retail investors.
Focus Growth, formerly called
, focuses primarily on mid- and large-cap stocks that look cheap relative to their industry peers, according to the filing. Since the fund's Nov. 11, 1998, inception, it has posted a 26% return, lagging both the S&P 500 and the Russell 1000 Growth Index, its benchmark.
Growth Opportunities focuses on mid-cap stocks with strong earnings growth, according to the filing. Since its June 24, 1998, inception, it's up 17%, beating the S&P Mid-Cap Index by half a percentage point, according to the filing.
The financial-services fund invests in financial companies of all flavors based in the U.S. and overseas. Over the past year, the fund is up 4.5%, compared with 8.6% for its benchmark MSCI World Finance Index.
The filings don't disclose the names of the funds' managers. The two growth funds are run in-house and
Framlington Overseas Investment Management Limited
, a Munder affiliate, subadvises the financial-services fund.
The funds aren't necessarily bargains. Class A and Class II shares levy a maximum 5.5% and 1% front-end load or sales charge, respectively. Class B shares carry a maximum 5% back-end load and Class II shares have a 1% charge on shares redeemed within 18 months of purchase.
The two growth funds' annual expenses range from 1.35% to 2.18%, compared with 1.22% for the average growth fund, according to Morningstar. The financial-services fund's expenses range from 1.5% to 2.25%, compared with 1.68% for the average financial-services fund.