When Dave Nadig, comanager of the maverick
OpenFund, spoke before a panel of top mutual-fund company lawyers in Washington on Tuesday, warm fuzzies were in short supply.
Nadig asked the Rules Committee of the
Investment Company Institute
, the mutual-fund industry's trade group, to amend its "Best Practices" recommendations to call for more frequent disclosure of fund holdings than the current twice-a-year minimum. His pitch -- monthly or quarterly disclosure of complete fund holdings, with no more than a one-month lag time -- was about as well received as
"After my impassioned five-minute plea, the committee opened it up for comment and there was a dead silence for about 30 seconds," said Nadig, whose fund discloses its holdings in real time on its
Web site. "Finally people started commenting. They were overwhelmingly defensive of the status quo." The most vociferous members of the committee were representatives from bigger firms, he said. After a few minutes of discussion, the issue was dropped without recommendation for further review.
But just as one doesn't expect Goliath to lie down without prompting, this David says this setback doesn't mean the fight is over. He says
, OpenFund's adviser, plans to keep plugging the issue with other ICI committees and hopes to "take it to the streets" with a summer poll of investors that will provide more compelling ammunition.
"I think there's a fundamental investor issue right here," he said.
"I don't know that the issue is dead, but when I was there, there wasn't a move for more discussion. There's not much more I can say because those discussions are confidential," says John Collins, an ICI spokesman.
Big fund companies often say that more frequent disclosure would give rogue traders and other funds the ability to trade ahead of them and reduce their returns.
One attorney who works for a Boston fund company said the cool reception isn't a shock. If more frequent disclosure sold funds or if regulators were hot on the issue it would be on a "fast track" with the group. But he wasn't aware of any such catalyst on this issue.
Although many fund companies disclose funds' full portfolio holdings monthly or quarterly on their Web sites, shareholders of funds from big shops such as
often have to wait until they get a shareholder report in the mail to see where their money is invested.
Nadig and his colleagues at MetaMarkets.com first raised the issue with the ICI last month when they
wrote an open letter to Mathew Fink, president of the group. Citing an April 26
story on the issue, the letter called for more frequent disclosure to keep investors more informed of where they were invested. The letter noted that 18 of the largest 25 fund firms show fund shareholders the complete holdings of their funds only twice a year.
The ICI was quick to reject the idea, but Fink invited Nadig or his comanager Don Luskin to present the idea to the Rules Committee on Tuesday.
"Unfortunately the environment didn't lend itself to much discussion," says Nadig. In order to be added to the group's "Best Practices" recommendations, the idea would have to be endorsed by the Rules Committee, as well as others, including top-level officials such as Fink.
Despite the early setbacks, several industry watchers believe fund companies will end up posting their holdings more frequently.
"I think big companies could disclose quarterly. Eventually the industry will be more forthcoming," says Burt Greenwald, a Philadelphia-based fund consultant.
Meanwhile, some industry observers claim MetaMarkets.com's campaign is driven in part by self-interest, since it highlights one of the unique aspects of their own fund.
But the movement has other supporters. One of the signers of the open letter to the ICI was Robert Loest, manager of
IPS New Frontier and
IPS Millennium, which posts holdings on the IPS
Web site monthly. The letter was also signed by the
National Association of Investment Clubs
, among others.
"This is an industry issue. It's near and dear to our heart because we're on the edge of it," Nadig says. "If we don't advance it, who will?"