The merger of two mutual funds may seem like a nonevent if you own shares of the surviving fund. But the process of absorbing another fund's portfolio can impact your fund's returns and your tax return.
We'll take a close look at mergers in four stories. On Monday,
When Funds Collide, Survivors Often Suffer examines how business reasons that prompt fund mergers don't necessarily dovetail with the interests of the funds' shareholders. A fund company may simply be trying to bury a poor track record. More importantly, surviving funds tend to underperform after a merger.
Mergers Cause Sleepless Nights at SEC looks at how the
Securities and Exchange Commission
treats this complex issue. The SEC must balance the fund company's business interests against the interests of shareholders. It's a not an easy task. Neither is it easy to pin down the criteria that the SEC uses when passing judgment on a proposed merger.
Combining Capital Gains May Be Your Loss explains tax consequences of mergers. And
Name Change Is a Shortcut to a New Image looks at another tactic for changing the images or fortunes of faltering funds: changing their names.
Has your mutual fund gotten caught in merger mania? Did you sign up for a small-cap fund only to get dumped into a mid-cap? Or has your fund performed poorly since absorbing another?
Tell us your stories of what happened when your fund collided with another.
And take our poll:
Mutual fund mergers are:
Fair and efficient. They provide economies of scale while giving investors a reasonable alternative to a failing investment.
A necessary evil. Markets change over time, and ideas from years past eventually need to be phased out as investors embrace new ones.
Widely abused. They're just excuses for fund companies to bury mistakes and pass the costs of their errors onto shareholders.