Three funds put on hold

Three funds from "well-known" managers have been put on hold by research house FundSource because of the size of their tax losses.

FundSource executive chairman David van Schaardenburg says that it has set a threshold for tax losses in funds.

He says these three funds have tax losses in excess of the 5% threshold set by the research house.

Consequently they have been shifted from a recommended status to hold.

Van Schaardenburg says there are other funds that have tax losses in excess of 5% however they are not currently recommended by FundSource.

Investment Savings and Insurance Association chief executive Vance Arkinstall says the issue of tax losses is "important" for the industry.

The association is currently working through the issue. He says putting a cap on the size of losses is not an option for all managers. Rather the association is looking at making sure managers disclose the value of tax losses in their funds.

He says there should be transparency on the issue, especially for investors in funds or currently considering buying into them.

"At the least there has to be much greater disclosure around the whole issue."

Van Schaardenburg says that FundSource's policy has changed from having a cap on tax losses (set at 3%) to one of disclosure.

All funds would be treated equally if none of them included tax assets in their unit prices. He says the managers would still have access to the assets.

He believes the disclosure should be done on an on-going basis as opposed to just disclosure at the point of producing investment statements and prospectuses.

He says people who went into a fund and then had the unit price written down soon afterwards "could justifiably feel quite aggrieved."