News Round Up

More legal action on market timing practices, Police get new adviser for super scheme.

Monday, January 12th 2004, 1:28AM

Putnum's NYSE listed parent company Marsh & McLennan is facing class action over the fund manager's market timing practices.

Connecticut-based law firm Scott + Scott alleges the market timing practices breached federal securities laws in the United States. It also says the practice result in investors being treated unevenly.

"The complaint alleges that Marsh represented that Putnam's mutual funds were designed to be long-term investments for 'buy and hold' investors and were a favored investment for Americans' retirement plans or annuities for a child's education," the firm says in a statement.

"Certain investors, however, have attempted to use mutual funds to generate quick profits by rapidly trading in and out of mutual funds.

"Typically, these investors, who are able to time the market, seek to capitalise on low fund prices. They then focus on price discrepancies involving international funds (examples other than Putnam include those by Templeton, T Rowe Price, Scudder, Credit Suisse, Morgan Stanley and more). Market timers take advantage of price inequities and thereby damage long-term shareholders who own such annuities."

The complaint alleges that Marsh had a duty to treat all shareholders equally. This duty would not permit granting one group of shareholders (ie: market timers) privileges and rights not granted to all shareholders (ie: long-term investors). In addition, when a fund's prospectus discloses that the fund management will act to limit timing the market, it cannot knowingly permit such activities. The complaint further alleges that Marsh knowingly permitted this behavior.

New adviser for Police scheme

Russell Investment Group is the new investment adviser to the $220 million Police Superannuation Scheme.

“Russell was selected through a competitive tender that arose from a regular review of advisers to ensure the scheme continues to meet members’ needs,” trustee chairman Alan Harwood says.

Russell is providing advice on asset allocation, product evaluation, and the monitoring of managers and investment performance.

Last year the scheme introduced member choice to its 6000 members, who can now choose from three portfolios with different risk profiles.

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Sovereign takes regulation bull by the horns »

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