Funds Pressured For Fee Figures

Sat., July 15, 2000

Dunstan Prial Ap Business Writer

Pressure is mounting on the mutual fund industry to make it easier for investors to determine exactly how much of their investment dollars is being diverted toward fund operating costs.

An exhaustive 124-page report on mutual fund fees released earlier this month by the General Accounting Office, the nonpartisan investigative arm of Congress, came to a simple but revolutionary conclusion.

Mutual fund companies should be required to disclose to investors the exact amount in dollars and cents paid during a given period for fees associated with operating costs.

In effect, fund companies would be required to list costs and fees the same way banks do on monthly account statements.

“Providing such information could reinforce to investors the fact that they pay fees on their mutual funds and provide them information with which to evaluate the services their funds provide,” the GAO report states.

Moreover, the GAO suggested that by including specific dollar amounts on fund statements it would make it easier for investors to compare fees charged by different funds, which would likely encourage price competition among the funds and possibly help reduce fees.

The Securities and Exchange Commission is considering whether to accept the GAO’s recommendation and start requiring fund companies to include exact dollar amounts.

The industry, through its trade organization, the Investment Company Institute, has voiced reservations concerning the GAO’s recommendation. John Collins, an ICI spokesman, said changes to existing disclosure rules could “reduce the usefulness of fee information” already provided in fund prospectuses, and make it harder for investors to compare costs of different funds.

But the idea already has the support of some high-profile industry figures.

“If you spell out what the facts are in terms of dollars and cents instead of in terms of percentages and ratios it really brings home the message that fees matters,” said John Bogle, founder and former chairman of the Vanguard Group.

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