| With tens of thousands of funds available
| |
| | place.
|
| and hundreds of fund families, it is
| |
| | What to Do if Your Mutual Fund is Merging
|
| fully expected that mutual funds will
| |
| | Any time a merger is announced for a fund
|
| merge fairly often. Unlike many
| |
| | you own (as an aquirer or aquiree), it is
|
| non-investment products, mutual funds
| |
| | time to re-evaluate that fund.
|
| live and die by their performance, plus
| |
| | You must understand the similarities or
|
| the investing world profits off
| |
| | differences between the two funds that
|
| efficiencies—where even a tenth of a
| |
| | are merging or your portfolio may be
|
| percent can make a big difference. Even
| |
| | thrown off.
|
| with those factors in mind, you should be
| |
| | Look out for dissimilar strategies. If
|
| concerned about any fund you own that is
| |
| | you own a Japan fund, for example, and it
|
| merging.
| |
| | is being merged into a Worldwide fund,
|
| Why Mutual Funds Merge There are many
| |
| | your fund may now own stocks in countries
|
| different reasons for fund mergers. Often
| |
| | other than Japan, including domestic
|
| they are due to fund company mergers or
| |
| | stocks. Not only will it throw your
|
| buy-outs. Other times a fund may merge to
| |
| | portfolio off, but the reason for the
|
| cover up past performance, to make up for
| |
| | merge may be questionnable. Are they
|
| low assets or are no longer the flavor of
| |
| | trying to cover up poor stock picking in
|
| the week.
| |
| | Japan? Even if the funds merging are
|
| In 2005, over 200 funds were merged (130
| |
| | similar, will there be changes in risk?
|
| funds merged in 2004). Mutual fund
| |
| | Will the fund become more or less
|
| companies would have you believe fund
| |
| | conservative than before? Does this
|
| mergers create economies of scale,
| |
| | affect your overall portfolio? If the
|
| providing cost savings on operational
| |
| | merging funds are bond funds, you should
|
| activities like prospectus printing and
| |
| | pay special attention to taxes. Will the
|
| mailing, audits and marketing.
| |
| | new fund alter your tax situation? As
|
| In some respects, it is true, but that
| |
| | mentioned in "When to Sell a Mutual
|
| doesn't explain why in 2001 over 530
| |
| | Fund," will the combined fund size be a
|
| mutual funds merged (think dot-com crash,
| |
| | problem? Often when funds get too large
|
| and poor performance). Removing bad
| |
| | (especially small cap funds), they lose
|
| apples seems to be a more common reason
| |
| | their nimbleness and have difficulty
|
| to merge funds. When two funds merge, the
| |
| | finding the stocks they need for such a
|
| only performance record that remains is
| |
| | large asset base. Also pay attention to
|
| the fund considered to be the acquirer.
| |
| | fishy fund merges involving size. For
|
| Though mergers require shareholder
| |
| | example, if you see a $500 million fund
|
| approval, it is rare for shareholders to
| |
| | merging with a $20 million dollar fund,
|
| vote against the merge. This is because
| |
| | but the $20 million fund will be the
|
| only the shareholders of the fund being
| |
| | surviving fund, there is no question
|
| acquired get to vote and, in general, the
| |
| | something fishy is going on here.
|
| fund being acquired is going to a better
| |
| |
|
