FT Interactive Data And Reflow Management Co-Host Mutual
Fund Forum 2003 —
Industry Experts Offer Insight on Fund
Performance, Liquidity and Market Timing Issues
30 October 2003 - Bedford, MA
FT Interactive Data, the major operating division of Interactive
Data Corporation (NYSE: IDC) and a leading supplier of financial
information to global markets, today announced the successful
conclusion of the Second Annual Mutual Fund Forum. Held in
New York City, and co-hosted by ReFlow Management, the Forum
addressed the impact of shareholder transactions on fund performance
and the various tools available to aid in the fair value pricing
of international equities.
"This Forum is held at a time when mutual fund companies
are facing increasingly complex business decisions,"
said Raymond D'Arcy, President, Data Delivery Products for
FT Interactive Data. "Our purpose in holding this Forum
was to open up new avenues of insight and information for
all those in the mutual fund industry including compliance
and legal personnel, investment professionals, treasurers,
and senior operations professionals."
Among the topics discussed at the Forum were:
- The Impact of Shareholder Transactions on Fund Returns
- Arbitrage-Proofing Mutual Funds: New Findings and Developments
- Market Timing: Effects on Shareholders and Investor Confidence
- A Statistical Approach to Identifying Fair Value Triggers
- Audit Issues for Fair Valued Securities in Mutual Fund
Portfolios
The presenters included Roger Edelen, Managing Director of
Research, ReFlow Management; Eric Zitzewitz, Assistant Professor
of Economics, Stanford Graduate School of Business; and Peter
Ciampi, co-designer of the Fair Value Information Service,
FT Interactive Data, among others.
"We found market timing opportunities just as large
with small and mid cap funds as with international equities,"
said Roger Edelen, Managing Director of Research, ReFlow Management.
"Management of NAV and efficient control of liquidity
demands can reduce lost shareholder value and improve fund
performance."
"Dilution from market timing was fairly substantial
up to September 2003, and there has not been a dramatic deceleration
since the investigations into fund families began," said
Eric Zitzewitz, Assistant Professor of Economics, Stanford
Graduate School of Business. "It is evident that mutual
funds are still not fully fair valuing and shareholder losses
due to market timing are large enough to require decisive
action."
"Regular use of fair value adjustments when a market
timer is in the fund can create dramatic shareholder savings
and improve the fund's performance," said Peter Ciampi,
co-designer of the Fair Value Information Service, FT Interactive Data. "In addition, our research shows that low triggers
can dramatically reduce market timer profits."
A leading provider of global financial information, FT Interactive Data currently has more than 30 leading mutual fund companies
and mutual fund processors subscribing to its Fair Value Information
Service.
About FT Interactive Data's Fair Value Information Service
FT Interactive Data's Fair Value Information Service assists
mutual funds in deriving fair value estimates for foreign
securities for which market quotations are not "readily
available" due to market events that have occurred since
the local market closed but before a fund's daily NAV calculation.
The Service uses a multi-factor methodology, which applies
relevant factors such as ADRs, sector indices, and futures
to each covered international equity to assist a client in
their determination of whether a fair valuation process is
appropriate for that security and, if so, to provide the client
with relevant data for its fair value consideration.
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