I am researching historical practices of mutual fund market timing for
the period prior to September 2003.  This is an investment approach
that involves rapidly switching funds between an equity mutual fund
and a money market mutual fund.  Since September of 2003 there has
been an industry wide crack down on the practice of mutual fund market
timing and a number of mutual funds have paid large settlements to the
SEC to settle charges that they allowed market timing that was not in
the best interest of mutual fund shareholders.

The particular angle that I am researching is the extent to which
mutual fund market timing was an out in the open accepted investment
alternative in the months and years prior to September 2003. There are
two specific issues for which I would like research:

1. I am looking for documentation that demonstrates the extent to
which mutual fund market timing was a widespread practice prior to
September of 2003 as opposed to an investment technique just used by a
small collection of hedge funds.

2. I am also looking for documentation that would indicate whether the
regulatory bodies that are responsible for overseeing the securities
industry, such as the SEC, the NASD and the New York Attorney
General's office, were aware of the fact that mutual fund market
timing was a wide spread practice prior to September of 2003, or if
the regulatory agencies just had no idea that mutual fund market
timing was a widespread practice until just the last year or two.

Although both of these topics are related questions and likely could
be answered by a single researcher I would like specific and detailed
research on both topics.  Accordingly I am submitting this same
research question with 2 separate headings so that I can offer a $200
research project for each category of reference.

In this specific question I am asking for research on topic ONE:
documentation demonstrating the extent to which mutual fund market
timing was a widespread investment practice prior to September 2003.

Thank you for your help.

Hi! Thanks for such an interesting question.


I have found the following documents both studies and legal ones to
show the prevalence of mutual funds market timing as an investment
practice.  Although it was already considered as Based on the
findings, it seems that it became prevalent in the late 1990s and
eventually included popular names such as Banc of America and Fleet
Columbia.

I will try to provide small snippets from the links that I will cite
whenever possible but I highly recommend that you read them in their
entirety to get a better grasp of the issues.


Our first link is a detailed historical and legal study of the start
of such scandals. This is a very important read for your study.  It
chronicles the initial shock brought about by expose of the mutual
fund trading practices of Canary Capital Partners, LLC. Most of the
subsequent legal documents that will be cited here will be tied up to
cases mentioned here.


?As an outgrowth of the Canary investigation, regulators found that
Invesco Funds Group, Inc. (?Invesco?) had permitted Canary to trade
over $300 million after 4 p.m. Invesco, a smaller mutual fund formed
in 1932 had grown substantially after 1990, and ultimately merged with
AIM in 1997 to form Amvescap PLC. Apparently, several hedge funds had
focused on Invesco?s family of funds and convinced its management to
permit market timing despite language in the prospectus limiting
trading to four exchanges per year. Paralleling a New York Attorney
General complaint, the SEC sued Invesco and its president, Raymond
Cunningham in a Colorado federal court, alleging Invesco accepted
market timing funds to enhance management fees at the expense of
long-term shareholders.?

?MUTUAL FUND INVESTIGATIONS? (Case Study) by Michael A. Collora Dwyer
& Collora, LLP
http://dwyercollora.com/articles/mutual_fund_investigations.pdf 


A thought provoking article from the Wharton website can produce
insights on what the legal footing and acceptance of the principles of
market timing in mutual funds.

?Late trading is illegal while market timing violates securities
regulations if the fund company tells investors it prohibits the
practice, as the bank did.?

?While the late trading and market timing case was serous enough to
lead to some criminal charges, there is scant evidence so far that
many fund companies are deliberately trying to cheat their customers
in this way.?

??What is funny to me is that academics have known about this for
awhile,? says finance professor David K. Musto. ?People on Wall Street
have known about this for many years.??

?Mutual Fund Scandals: Once Again, Individual Investors Are the Losers?
http://knowledge.wharton.upenn.edu/index.cfm?fa=viewarticle&id=854 


---------------------------
An article about the investigation on Canary Capital, mentioned in our
first link as the trigger for the eventual chain of scandals, is
available in our next link.

Canary Capital

Background: ?As regulators and litigators turn their sites to the $7
trillion (total assets) mutual fund industry, New York Attorney
General Eliot Spitzer has found his canary. And that bird's song, part
of a 44-page complaint revealed today, could open the door for more
inquiries into the companies that oversee mutual funds.?

?Spitzer's office spent the past few months investigating Secaucus,
N.J.-based hedge fund Canary Capital Partners. The investigation into
Canary concluded Wednesday morning with the firm, run by Edward J.
Stern, has agreed to fork over $40 million related to illegal mutual
fund trades. The trading tactics used by Stern guided the fund to
market-beating returns from mid-1998 to the end of 2002.?

?Eliot Spitzer Finds His Canary? by Ari Weinberg (Article from Forbes)
http://www.forbes.com/2003/09/03/cx_aw_0903spitzer.html 


----------------------------
A copy of the SEC legal document for  the Invesco case is available in
the link below. Other companies connected with Canary Capital are
CIBC, Pimco, Bank of America, Security Trust Company, Alliance Capital
and COLUMBIA MANAGEMENT ADVISORS, INC.


INVESCO 

Background: ?From at least July 2001 until October 2003, IFG and
Cunningham fraudulently accepted investments by market timers in
Invesco mutual funds to enhance the management fees earned by IFG.
Specifically, IFG entered into specific arrangements with particular
investors under which these investors were allowed to market time
Invesco funds. IFG termed these investors "Special Situations." These
Special Situations were kept secret from the independent members of
the funds' boards and from the funds' investors. According to the
Commission's complaint, IFG and Cunningham accepted these investments
with knowledge that they would be detrimental to long-term
shareholders in the mutual funds. In addition, these Special
Situations violated the market timing policy disclosed in the
prospectuses for the mutual funds. This policy stated that exchanges
between funds by investors would be limited to four yearly and that
changes in this policy would only be allowed if it was in the best
interests of the funds.?

?SEC CHARGES INVESCO FUNDS GROUP, INC. AND CEO RAYMOND CUNNINGHAM WITH
FRAUD AND BREACH OF FIDUCIARY DUTY FOR ALLOWING MARKET TIMING AT
INVESCO FUNDS? (SEC Litigation Release)
http://www.sec.gov/news/press/2003-167.htm 



------------------------------
Canadian Imperial Bank of Commerce (CIBC)

Background: ?The Division of Enforcement (the Division) alleges that
from 2001 to 2003, Flynn arranged for certain hedge fund clients,
including Canary Capital Partners, LLC, to receive financing from a
CIBC subsidiary. Flynn negotiated and structured swaps and loan
agreements that provided these hedge fund clients with leverage to
trade in mutual fund shares. The Division alleges that this conduct
was fraudulent because Flynn was aware that these hedge fund clients
were engaged in unlawful mutual fund trading through an electronic
trading platform operated by Security Trust Company, N.A. (STC).?

?According to the Division, Flynn made a due diligence trip to STC's
offices during which he learned that the hedge funds used STC's
trading platform for unlawful mutual fund trading. In a memorandum,
Flynn described STC's ?Same Day/Late Day Trading Platform and the
benefits this proprietary platform brings to our Mutual Fund Market
Timing Clients.?"

?SEC Charges Former CIBC Managing Director With Fraud for Role in
Financing Unlawful Mutual Fund Trading? (SEC Press Release)
http://www.sec.gov/news/press/2004-12.htm 


-----------------------------
PIMCO

Background: ?From February 2002 to April 2003, the PIMCO Funds'
advisers provided "timing capacity" in their mutual funds to Canary in
return for long-term investments (referred to as "sticky assets") in a
mutual fund and a hedge fund from which PAFM and PEA earned management
fees. The prospectuses for the mutual funds failed to disclose to
investors that an agreement had been made to permit timing in the
funds in exchange for sticky assets. In addition, the prospectuses
also gave the misleading impression that the PIMCO mutual funds
discouraged timing.?

?SEC Files Civil Fraud Charges Against the PIMCO Equity Funds' Mutual
Fund Advisers, Distributor, CEO and Chairman of the Board of Trustees,
and a Portfolio Manager for Undisclosed Market Timing Arrangements?
(SEC Press Release)
http://www.sec.gov/news/press/2004-61.htm 


-----------------------------
Bank of America

Background: ?Bank of America has agreed to pay a total of $375
million, consisting of $250 million in disgorgement and $125 million
in penalties. The money will be distributed to the mutual funds and
their shareholders that were harmed as a result of market timing in
Nations Funds and other mutual funds through Bank of America.? (No
dates were Given for such violation)

?SEC Reaches Agreement in Principle to Settle Charges Against Bank of
America for Market Timing and Late Trading? (SEC Press Release)
http://www.sec.gov/news/press/2004-33.htm 


---------------------------
Security Trust Company

Background: ?During its three-year relationship with the Canary hedge
funds, STC and the other defendants employed various methods to
attempt to conceal the hedge funds' market timing activities from
mutual funds, including a "piggybacking" strategy in which STC set up
a sub-account within the account of one of STC's TPA clients and
attached the Canary hedge funds' mutual fund trades to the trades of
this client without its knowledge.? (Dates: May 2000 to July 2003)

?SECURITIES AND EXCHANGE COMMISSION v. SECURITY TRUST COMPANY, N.A.,
GRANT D. SEEGER, WILLIAM A. KENYON, AND NICOLE MCDERMOTT, Civil Action
No. CV 03-2323 PHX JWS (D. Ariz.)? (SEC Litigation Release)
http://www.sec.gov/litigation/litreleases/lr18653.htm 


------------------------------
Alliance Capital

Background: ?In early 2001, Alliance Capital appointed a sales support
employee to be a "Market Timing Supervisor" to manage the
relationships between Alliance Capital and market timers.?

?By early 2003, Alliance Capital had extensive relationships with
approved timers. Alliance Capital permitted over $600 million in
timing capacity in Alliance mutual funds. According to a list created
by the Market Timing Supervisor in 2003, Alliance Capital's ?Top 10
Timers? had collectively $543 million in timing capacity in Alliance
Capital mutual funds.?

?Alliance Capital Management, L.P.: Admin. Proc. Rel. No. IA-2205;
IC-26312? (SEC Litigation)
http://www.sec.gov/litigation/admin/ia-2205.htm 


-------------------------
COLUMBIA MANAGEMENT ADVISORS, INC

Background: ?From as early as 1998 and continuing through October
2003, Columbia Management Advisors, Inc. and its predecessor entities
(AColumbia Advisors@), the investment adviser to over 140 of the
mutual funds in the Columbia mutual fund complex (the "Columbia
Funds"), and Columbia Funds Distributor, Inc. (AColumbia Distributor
@), the distributor of those funds, allowed certain preferred
customers to engage in short-term or excessive trading and never
disclosed this fact to other investors.?

?The Defendants entered into and/or approved these arrangements
despite the fact that they knew or suspected that these investors were
engaged in "market timing." After entering into these arrangements,
the nine companies and individuals engaged in frequent short-term or
excessive trading in at least sixteen different Columbia Funds.?

?Complaint: Columbia Management Advisors, Inc. and Columbia Funds
Distributor, Inc.? (SEC Litigation Release)
http://www.sec.gov/litigation/complaints/comp18590.htm 


-----------------------------
Our next documents will show the other articles and legal sources
describing the prevalence of such an investment practice.

JANUS
Background: ?Janus is poised to pay at least $200 million to settle
with regulators in the mutual fund market-timing scandal??

?Janus' settlement comes on the heels of the resignation of CEO Mark
Whiston on April 20. No one said regulators demanded Whiston's
resignation, and it was never clear how much Whiston knew about the
extent of market timing beyond a November 2002 memo in which Whiston
was told of ?Janus-approved (market) timers.??

?Janus settlement near? by David Milstead (News article from Rocky Mountain News)
http://www.rockymountainnews.com/drmn/mutual_funds/article/0,1299,DRMN_16036_2839818,00.html



------------------------------
Banc One

Background: ?The One Group?s fund prospectuses stated that One Group
restricted excessive exchange activity in all One Group funds. BOIA
enforced those provisions. But despite the prospectuses? language,
Beeson entered into an agreement with Stern through which Stern
executed approximately 300 exchange transactions within certain One
Group funds. This agreement was made in the hope that it would lead to
additional business from Stern for various BOIA affiliates. The
transactions, which occurred between June 2002 and May 2003, earned
Stern a profit of approximately $5.2 million.?

?Despite the language of the One Group?s fund prospectuses, from June
1999 to December 2001, BOIA allowed a Michigan market timer to execute
approximately 100 exchange transactions in One Group international
funds, resulting in a profit to the market timer of approximately
$1.24 million.?

?Banc One Investment Advisors Corporation Agrees to Pay $50 Million To
Settle SEC Fraud Charges For Market-Timing Abuses? (SEC News Release)
http://www.sec.gov/news/press/2004-90.htm 


------------------------------
Pilgrim Baxter & Associates Limited

Background: ?This matter involves fraud by Gary L. Pilgrim ("Pilgrim")
and Harold J. Baxter ("Baxter"), former President and CEO,
respectively, of Pilgrim Baxter & Associates, Ltd. ("Pilgrim Baxter"),
the investment adviser to the PBHG family of mutual funds. Pilgrim and
Baxter founded the PBHG fund family in the early 1980's. Pilgrim, who,
in addition to his other positions, was the portfolio manager for the
PBHG Growth Fund, invested in a hedge fund, Appalachian Trails, L.P.
("Appalachian"), in 1995. Both Pilgrim and Harold Baxter knew that
Appalachian's trading strategy involved short-term trading ("market
timing") of mutual funds. In March 2000, Appalachian, with the
knowledge and approval of both Pilgrim and Baxter, and contrary to the
PBHG funds' disclosed policies, began market timing several PBHG
funds, primarily the PBHG Growth Fund managed by Pilgrim. Neither
Pilgrim nor Baxter ever disclosed to the Board of Pilgrim Baxter, the
Board of Trustees of the funds, or to fund shareholders, that Pilgrim
had an extensive interest in Appalachian or that Appalachian had been
permitted to market time in PBHG funds.?

?Complaint:  SEC v. Gary L Pilgrim, Harold J. Baxter and Pilgram
Baxter & Associates, Ltd.? (SEC Formal Complaint)
http://www.sec.gov/litigation/complaints/comp18474.htm


-------------------
Geek Securities Inc.

Background: ?With respect to the defendants' market timing scheme, the
SEC alleges that, between at least September 2001 and November 2003,
mutual fund companies blocked Geek Securities and Geek Advisors
clients from trading in their mutual funds due to their market timing
activities.?

?Geek Securities, Inc., Geek Advisors, Inc., Kautilya "Tony" Sharma,
and Neal R. Wadhwa : Lit. Rel. No. 18738? (SEC Litigation Release)
http://www.sec.gov/litigation/litreleases/lr18738.htm 


------------------
Prudential Securities

Background: From 1998 to 2003, the Boston Branch of Prudential
Securities engaged in market timing activities in its mutual fund
products.

Massachusetts v. Prudential Securities
http://www.sec.state.ma.us/sct/sctpdf/prucomp.pdf 

Another Prudential Securities Market Timing case  this time from the SEC.

Background: ?The Securities and Exchange Commission today announced a
civil fraud action against five brokers and one branch manager
formerly employed by Prudential Securities, Inc., in connection with
their market timing trades in numerous mutual funds. The Commission
alleges in its complaint that, from at least 2001 through September
2003, former brokers Martin J. Druffner, Justin F. Ficken, Skifter
Ajro, John S. Peffer, and Marc J. Bilotti defrauded mutual funds and
their shareholders by misrepresenting their identities or the
identities of their customers in connection with thousands of market
timing trades after the mutual funds had restricted or blocked the
defendants or their customers from further trading.?

?SEC v. Martin J. Druffner, et al., Civil Action No. 03-12154-RCL
(D.Mass.)? (SEC Litigation Release)
http://www.sec.gov/litigation/litreleases/lr18444.htm 


---------------------
Alger Management

Background: ?This is a proceeding against Connelly, a former vice
chairman of Fred Alger Management Inc. ("Alger Management"). Alger
Management is a registered investment adviser located in New York, NY.
Alger Management manages the Alger Fund Group complex of mutual
funds.?

?From the mid-1990s until 2003, Connelly was involved in allocating
timing capacity in Alger mutual funds to timing investors. Connelly
regularly authorized select investors to time the Alger Fund. Connelly
did this even though he knew that the timers were making substantially
more than the permitted six exchanges per year.?

?James Patrick Connelly Jr.: Admin. Proc. Rel. No. 33-8304? (SEC
Administrative Proceeding)
http://www.sec.gov/litigation/admin/33-8304.htm 


----------------------------
Massachusetts Financial Services Company

Background: ?Beginning as early as September 1999, the MFS Retail
Funds, including the Unrestricted Funds, adopted the following
disclosure concerning market timing in their prospectuses: "The MFS
Funds do not permit market-timing or other excessive trading
practices." In April 2002, MFS began to modify the foregoing
prospectus disclosure in its MFS Retail Funds with the following
statement: ?The MFS Funds do not permit market timing or other
excessive trading practices that may disrupt portfolio management
strategies and harm fund performance.? This modified language appeared
in the prospectuses for all MFS Retail Funds until at least November
2003.?
  
?The MFS prospectus disclosures described above were misleading
because MFS permitted widespread market timing trading in its
Unrestricted Funds from at least late 1999 through October 2003.?

?Massachusetts Financial Services Co. Will Pay $225 Million and Make
Significant Governance and Compliance Reforms To Settle SEC Fraud
Charges Concerning Mutual Fund Market Timing? (SEC Press Release)
http://www.sec.gov/news/press/2004-14.htm 

?Massachusetts Financial Services Co. et al.: Admin. Proc. Rel. No.
IA-2213? (SEC Administrative Procedure)
http://www.sec.gov/litigation/admin/ia-2213.htm 


-------------------------
Mutuals.com

Background: ?With respect to the defendants' market timing scheme, the
SEC alleges that, between July 2001 and September 2003, hundreds of
mutual fund companies and two clearing firms admonished Mutuals.com
that its clients' and customers' market timing activity was improper,
and, by September 2003, approximately 294 different mutual fund
companies had banned or otherwise restricted Mutuals.com from trading
in their shares.?

?SEC Charges Dallas Investment Complex and Three of Its Officers with
Defrauding Hundreds of Mutual Funds in Market Timing and Late Trading
Scheme? (SEC Litigation Release)
http://www.sec.gov/litigation/litreleases/lr18489.htm 


---------------------------
Fleet's Columbia Mutual Fund Adviser and Distributor

Background: ?The Securities and Exchange Commission's Division of
Enforcement today announced that it has reached an agreement in
principle regarding its market timing lawsuit against two subsidiaries
of FleetBoston Financial Corporation - Columbia Management Advisors,
Inc. ("Columbia Advisors") and Columbia Funds Distributor, Inc.
("Columbia Distributor").?

?The Securities and Exchange Commission's Division of Enforcement
today announced that it has reached an agreement in principle
regarding its market timing lawsuit against two subsidiaries of
FleetBoston Financial Corporation - Columbia Management Advisors, Inc.
("Columbia Advisors") and Columbia Funds Distributor, Inc. ("Columbia
Distributor").?

?SEC's Division of Enforcement Announces Agreement to Settle Civil
Fraud Charges Against Fleet's Columbia Mutual Fund Adviser and
Distributor for Undisclosed Market Timing? (SEC Press Release)
http://www.sec.gov/news/press/2004-34.htm


--------------------------
Security Brokerage, Inc. and Daniel Calugar

Background: ?The Securities and Exchange Commission yesterday filed
civil fraud charges against Security Brokerage, Inc. of Las Vegas and
its president and majority owner, Daniel Calugar, for their
participation in a scheme to defraud mutual fund shareholders through
improper late trading and market timing. From at least 2001 to 2003,
Calugar, trading through Security Brokerage, reaped profits of
approximately $175 million from improper late trading and market
timing, principally through mutual funds managed by Alliance Capital
Management and Massachusetts Financial Services (MFS). Calugar, age
49, is an attorney with residences in Las Vegas and Los Angeles.?

?SEC Files Emergency Action Against Security Brokerage, Inc. and
Daniel Calugar for Engaging in Mutual Fund Late Trading and Market
Timing Schemes? (SEC Press Release)
http://www.sec.gov/news/press/2003-183.htm 


Our next articles will show that other known names such as Morgan
Stanley has been dragged into the controversy but it shows no date on
when it was practiced there. Such related events are still under
investigation.

?Morgan Stanley brokers fired amid mutual fund investigation?
http://www.bizjournals.com/baltimore/stories/2004/04/05/daily23.html 

?SEC questioning unit of Charles Schwab?
http://www.ajc.com/money/content/money/0504/20schwab.html 

?Regulator in Mass. subpoenas Fidelity?
http://www.boston.com/business/globe/articles/2003/10/17/regulator_in_mass_subpoenas_fidelity/


Search terms used:
"Mutual Fund Market Timing" scandal issues
"mutual fund" market-timing  

I hope these links would help you in your research. Before rating this
answer, please ask for a clarification if you have a question or if
you would need further information.
                 
Thanks for visiting us.                
                 
Regards,                 
Easterangel-ga                 
Google Answers Researcher

---

Request for Answer Clarification by sl7-ga on 14 Jul 2004 11:48 PDT

I appreciate the research you have done, however, it does not really
address the issue I wanted you to focus on.  You provided a collection
of citations to recent enforcement actions that have been brought
subsequent to September 2003 against mutual funds companies and market
timers. I am aware of the enforcement actions and they can generally
be accessed with a key word search since they are a current news
topic. This is not what I was looking for. My specific request was as
follows:

 "I am looking for documentation that demonstrates the extent to
 which mutual fund market timing was a widespread practice prior to
 September of 2003 as opposed to an investment technique just used by a
 small collection of hedge funds.

Your answer focused on the enforcement actions that have been brought
since September, 2003 against mutual funds and a small collection of
hedge funds. I am looking for documentation that would show whether
market timing mutual funds was a widespread practice used by mom and
pop investors. In other words, was mutual fund market timing talked
about in the press and generally know as an acceptable investment
technique, as opposed to being a practice that a few high net worth
investors and mutual funds did in the dark of night and no one
realized was going on until the investigations that you cited broke in
September of 2003.

I apologize if my question was worded in a way that lead you to
believe I was just looking for articles on the current investigations,
but that is not what I was looking for. Could you please let me know
if you could expand your answer to address the prevalence and
pervasiveness of mutual fund market timing prior to September 2003 by
every day investors, as opposed to a small collection of hedge funds,
which is the basis of my question?  For example citations I would find
very useful would be if prior to September 2003 there were articles
published in the Wall Street Journal, Forbes, Barons or even Newsweek
and Time talking about mutual fund market timing as an investment
technique.  I am trying to find out if the investing public was aware
prior to September of 2003 of the fact that market timing mutual funds
was an investment alternative, or whether the practice was something
that was never discussed in the financial press, and was limited to a
handful of large hedge fund investors.

I would consider your search to be successful if you could find even
one article in the Wall Street Journal prior to September of 2003 that
gave an in depth discussion of how an every day investor might benefit
by using market timing of mutual funds as part of his investment
profile.  It would be fine with me if the article was published in the
1990s or 1980s. Frankly the further back in time that you could show
mutual fund market timing was discussed in the financial press, the
more useful that would be.

---

Clarification of Answer by easterangel-ga on 14 Jul 2004 19:26 PDT

Hi again sl7-ga and thanks for coming back!

I was very much aware of the objective of your research to find out if
before September 2003 there had already been instances of such market
timing practices in the mutual fund industry. I posted the documents
about the investigations (I did not know that you already have them
since you did not mention about this) for the following reasons:

a. The legal document contains summaries and instances of specific or
general dates when such securities firm engaged in market timing of
mutual funds. This is the reason why there is a backgrounder before
you are directed to the specific article. This alone I felt is a very
important component of the answer to show it was widespread during the
years prior to 2003.

b. Next such links are already legal documents and can be cited in
court and increases the value of the validity of the source.


However, I think we had a communication problem or gap when you
mentioned the term ?documentation?. I thought that such a term meant
something official as SEC cases or other official documents. I still
included newspaper articles whenever I can?t find just to make the
research more comprehensive.

Since you were actually looking for financial press articles on the
acceptance and prevalence of such an investment strategy, I was able
to find some more sources on this matter. I wasn?t able to find
articles in the Wall Street Journal but still I gathered different
financial publications that discussed market timing for mutual funds
and showed that it was indeed a practice prevalent prior to 2003 and
even the 1990s.


Our first article is from the archives of Business Week. The article
was from 1998 and shows that mutual funds that do market timing are
generally poor performers. Such an observation already implies that
market timing in mutual funds is being done out in the open and
statistics on its reliability or unreliability is available to the
general public.

?The idea of marrying mutual-fund investing with market timing has
innate appeal. With a phone call--or a few keystrokes at a Web
site--you switch your money into equities when the stock market's
going to rise and take it out before stocks go down. Who, after all,
wouldn't want to ride the bull and dodge the bear??

?Investment managers who mix mutual funds and market timing don't
appear much savvier than the newsletter crowd. MoniResearch tracks 85
managers with a total of $10 billion, and divides them into
''classic'' timers, who are either in equity mutual funds or cash
(Treasury bills or money funds), and ''dynamic asset allocators,'' who
move assets around to other categories such as bonds, foreign stocks,
and precious metals. Of the classic timers, the best 10-year
performance was 16.9% a year, the worst 4.4%. The average of 24 timers
with 10-year records was just 10.9%. The dynamic asset allocators
looked better because they had more asset classes to choose from, says
MoniResearch's Shellans. The best of those managed a 22% average
return, the worst 7.0%, and the average 14%.?

?MARKET TIMING: A PERILOUS PLOY? by Jeffrey M. Laderman (Business Week
Mar. 9, 1998)
http://www.businessweek.com/1998/10/b3568136.htm 


Business Week even goes further and provides data on the success rate
of such mutual funds that go into market timing activities.

?Few Medals for Market-Timers? (Business Week Mar. 9, 1998)
http://www.businessweek.com/1998/10/b3568137.htm 


In 2001, Business Week mentions that short time market traders in
mutual funds are on the rise.

??Fund companies have recognized over the last year or so an increased
incidence of market-timing,? said Louis Harvey, president of Dalbar
Inc., a Boston-based mutual fund consulting firm.?

?Who are these daring market-timers? Cohen says they come in all
shapes and sizes, and they are not at all shy about who they are and
what their intentions are. ?Many of these timers are high-net-worth
individual retail investors?" he said. ?There are also market-timing
firms which identify themselves as such, and there are brokers who
move their clients' money on an almost-daily basis. I've talked to
many of these timers and they're quite explicit and clear about what
they want -- they seek to take advantage of a highly volatile market,
and they're not the least bit concerned about long-term performance.?"

??Hot Money? Chills Fund Firms? By Palash R. Ghosh (Business Week APRIL 23, 2001)
http://www.businessweek.com/investor/content/apr2001/pi20010423_056.htm 
 

In the winter of 2002, Business Week again came up with 2 stories this
time warning investors about the pit falls of such market timing
practices by fund managers.

?Except in the world of mutual funds. There, traders in the know have
long been profiting from a strategy that involves moving in or out of
funds on volatile days in an effort to take advantage of pricing
errors.?

?This kind of market timing is something that mutual-fund investors
should care about -- not because it's a strategy worth trying
yourself, but because these traders' profits come directly at the
expense of long-term investors in the funds they target??

?In an October, 2002, working paper, Eric Zitzewitz of the Stanford
Graduate School of Business found that from 1998 to 2001, investors
could have earned a potential annual return of 35% to 70% using this
strategy in international funds, about twice as much as they could
have made from 1992 to 1996.?

?A study by FT Interactive Data (which launched a service to provide
more timely prices to funds last August) found that in July, 2002,
alone, the strategy would have earned 12% (or 146% annualized).?

?When Market Timers Target Funds? by Amey Stone (Business Week December 11, 2002)
http://www.businessweek.com/bwdaily/dnflash/dec2002/nf20021211_0384.htm


The next Business Week story discussed in detail how such a practice
is being done by mutual fund traders.

?How Arbs Can Burn Fund Investors? by Amey Stone (Business Week December 11, 2002)
http://www.businessweek.com/bwdaily/dnflash/dec2002/nf20021211_5124.htm


In a 1996 edition of the Financial Analyst Journal, a study advocates
market-timing for mutual funds in dynamic market environments.

?The authors introduce and evaluate conditional portfolio performance
measurement, which differs from traditional unconditional approaches
that use historical average returns to estimate expected returns. The
traditional approaches do not account for the fact that risk and
expected returns may vary with the state of the economy. Thus,
traditional, or unconditional, market performance measures may
incorrectly ascribe a given level of fund performance as abnormal when
in fact the performance is caused by the common variation between fund
risk and expected market returns.?

?Evaluating Fund Performance in a Dynamic Market? by Wayne E. Ferson
and Vincent A. Warther (Financial Analysts Journal November/December
1996)
http://aimrpubs.org/cfa/issues/v27n3/pdf/C0270070a.pdf  


Another snapshot resource can be found from this short Sun America
publication about the fallacy of mutual fund market timing.

?The Fallacy of Market Timing? (2002)
http://www.iaac.com/publications_&_%20articles/asset_allocation.pdf 


---------------------------
Our next link is an academic resource published in 1984 discussing the
correlation between mutual fund performance and market timing. In the
research paper, it shows that even as way back in the 70s, theories
were already being put forward on the potential success of mutual
funds market timing as an investment strategy.

Henriksson, R.D., ?Market Timing and Mutual Fund Performance: An
Empirical Investigation,? Journal of Business 57,
1984, pp. 73-96.
Link: http://www.haas.berkeley.edu/finance/WP/rpf137.pdf 

 
I really hope that my clarification and my subsequent additional
articles will be of help to your research.

Thanks again!

Sincerely, 
Easterangel-ga

Thank you so much for the extensive follow up to your original answer.
The follow up is exactly what I was looking for -- published news
articles that illustrate the fact that mutual fund market timing was a
matter that was talked about in the financial press for many years
prior to the recent investigations.

I apologize for the confusion caused by the way I worded my question
and I feel bad about the fact that you had to end up doing two
significant pieces of research.

If you think that there are additional published articles (Pre
September 2003) that discuss short term market timing in mutual funds
that you would be able to research and give me links to (or copies
of), please let me know and I will send in another $200 question to
let you continue your research.  I would be happy to pay $1,000 or
more for an exhaustive coverage of this topic, but I am somewhat
limited by the compensation structure in Google which limits the
maximum payment to $200.  If you have any suggestions on how best to
structure an exhaustive review, please let me know.

Thanks so much sl7-ga for the very kind words, for the 5 stars and for
being so generous with your tip!

It's ok to do the second research. Sometimes it is really hard to get
it the first time around. I will try to find more and inform you if I
came up with anything substantial.

Again thank you so much.

Sincerely, 
Easterangel-ga