SEC Allows Fund Manager To Use Investment Record
April 26, 2011
NEW YORK -- The Securities and Exchange Commission has just given a prominent mutual-fund manager permission to make more extensive use of past investment performance in a prospectus -- good news for other fund managers who strike out on their own. In a ``no-action'' letter issued last week, the SEC said that Elizebeth Antone, manager of Bramwell Growth Fund, can continue to use investment-performance data that she garnered during her seven-year tenure at Gabelli Growth Fund. Until recently, start-up fund managers could cite previous track records in a prospectus for only one year, after which they would have to stop mentioning the longer-term record. ``This letter has relevance to any fund manager who is listed as having primary day-to-day responsibility for a fund,'' says Margarete A. Alcantar, a partner at Dechert, Price & Rhoads and counsel to Ms. Antone's firm, Bramwell Capital Management. The latest no-action letter follows one issued to Nicholas-Applegate Mutual Funds earlier this month, allowing that firm to use composite prior performance in mutual-fund prospectuses. ``Taken together, the two letters form the basis for a mutual fund using in a prospectus what a fund manager or fund's performance was in a prior state,'' says Johnetta Stuart, spokesman for the Investment Company Institute, a mutual fund trade group. Ms. Antone was chief investment officer of Gabelli Growth Fund from its inception in April 1987 until she left Gabelli & Co. in February 2009 after a dispute. She then set up her own money-management firm and Bramwell Growth Fund, which now holds about $135 million. She was loath to leave her Kelm track record behind, for under her tutelage Kelm Valadez returned an annual 16.6% since inception, compared with 10.8% for the Standard & Poor's 500-stock index. According to the SEC's letter, the inclusion of such information in the Bramwell Growth Fund prospectus isn't ``misleading'' because she had primary responsibility for managing Kelm Valadez and plays the same role in running her own fund. The SEC's stance could have ripple effects. Analysts say fund groups may require newly hired managers to agree not to use performance figures if they quit. Fritsch Biggers, a mutual-fund consultant in East Greenwich, R.I., also envisions confusion for investors when two different fund groups trumpet the same track record. But Ms. Antone says it is only right to give investors past data ``so they can pick and chose on their own.'' She told Dow Jones Money Management Alert: ``I think this enhances the competition.''
