Fund managers should disclose the size of their tax losses

Tuesday 2nd March 2004

Fund managers should be more open about disclosing the size of the tax losses in their managed funds and not hiding these details from investors and advisers.

One Auckland based adviser has been trying to find out the size of the tax loss in BNZ's international equity fund, but has been stonewalled by both the manager and the trustee.
He raised the issue again yesterday in an email sent to Good Returns questioning why BNZ should win the Morningstar international equities fund manager of the year award.

"Both the BNZ staff, and the trustee for unit holders, Public Trust, refuse to disclose this information saying it is not their policy to do so. (They wont' even make the information available to all unit holders which I have asked them to do.)

"This is particularly disappointing at a time when the funds management industry is looking for as much credibility as possible from the investing public."

Morningstar says its awards are quantitatively based on risk/return measurements over the past year and qualititative factors such as this don't come into the equation.

"The issues raised...although valid, are not part of the criteria for judging the winners or losers," Morningstar head of sales Stuart Auld says.

Morningstar boss Scott Cooley says that he favours mandatory disclosure of a fund's tax position "to all unitholders who want that information."

"I don't see a case for not seeing that disclosure."

He says it's a matter of transparency and fund managers need to account for other people's money.

It seems investors and advisers aren't the only ones having trouble getting this type of information.

Morningstar that it has found managers reluctant to tell it about the size of their tax credits.

However, in an interesting twist managers have disclosed their tax losses - albeit on a confidential basis - to fellow researcher FundSource.

Currently FundSource has three international funds on hold because of the size of their losses. They are funds run by BNZ, ING and Tower.

BNZ is thought to have the highest level of losses running at more than 10% of the fund's assets.

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