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Investment Company Act of 1940 was a piece of regulatory legislation that forced fund companies to take the share prices at noon and at the close of trading on the New York Stock Exchange and use those numbers to determine the net asset value of the fund. Several amendments later to the law found fund companies in 1979 appointing the time of specific pricing.
Net Asset Value or NAV according to the 1940 act directed pricing to be based on determinable asset value. Basically this meant that if you could not find the exact price of the share in the fund, a value of possible worth could be used in its place. When old prices were used instead of valuations or when valuations were skewed, opening market profit taking did damage to long term shareholder interest by market timers aware that prices were not correct. Putnam funds was the first company to ask for leniency when judging how they used valuation catering to this group. Valuation calls with concern for long term investors, will estimate the future opening prices of underlying issues. Efforts at increasing information on how they do this has been slow in coming to the general public. And even if you do know, the human factor (the managers and the boards of directors) involved in determining the fair value is an undeniable deterrent to absolute accuracy in pricing. That's as fair as it is likely to get. [ Close Window ] This site and all its contents are copyright 1998-2004 by Paul Petillo/Editor/BlueCollarDollar.com. All Rights Reserved. |