Boeing Departure Could Cause Turbulence for Some Fund Holders

May 10, 2004 ( - A large 401(k) plan has pulled out of a tainted mutual fund family - and the remaining shareholders could be stuck with higher expenses as a result.

Dow Jones reports that on April 30, Boeing’s 401(k) plan pulled about $1.2 billion out of the Invesco Technology Fund, nearly half the fund’s assets.   As a result, Invesco says, the remaining investors could end up being hit with higher expenses.

The report notes that Boeing made the decision in part because the fund failed to meet long-term performance criteria.   However, “…allegations against Invesco and its CEO added to concerns about its ability to improve its performance,” according to Dow Jones, quoting Boeing spokeswoman Anne Eisele. Invesco Funds and its president, Raymond Cunningham, are facing state and federal civil-fraud charges for allowing improper short-term trading in the firm’s funds, hurting long-term investors (see  Prosecutors: Invesco Engaged in Massive Market Timing Scheme ).

Invesco said in a regulatory filing in March that “a large shareholder” had notified the fund that it might redeem “all or a substantial portion” of its investment. As a result, the company warned, expenses for other shareholders would likely increase because certain fixed costs would end up being allocated over a smaller asset base.

All of the assets came out of the institutional share class of the fund, of which Boeing was the sole investor as of last November, according to the fund’s prospectus. The fund now has $1.83 billion in assets, according to Dow Jones, citing AMG Data Services.

The Boeing 401(k) funds were moved to the Dreyfus Premier Technology Growth Fund.   That shift has, in turn, more than doubled the size of that offering to $2.11 billion from $868 million. A spokeswoman for Dreyfus said the firm has examined the fund’s expenses “to assure us that existing shareholders would not be adversely affected.”