InvestmentNews.com reported that Jim Ross, co-head of the adviser services unit at SSgA, said the decision was based on the company’s assessment of the effectiveness of redemption fees and other methods to prevent market-timing. SSgA decided fair-valuation tools are sufficient to eliminate the need to charge redemption fees, he said, according to InvestmentNews.com.
Putnam Investments of Boston and its fund boards reached a similar conclusion, according to the news report, and on October 2 the company reduced to 1%, from 2%, the redemption fees it charges investors in many of its funds. Unlike SSgA, though, Putnam did not eliminate redemption fees entirely and decided the fees in conjunction with improved fair-market values and internal controls can help curb market-timing, said Gordon Forrester, a managing director at Putnam, according to the news report.
Paul Kraft, a Boston-based partner with the asset management practice at Deloitte & Touche LLP, says more fund companies are implementing fair-valuation procedures, and those that already have them are revising them to make them stronger. Revisions can be attributed to the lowering of “triggers” of fair-valuation procedures, he said.
The revisions could mean more accurate prices, which will in turn lessen the need for redemption fees.