2006-04-03T12:23:00.000-07:00

The Conflict of Interest Game ( Mutual Funds )..Disgruntled investors are going after Wall Street once again,this time accusing one of investment bank MorganStanleyshightech mutual funds of making biased stock picks. Recent lawsuits allege the Morgan Stanley Technology fund wasinfluenced to buy and hold stocks of companies that deliveredhuge investment banking fees or could potentially bring bigbusiness to the investment bank. According to the lawsuitsthe Morgan Stanley fund followedthe biased recommendations of the firms analysts decisionsthat have cost shareholders millions of dollars since theportfolios October 2000 inception. The fund lost 48 percent in 2001 and was down another 50percent during the first nine months of 2002. While MorganStanley strongly denied the allegationsI fail to see how themanagement of the fund is somehow distinct from the otherdivisions of Morgan Stanley. Ultimatelythey all work for thesame boss. The suits further claim that the tech fund failed to disclosethat the firm had investment banking ties with anumber ofcompanies whose stocks were part of the portfolio. They alsofailed to reveal that those links could affect the funds buyor sell calls. Why bring all this up? For one thingit is interesting tonote that Morgan Stanley offered four of these types of fundsin October 2000. Just around the time when we sold all of ourpositions (Oct. 132000) and it became clearat least tothose of us who were tracking longterm trendsthat amajortrend change had taken place. More recently in the news its been Merrill Lynch who had aquestionable deal involving transactions with failed energytrader Enron. Of coursethe financial services industryregulates itself so wellthat an $80 million payment to theSEC is sufficient to wrap up this case without admitting ordenying wrongdoing. Whats the moral of this story? While it is impossible topredict these alleged conflict of interest schemesit isdefinitely possible to follow adisciplined approach and be onthe rightMutual Fund side of the market so you can avoid jumping aboardasinking ship. About the Author
Ulli Niemann is an investment advisor and has been writingabout objectivemethodical approaches to investing for over10 years. He eluded the bear market of 2000 and has helpedhundreds of people make better investment decisions. To findout more about his approach and his FREE Newsletterpleasevisit: .....successfulinvestment.com www.successfulinvestment.com
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-cULK

2006-03-13T14:29:00.000-08:00

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