Chuck Jaffe looks back at eight mutual funds that closed their doors in 2007, and for good reason. It's a roll-call of weird, expensive, or just plain lousy funds run by managers with a deadly combination of hubris and incompetence. None of these funds will be missed, least of all the Ameritor Investment fund, which was quite possibly the worst mutual fund (from perhaps the worst fund family) of all time:
The Ameritor funds started life in the 1950s as the Steadman funds. They were nicknamed the 'Dead Man funds,' because they finished dead last in their peer group, losing money all the way, for years. Ultimately, Steadman Oceanographic — which was supposed to profit from companies that were farming and building communities at the bottom of the sea — and Steadman Technology ran through almost all of their money.
When Charles Steadman died in the late 1990s, his daughter took over. The funds had no prospect for growth, but she had no reason to shut them; the double-digit management fee was like a personal annuity, up to the point where it bled the fund to death. When the Securities and Exchange Commission finally filed paperwork stating that the fund 'had ceased to be an investment,' the loss over the last 10 years was 98.98 percent, turning a $10,000 investment into $102. It took about four decades for the losses to drive shares down to less than a penny, but Ameritor got the job done, and then kicked the bucket.
It’s a lesson in just how bad mistakes can be if you insist in hanging on to them. Sadly, this fund is survived by a sister, Ameritor Security Trust (ASTRX), with performance that is 'better,' but only when compared to its all-time loser sibling."
The long life of the Ameritor Investment fund highlights an important point. While mutual funds are regulated by the Securities and Exchange Commission, it is possible for a fund to be operating within the letter of the law but still be an absolutely horrible scam-grade investments.
There is no law against high fund expense ratios - when a fund's assets fall below about $10 million and the management company stops caring about the shareholders, the sky's the limit on expenses because the minimum fixed costs of running a fund have to be paid by a small group of investors. We call these "free range" expense ratios - ones that are not capped by fund companies because frankly, my dear, they don't give a damn. As Jaffe notes, Ameritor Security Trust (ASTRX) still clings to life - with two million of investor assets and an expense ratio of 16.36%.
Chuck Jaffe looks back at eight mutual funds that closed their doors in 2007, and for good reason. It's a roll-call of weird, expensive, or just plain lousy funds run by managers with a deadly combination of hubris and incompetence. None of these funds will be missed, least of all the Ameritor Investment fund, which was quite possibly the worst mutual fund (from perhaps the worst fund family) of all time:
The Ameritor funds started life in the 1950s as the Steadman funds. They were nicknamed the 'Dead Man funds,' because they finished dead last in their peer group, losing money all the way, for years. Ultimately, Steadman Oceanographic — which was supposed to profit from companies that were farming and building communities at the bottom of the sea — and Steadman Technology ran through almost all of their money.
When Charles Steadman died in the late 1990s, his daughter took over. The funds had no prospect for growth, but she had no reason to shut them; the double-digit management fee was like a personal annuity, up to the point where it bled the fund to death. When the Securities and Exchange Commission finally filed paperwork stating that the fund 'had ceased to be an investment,' the loss over the last 10 years was 98.98 percent, turning a $10,000 investment into $102. It took about four decades for the losses to drive shares down to less than a penny, but Ameritor got the job done, and then kicked the bucket.
It’s a lesson in just how bad mistakes can be if you insist in hanging on to them. Sadly, this fund is survived by a sister, Ameritor Security Trust (ASTRX), with performance that is 'better,' but only when compared to its all-time loser sibling."
The long life of the Ameritor Investment fund highlights an important point. While mutual funds are regulated by the Securities and Exchange Commission, it is possible for a fund to be operating within the letter of the law but still be an absolutely horrible scam-grade investments.
There is no law against high fund expense ratios - when a fund's assets fall below about $10 million and the management company stops caring about the shareholders, the sky's the limit on expenses because the minimum fixed costs of running a fund have to be paid by a small group of investors. We call these "free range" expense ratios - ones that are not capped by fund companies because frankly, my dear, they don't give a damn. As Jaffe notes, Ameritor Security Trust (ASTRX) still clings to life - with two million of investor assets and an expense ratio of 16.36%.
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