Wilshire trades.Pension fund investors are watching with particular interest the case of Santa Monica-based Wilshire Associates Inc., whose short-term "market timing" trades dating back to 1993 are being examined by the SEC. The question, said one money manager Money Manager A business or bank responsible for managing the securities portfolio of an individual or institutional investor. Typically, a money manager employs people with various expertise ranging from research and selection of investment options to monitoring the assets and deciding when to sell them. familiar with such practices, is whether Wilshire's in-and-out trades in mutual funds violated the internal procedures of some of its fund-company clients, which publish the provisions against the practice in their prospectuses. Many mutual funds also impose penalties to discourage market timers. "It does hurt investors," said the money manager. "But unless you have a provision, it's not illegal." The SEC is reviewing investments Wilshire Associates made for its clients and for its own accounts that involved buying selected mutual funds and simultaneously selling short Selling short Selling a stock not actually owned. If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market. For instance, you borrow 1000 shares of XYZ on July 1 and sell it for $8 per share. Then, on Aug. 1, you purchase 1000 shares of XYZ at $7 per share. You've made $1000 (less commissions and other fees) by selling short. equity index futures Index Futures A futures contract on a stock or financial index. For each index there may be a different multiple for determining the price of the futures contract.Notes: For example, the S&P 500 index is one of the most widely traded index futures contracts in the U.S. Often stock portfolio managers who want to hedge risk over a certain period of time will use the S&P 500 index future to do so. contracts to profit from changes in the spread, according to a statement issued by the company last week. Wilshire, the second-largest pension consulting firm, said in the statement that it doesn't believe its conduct violated any law, and that decisions regarding implementation of the strategy were made "independent of the consulting and the analytics divisions of the firm." A spokeswoman for the firm declined further comment. |
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