The Secrets of Eddie Stern.
Peter Elkind.
- Fortune, 2004.
- SIRS Enduring Issues 2005. Article 30, Business, 1522-3191; .
Articles Contained in SIRS Enduring Issues 2005. Originally Published: The Secrets of Eddie Stern, April 19, 2004; pp. 106+.
"Under the rules in place at most mutual fund firms, market timing was forbidden. The fund industry has long acknowledged that market timers--that is, investors who rapidly trade in and out of mutual funds--hurt buy-and-hold shareholders. As a result, most fund prospectuses contained language bluntly declaring timers unwelcome. As we now know, however, many fund companies did permit market timing--for select investors. While the average shareholder was left in the dark, a kind of alternative mutual fund universe emerged, one that included not only market-timing hedge funds but also middlemen who arranged illegal trades and secret deals, fund insiders who gave timers proprietary information, and fund companies that embraced timers to boost their own bottom line....Market timing of mutual funds is no longer a secret. Instead it has become a full-blown scandal--the biggest in the history of the $7 trillion fund business. Today virtually the entire industry is under investigation--by New York State attorney general Eliot Spitzer and other state regulators, by the Justice Department, and--belatedly--by the SEC." (FORTUNE) This article reveals how the funds scandal began when a former employee of market timer Eddie Stern blew the whistle on him and reports on the information Stern has supplied since cutting a deal with prosecutors.