The popularity of the Internet is surely creating a new breed of mutual fund, as the newly registered Allied Owners Action Fund (no symbol yet) will strive to promote shareholder scrutiny and debate in an open online forum. Management seeks to benefit from the interaction of ideas and strategies from its shareholders, hoping that active, insightful participation by shareholders will help unlock the value of invested companies.
The fund will be managed by Privateer Asset Management of New York, which will have all acquisitions, news, data and analysis of the fund’s investments posted on an independent website called eRaider. Using an outside moderator to oversee online communications, the site will post a “no market manipulation” warning to discourage individuals from posting false and manipulative information (it can’t guarantee that such misdeeds won’t happen, of course). Fund management will not partake in these discussions.
The fund will invest up to five percent of assets in relatively large stakes of 20 or fewer small to medium-sized capitalization (below $500 million) domestic companies. In addition, the fund will allocate no more than 25 percent to any one industry. Total operating expenses are not disclosed in the SEC filing, but management fees are capped at one percent and the fund will maintain an annual distribution fee. The fund will attempt to limit portfolio turnover in order to minimize costs and taxes. Minimum investments start at $2,500 for regular accounts, with no specific information provided for retirement accounts.
Savvy investors are well familiar with the risks of investing, but potential shareholders of Allied Owners Action Fund face the additional risk of the fund’s message boards attracting misinformation and manipulative information that could adversely affect the fund’s holdings. But if you want a fund where shareholders have a voice, no matter how small, through informed and thoughtful discussions, perhaps the fund merits consideration. The fund is currently stuck in the SEC’s “quiet period.”