From the Editor...

March 28, 2022

By Hillary Jackson

From the Editor...

 

The years-long trend of mutual fund firms being sued for alleged excessive fees may be over, but the plaintiffs' bar continues to find ways to go after the industry. Vanguard and Nuveen Investments are fighting litigation at the moment, both unusual and interesting lawsuits that name the fund directors as defendants. 

 

In the case of Verduce et al. v. Vanguard Chester Funds et al., plaintiffs accuse the board members of being "ultimately responsible" for decisions that led to high capital gains, and resulting unexpected tax bills, for investors who held target-date funds in taxable accounts. The class-action suit, filed in U.S. District Court in the Eastern District of Pennsylvania, also names the adviser, the fund trust, and several officers as defendants. 

 

In the case of Saba Capital CEF Opportunities 1, Ltd. v. Nuveen Floating Rate Income Fund, Nuveen Investments has appealed a ruling that found a control share bylaw amendment adopted by the fund violated the Investment Company Act of 1940. The judge granted summary judgment to plaintiffs Saba Capital Management and an affiliate, and the defendants—including the fund's directors—filed an appeal at the end of February.

 

We're keeping an eye on both cases as they make their way through the court system. While both are considered to most likely be one-off lawsuits, given the specific circumstances of each, it'll still be interesting to see what happens—and potentially helpful to directors going forward. 

 

In other news, Management Practice Inc. has generated its annual figures on profitability within the fund business. Numbers are up, in line with—but at a slower pace than—growth in assets under management. We spoke to MPI's Sara Yerkey and Kelley Howes from Morrison Foerster about how directors can think about the data in the context of fund profitability and economies of scale. 

 

Also, don't miss our latest Viewpoints from Ethan Corey of Eversheds Sutherland on ESG ratings providers and our exclusive 10in10 series from Buddy Donohue and Kim Kaufman, who wrote 10 articles on the top 10 regulatory developments of the 10 years between 2010 and 2020. It's great reading!

 

For now, 

 

Hillary Jackson, founding editor

 

 

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