August 4, 2004
The propsed 2 percent redemption fee seems to be based on investment company practices which you seem to indicate reflects a real cost of the transaction. Checking with investment companies, the 2 percent figure is meant not to approximate costs involved in these transactions but is meant to be punitive and discourageing enough to keep the investor from making the redemption in the first place.
The real cost to non market timeing investors by the actions of their fellow investors has not been percisely determined by anyone and probably cannot be. Why penalize investors for a short term change in investment goals, an unforseen emergency the process for exception is burdensome or simply a gut desire to retreat out of a falling market?
Disclosure to investors that excessive trading by their fellow investors can add costs and reduce returns would be fair and sufficient. Indications as to the amount of trading for a particular fund in any given year could be included in the fund prospectus.