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Rating:Guggenheim Tried to Take Over the Value Line Funds Not Rated 4.0 Email Routing List Email & Route  Print Print
Thursday, September 02, 2010

Guggenheim Tried to Take Over the Value Line Funds

News summary by MFWire's editors

Guggenheim Partners almost added another mutual fund business to its family this year. In a profile of the recent woes of beleaguered Value Line (publisher of the Value Line Investment Survey and parent of the dozen Value Line mutual funds), the Wall Street Journal's Eleanor Laise reports that Guggenheime Transparent Value (a unit of Guggenheim Partners) wrote to the Value Line [see profile] funds' board this spring asking to take over the funds, which hold $2.3 billion in total assets. Yet the deal didn't happen.

"Why they didn't call or act is beyond me," Transparent Value co-CEO Julian Koski tells the WSJ.

So why didn't the Value Line funds' board entertain the offer? The WSJ writes that "a spokesman for the funds' independent directors says Transparent Value's letter concerned matters better addressed to Value Line Inc., the parent company." (Value Line Inc. is publicly traded.)

The offer came in light of an almost $45 million settlement last year with the SEC over allegedly inflated brokerage commissions, a settlement which hit Value Line CEO Jean Buttner, ex-chief compliance officer David Henigson and the Value Line Securities broker-dealer itself. That settlement -- which barred Buttner, the daughter of Value Line founder Arnold Bernhard, from any ties to broker-dealers or advisors -- required Buttner to disconnect herself within a year from both Value Line's own b-d and its fund business (but not its financial publishing business, which releases the Value Line Investment Survey). Buttner stepped aside for Value Line board member Howard Brecher to fill the acting chairman and CEO shoes, yet Buttner controls a holding company that in turn "owns most of Value Line's shares," the WSJ writes.

Value Line's response to the settlement, in addition to elevating Brecher, has been to transform the money management arm into a trust that Value Line earns money from without having any "voting control," Laise writes.

Fundsters interested in the fate of Value Line and its mutual fund arm, Eulav Asset Management, may want to take a look at the full article. Several non-Value Line fundsters weighed in for the article, including: Auxier Focus Fund PM Jeff Auxier; former Value Line PM Jack Dempsey; and Gamco Investors chief Mario Gabelli. Both Auxier and Gabelli hold Value Line stock in their funds.

Chicago-based Guggenheimer bought ETF manager Claymore [see profile] last year, and this year Guggenheim led a group of investors in buying Security Benefit (parent of asset managers Security Global Investors and Rydex | SGI [see profile) this year. 

Edited by: Neil Anderson, Managing Editor

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