Chicago fund rating firm Morningstar, Inc. took an unusual step yesterday when it directed comments not to investors, but to a specific fund advisor. The company posted an open letter to Ralph Wanger, founder, director and trustee of Columbia Wanger Asset Management (WAM), on its website.

The letter, signed by senior mutual fund analyst Emily Hall, expresses concern that a string of acquisitions - WAM was sold to Liberty, which was sold to FleetBoston, which was sold to Bank of America - were detrimental to shareholders in WAM's Acorn Funds.

Hall chastises the funds for new fees, major management departures and involvement in market-timing scandals. "Because of these problems, we are writing this open letter to you to urge you and the rest of the Acorn board to consider making substantive changes to the Acorn funds," she writes.

She urges the funds to lower fees, carefully guard their independence from parent firm Columbia Asset Management and "to carefully evaluate the fund's contract with its distributor in the coming months."

"We still have a high regard for the investment philosophy at Columbia Wanger Asset Management, but stock-picking skill alone is not enough," she writes.

Hall told the 401kWire that, to her knowledge, this is the first open letter Morningstar has sent to a fund company.

"It was a way of conveying our concerns both to the Acorn Fund Family and to investors," she said. She added, "Morningstar has had pretty good communications with Wanger Asset Management over the years."

Acorn Funds spokesperson Marilyn McCarthy said their legal counsel had advised them not to comment because their parent company is in final settlement discussions with regulators.  

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