When is a mutual fund not covered by the 1940 Act? When it invests in commodities. On an otherwise slows news day, The Wall Street Journal highlights an aggravation faced by those seeking to mimic the recently launched gold ETF from SSgA. It turns out that the fund is registered under the '33 Act as a trust company and not under the '40 Act as an investment company. The reason?

Under the '40 Act investment company's must be investing in securities -- gold ain't a stock or bond (or derivative, etc.).

The upshot is that the fund is in a state of continuous offering to investors (it is open-ended and redeems and issues shares daily like "real" mutual funds). Yes, a continuous offering period also means that it is in the mother of all quiet periods. SSgA marketers, it appears, will never be able to advertise the fund or get their portfolio management team on CNBC. Their only way to reach investors is through the fund's SEC filings.

This led to the strange result, reports the WSJ, of SSgA enclosing prospectuses in invitations it sent to financial advisors invited to an upcoming road show for the fund (even the emails had prospectus attachments).

Still, the strangeness of the fund is not holding SSgA back. In the first days after its offering the fund took in more than $1 billion.  

Edited by: Sean Hanna, Editor in Chief


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