MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication
an InvestmentWires' Publication
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MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication |
|
Tuesday, July 17, 2001 Cornerstone Muni-Fund Slammed by Default Heartland Funds is not the only firm to have a meltdown in a municipal bond portfolio. Reuters has reported that New York City-based Cornerstone Funds faced its own problems in its closed-end New York fund last March when it dropped the NAV on its fund by 8.3 percent in a day. The problems have so far been all but ignored in the fund industry. The fund firm first told investors of a problem in the portfolio on March 12. It also posted a market commentary on that date explaining the reason for the writedown. It also explained that the change in NAV would be retroactive to February 25, 2000. T funds had carried the bonds at a value of $5.6 million since 1996 and realized the writedown in one fell swoop in March. The $2 million writedown was then back-dated to February 25 when the default took place. The firm uses Standard & Poor's J.J. Kenny Evaluation Service to price its holdings. The problems arose after the Niagara Falls-based Falls Street Faire entertainment complex default on $10 million of bonds in which two Cornerstone funds were the only holders. The bonds have since been purchased by Cornerstone's parent firm. Cornerstone discussed the fund repricings with the SEC and the Commission approved of the action, Reuters reported. The fund is now in the process of being shuttered. The problem at Cornerstone again raises a flag on the problems of pricing illiquid issues in the municipal bond market. Printed from: MFWire.com/story.asp?s=26949 Copyright 2001, InvestmentWires, Inc. All Rights Reserved |