Chicago-based Harris Associates, founded in 1976, is the investment advisor to the Oakmark Funds. Harris is an indirect subsidiary of Natixis Global Asset Management.
On July 21, 2010, Kristi Rowsell was elected president and trustee of the Oakmark Funds.
Oakmark Fee Case
In August 2004, three investors in the Oakmark funds sued Harris, alleging that the funds' fees were excessive, thus violating Section 36(b) of the Investment Company Act of 1940, and that the board of directors, who is responsible for approving the fees, was not sufficiently independent. Furthermore, the investors took issue with the fact that Harris charged separately managed accounts for pension funds as little as half what is charged retail mutual funds for comparable services. Annual fees for the flagship Oakmark fund were around 1.05% (now 1.1%). Harris denied these claims, asserting that its fees were reasonable and that the board of directors gave its approval of the fees after careful review. Harris argued that it is less expensive to serve a small number of large pension clients than many mutual-fund investors.
The suit, which was originally filed in an Illinois federal district court, was dismissed before it came to trial in 2007, holding that Section 36(b) did not permit judicial regulation of mutual fund management fees. In his decision, Judge Frank Easterbrook acknowledged that management had a fiduciary duty to investors but that this responsibility did not imply judicial regulation of management fees was necessary – in short, mutual fund fees should not be capped. That decision was affirmed by the federal appeals court in Chicago last year. In August 2008, the U.S. Court of Appeals for the Seventh circuit declined to rehear the case but raised the stakes when the five judges, who included renowned jurist Richard Posner, signed a dissenting opinion stating that the case was ripe for reexamination as there was little incentive for the board of directors to police compensation.
The Supreme Court of the United States heard oral arguments for Harris v. Jones on November 2, 2009.
On March 30, 2010, the Supreme Court
unanimously overruled the Seventh Circuit's dismissal of Jones v. Harris Associates.
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Key People:
Kristi L. Rowsell President, Oakmark Funds, Harris Associates Securities L.P.
Robert M. Levy Chairman and Chief Investment Officer, Harris Associates Securities L.P.
Michael Neary, CFP Managing Director, Marketing & Client,
Janet L. Reali General Counsel, Harris Associates Securities L.P.
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