What is market timing?
Market timing of mutual funds refers to the investment practice of short-term “in and out” trading of mutual fund shares to capitalize on the fact that funds use “stale” prices to calculate the value of the shares, which do not necessarily reflect the “fair market value” of the shares at the time of valuation. Unlike other types of traded securities, mutual funds are valued once per day, as of 4:00 p.m. EST, and not on a real-time basis. This daily valuation is referred to as the fund’s net asset value or NAV.
As a result of time zone differences, a market timer can take advantage of positive developments on shares held by the fund that come to light after the close of trading in those shares to buy into the fund at a unit price lower than its fair market value. A profit can be realized by selling the fund units after the increase in value is incorporated into the fund’s NAV the following day. By stepping in at the last moment to take part of the increase in value, effective timing captures a profit that comes out of the pockets of the long-term investors of the fund. This wealth transfer is referred to as “dilution”.
According to an investigation conducted by the Ontario Securities Commission, market timing activity took place in funds managed by the defendants. As part of a settlement reached with the OSC earlier this year, the defendants agreed to pay approximately $150 million to the unit holders of the subject funds. However, it is alleged that these payments reflect only a portion of the losses suffered by the class members.
The classes and class periods
Specifically, this action is brought on behalf of the classes of persons defined as follows:
(1) The IG Class:
All persons in Canada, except Quebec, who purchased and/or redeemed and/or held or otherwise acquired shares or other ownership units of one or more of the IG Funds during the period from October 1, 2000 to November 30, 2002.
Please click here to view a list of the implicated funds.
(2) The CI Class:
All persons in Canada, except Quebec, who purchased and/or redeemed and/or held or otherwise acquired shares or other ownership units of one or more of the CI Funds during the period from September 1, 1998 to September 30, 2003.
Please click here to view a list of the implicated funds.
(3) The Templeton Class:
All persons in Canada, except Quebec, who purchased and/or redeemed and/or held or otherwise acquired shares or other ownership units of one or more of the Templeton Funds during the period from February 1, 1999 to February 28, 2003.
Please click here to view a list of the implicated funds.
(4) The AGF Class:
All persons in Canada, except Quebec, who purchased and/or redeemed and/or held or otherwise acquired shares or other ownership units of one or more of the AGF Funds during the period from August 1, 2000 to June 30, 2003.
Please click here to view a list of the implicated funds.
(5) The AIC Class:
All persons in Canada, except Quebec, who purchased and/or redeemed and/or held or otherwise acquired shares or other ownership units of one or more of the AGF Funds during the period from
January 1, 1999 to September 30, 2003.
Please click here to view a list of the implicated funds.
Rochon Genova LLP is also investigating other mutual fund management companies whose funds the OSC found were subject to market timing activity, including:
• AIM Funds Management Inc.
• Clarington Funds Inc.
• Dynamic Mutual Funds
• Manulife Financial Corporation
• Guardian Group of Funds
• HSBC Asset Management (Canada) Limited
• Mackenzie Financial Corporation
• Industrial Alliance Fund Management Inc. /
BLC-Edmond de Rothschild Asset Management Inc.
• RBC Asset Management Inc.
• Scotia Securities Inc.
• MD Management Ltd.
• Talvest Fund Management
If you held units in funds managed by any of these companies or by the defendants, or if you have any questions about the lawsuit, please contact
Rochon Genova LLP through the Contact
Us page of this website, or by calling (416) 363-1867 (local) or (866) 881-2292 (toll-free).
If you would like to know more about how a class action works, please
click here.
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