Noting that Gabelli Asset Management is just one of a growing legion of mutual fund companies that have been subpoenaed by the New York attorney general’s office, as well as actions the firm has taken to prevent market timing, Merrill Lynch issued a favorable report on the firm Friday.

Citing a notice that Gabelli had posted on its Web site, Merrill analyst Cyntha Mayer maintained a "buy" on the firm. Gabelli has tried to prevent market timing for more than five years, according to the notice. It has monitored trading frequency and cash flows, particularly trades of $100,000 or more. In addition, it has employed fair value pricing in its gold, global and international funds to prevent time-zone arbitrage.

"Overall, the disclosure suggests Gabelli never made agreements with market timers, and, in fact, has worked hard to eliminate them from its funds," Mayer wrote in her note. "We also believe the firm’s own hedge funds do not use market timing as a technique."

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.