Jaffe: Bogle, BYSIS, ProFunds, SEC and Investors All Get Coal

Dow Jones Columnist Chuck Jaffe added Jack Bogle, BYSIS clients, ProFunds, the SEC and even investors in his 11^th  annual “Lump of Coal” list.

First up: the Securities and Exchange Commission.  “Fund companies actually were lining up to pay fines, and yet the agency hasn’t  gotten through all of the cases,” Jaffe worte. Those fines that have been collected have yielded few, if any, valuable “investor education tools,” he said.

ProFunds, for its part, has launched 66 exchange-traded funds (ETFs) no one needs, he said.  Other offenders of esoteric, high-leverage ETFs include Rockville, Md.-based Rydex, PowerShares, in New York and Claymore of Conshocken, Penn. “But no other firm did more to solidify the wrong public image of ETFs, the one which says they’re’ only meant for traders and pros,” Jaffe jibed. 

BYSIS is facing a public image problem of its own, and Jaffe criticizes the directors of the boards of the 27 fund companies that accepted kickbacks from the Roseland, N.J.-based back-office services, to keep their business.  “That money came directly from shareholders, in the form of heightened expense ratios,” Jaffe wrote.

But investors themselves also appear on Jaffe’s not-so-nice list. “Now that performance has been good, investors don’t seem to care what managers are doing wrong,” he wrote, referring to the reaction to BISYS.  “That’s precisely what the bad guys in the business are counting on.”

Jaffe also had sharp works for Jack Bogle, Vanguard founder and shareholder advocate.  “Bogle has made no secret of the fact he dislikes ETFs, speaking out against them seemingly at every opportunity,” Jaffe wrote. “These days, that’s the wrong message,” he wrote. Bogle’s ire swirls around leveraged ETF products, Jaffe noted. “Bogle needs to stop fighting progress and focus instead on helping consumers identify the investments, whether a fund or an ETF, that best allow them to follow the investment strategy he has championed for decades,” Jaffe wrote.