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IRS may revoke previous ruling on commodity mutual funds
For me, this is a perfect example of the industry's duplicity. In the mid 90s, Fidelity proposed offering insurance on MMFs, because it would give them a marketing advantage, and hey, there wasn't a big risk anyway. Now, they're still saying there's no big risk, but you don't see them suggesting that they could provide insurance. Rather, they're actively fighting the idea. (One of the SEC's suggestions was to increase cash reserves - a form of insurance; it is the alternative proposal, letting NAV float, that's gotten more press. See also Hank's second link).
Reply to @msf: I try not to step on Ted's (or anyone else's) posts. Thanks. - I changed thread to the IRS commodity funds issue. Since you had already commented on the money funds issue, left those links intact as well. Regards
I personally think that those Cayman corporations will cause problems and will be the base of some scandal one day. I agree they are a sham designed to bypass restrictions.
Carl Levin seems to be on a personal crusade to kill mutual funds investing in commodities. I am not sure about his motives.. leaving commodities investments to 'sophisticated investors and actual commodity producers'? stop increase in commodities' prices? (provided he believes their increase is caused by proliferation of retail access and not by supply/demand dynamics and inflation expectation.) All of commodity or 'real return' mutual funds in existence today function due to the PLRs issued by the IRS. If the PLRs are revoked, all these funds will immediately become corporations and subject to a 35% corporate tax rate. While the IRS clearly screwed up here in issuing the PLRs in the first place, they have to move carefully, because in the end they will damage the individual investor more than they will damage Pimco's of the world.
Comments
For me, this is a perfect example of the industry's duplicity. In the mid 90s, Fidelity proposed offering insurance on MMFs, because it would give them a marketing advantage, and hey, there wasn't a big risk anyway. Now, they're still saying there's no big risk, but you don't see them suggesting that they could provide insurance. Rather, they're actively fighting the idea. (One of the SEC's suggestions was to increase cash reserves - a form of insurance; it is the alternative proposal, letting NAV float, that's gotten more press. See also Hank's second link).
http://www.nytimes.com/1996/08/16/business/fidelity-seeks-to-insure-its-money-market-funds.html?pagewanted=print&src=pm
Regards