SSgA to Eliminate Redemption Fees

State Street Global Advisors Inc. (SSgA) has filed papers with the Securities and Exchange Commission (SEC) signaling its intention to halt redemption fees from its international and high-yield funds beginning in 2007. reported that Jim Ross, co-head of the adviser services unit at SSgA, said the decision was based on the company’s assessment of the effectiveness of redemption fees and other methods to prevent market-timing. SSgA decided fair-valuation tools are sufficient to eliminate the need to charge redemption fees, he said, according to

Putnam Investments of Boston and its fund boards reached a similar conclusion, according to the news report, and on October 2 the company reduced to 1%, from 2%, the redemption fees it charges investors in many of its funds. Unlike SSgA, though, Putnam did not eliminate redemption fees entirely and decided the fees in conjunction with improved fair-market values and internal controls can help curb market-timing, said Gordon Forrester, a managing director at Putnam, according to the news report.

Paul Kraft, a Boston-based partner with the asset management practice at Deloitte & Touche LLP, says more fund companies are implementing fair-valuation procedures, and those that already have them are revising them to make them stronger. Revisions can be attributed to the lowering of “triggers” of fair-valuation procedures, he said.

The revisions could mean more accurate prices, which will in turn lessen the need for redemption fees.