PEOPLE: CAROLYN MERTENS — NEW CHIEF THINKS TIMING IS RIGHT FOR MARKET TIMERS TO MAKE NICE

Carolyn Mertens has her work cut out for her. As the newly elected president of the Society of Asset Allocators and Fund Timers Inc., she plans to spend much of her one-year tenure making peace between market timers and mutual fund managers. The trade group has 150 members and is based in Denver.

“The biggest challenge is going to be getting (the mutual fund companies) to look at the money managers or investment advisers individually — convincing them that just because XYZ-firm did a fast trade doesn’t mean that the next firm will,” says Ms. Mertens. She is a senior vice president at R.M. Leary & Co. Inc., a Denver outfit with $50 million in assets under management.

speaks quickly– or else

She had better be a fast talker. Timers, investors who quickly move in and out of the stock market, are the bane of most mutual fund companies because their strategy can drive up stocks and disrupt investment plans.

Timers can also hurt performance returns when they liquidate their mutual fund positions, because in order to raise the cash to redeem the shares a money manager may have to sell stocks at an inopportune time.

To discourage timers, many mutual fund companies have begun to add loads or charges. Fidelity Investments, for example, charges a 1.5% fee for redemptions made within 90 days of purchase on a number of funds.

“Some of these market timers can be pretty influential,” says John Wilson, manager of Boston-based State Street Research and Management Co.’s $2.1 billion Investment Trust fund. “Still, there is probably an unscrupulous 3% that gives the other 97% of the business a headache.”

Ms. Mertens hopes to put some distance between her organization and that troublesome 3%. One of her first mandates as president of the association is to strike the words “market timer” from its bylaws.

That’s because most of the association’s members are, in fact, asset allocators — meaning they keep only a portion of their total assets in equities.

True market timers keep 100% of their assets in the stock market on the hunch that the market will go up or 100% in Treasury bills or money market accounts on the hunch that it will go down.

“When we first started out, 100% of our members were classified as ‘market timers,’ ” she says. “Right now, our membership is probably about 70% asset allocators.”

Members will vote on whether to change the bylaws in October at the association’s annual meeting in Orlando, Fla.

Meanwhile, Ms. Mertens is also working to organize a first-time meeting between the association and executives from the mutual fund industry. While a time and date have not been set for that meeting, she expects it will take place this fall.

“We would like to be known as an organization that does have good relationships with the funds,” she says.

She is also mulling over whether to launch a media campaign aimed at educating consumers about market timing. The campaign may even include a budget for limited television advertising, she says.

quick draw McGraw?

“We’re not out there with quick guns just pulling the trigger every time the market blinks,” she says. “But the perception is that that’s exactly what we do.”

And that perception is likely to be around a while.

Lance Hollingsworth, a vice president at Memphis-based Summit Asset Management, is skeptical of the trade group’s initiative toward peace. “I don’t know if there is any happy medium between the two sides,” he says.