SHORT INTERESTS: TIPS, TRENDS, OBSERVATIONS

Honest Quaker

Chalk one up for index funds. Quaker Small Cap Value manager Ted Aronson surprised an adviser audience with the news that he invests all his non-retirement taxable assets in index funds — eight Vanguard index funds. “It was just a clear-cut case,” says Mr. Aronson, whose Philadelphia firm, Aronson + Partners, runs active portfolios.

Index funds are generally regarded as more tax-efficient owing to their low turnover. Mr. Aronson, who spoke on a panel at the annual Waterhouse Securities Inc. conference in San Diego late last month, quickly added that his family’s retirement assets are invested in his own funds.

What do clients expect?

Investors sometimes expect mutually exclusive advice from their advisers, a study by the Certified Financial Planner Board of Standards shows.

Of 1,016 adults surveyed nationwide Feb. 12-14, 69% said they expected a financial planner to find out their personal and financial goals and needs before providing specific recommendations.

Despite that, more than a third said they’d expect financial planners to promise to put them into the best-performing stocks and mutual funds even before making specific recommendations. Then a surprising 17% expect to be assured that their financial planner can make them rich. The survey, conducted by Bruskin Goldring Research in Edison, N.J., comes on the heels of the Denver group’s Jan. 1 introduction of practice standards.

Mutual admiration society

Charlie Mayer, chief investment officer of Invesco Funds Group in Denver, is the first to admit it’s “a pretty competitive town,” but that hasn’t stopped him from loading up on shares in Kansas City Southern Industries Inc., which owns the Janus and Berger funds. It’s the top holding in his flagship $5 billion-asset Industrial Income fund (soon to be rechristened Invesco Equity Income Fund).

“Who’s closer to Janus than me? I’m right across the street,” he says. “If I can make money off my competitors by investing in them, I’ll do it.”

Mr. Mayer, 50, says Kansas City Southern is mostly followed by railroad analysts, yet 92% of its earnings come from Janus, Berger and DST Systems, which handles back-office services.

“Money management companies really have kind of lagged the market,” he says, noting Invesco parent Amvescap’s stock went from $55 to $20 during the October flop before settling at around $48. “Yet assets have grown substantially.”

[More: Shares of Invesco fall after $400M stock offering]

Hard to swallow

Shaman Pharmaceuticals Inc., which committed to give AIDS-related charities a 3.6% royalty on the first five years of sales of its initial product, a drug to treat diarrhea associated with the disease, has left the business. Instead, it will focus on herbal remedies from tropical plants.

The decision came after the Food and Drug Administration said an application for its drug, SP-303/Provir, would face a “significant delay.” Herbal remedies don’t require the FDA’s blessing.

Shaman’s stock, which traded as high as $4.50 in the past 12 months, skidded to 26 cents a share and was delisted from the Nasdaq stock market. Among those affected: Microsoft billionaire Paul Allen, whose Vulcan Venture fund based in Seattle committed half the $7.2 million raised by the company in a private offering (Investment-News, Jan. 11).

[More: Vanguard expert offers tips on hardship withdrawals]