That strategy prospered in the 1980s all the way up until there was a crackdown on the practice. It worked for Gil Blake and Norm Zadeh. Worked so well for Norm that he was able to burn through $46 million in his ill-fated attempt to create a nudie magazine empire.
Yes, Blake and Zadeh... two of the names.
When you say "crackdown on the practice", has more than one meaning. There was nothing inherently "wrong" about mutual fund timing. In fact, there was much good and common sense behind it for us "timers" and our clients.
1. Originally the mutual fund managers were happy to have our business (MF timers). We were small in number and assets managed then... but as we got to be more numerous fund managers decided we were more trouble than we were worth and began limiting trading to the point we could hardly be effective and had to take more "buy and hold"-type risk. (Mutual fund timing then was no different than ETF trading today.... except that MFs, with a couple of exceptions, are priced only at the close instead of real-time.)
2. The SEC hassled Zadeh on the reporting of results in
Barrons and
IBD. The big issue was that not all contestants had "adviser fees" deducted from their contest account results. (That made only a 1-2% difference at most, but was enough for the SEC. The year I won the $500,000 division of Mutual Funds, I did have adviser fees deducted... my results were "net of fees".) If I recall, 1999 was the last year of the US Investing Championships and MMVR. Due to SEC hassles, Zadeh stopped the contest in the middle of the year and returned our entry fees. (Too bad for me... I likely would have won the MMVR with 144% return... my best year.)
3. Some of the market timers were getting unfair and illegal "past posting" treatment from the mutual funds. (Never applied to me, however.) The SEC looked into that... stopped the practice, levied fines and charged violators.
Of course, with real-time fills.... had ETFs come along before mutual funds, there would likely not be a mutual fund industry.
How important was the US Investing Championships? Well, it gave us "no-names" the chance to make a bit of a name for ourselves. There was no prize money. The prize was notoriety. Besides winning the $500K MF division in 1994, I'd also finished 2nd, and 9th, in prior years. The management fees I generated from new accounts over the next couple of years are estimated to have been $2 Million.... which of course was the entire point of the contest.
FWIW....
