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Gabelli to Fight Timing Suit

Four years ago, the board of directors of the Gabelli Funds conducted a thorough investigation into charges by the Securities and Exchange Commission that market timing had occurred in its funds, according to a release the invesment manager issued last week on behalf former principal Marc Gabelli, who is now under investigation.

Gabelli maintains his innocence of the charges, recently re-issued against him (see "Marc Gabelli Hit With $16 Million Timing Fine," MME 4/25/08).

"The trading at issue, by a single investment advisor, was not prohibited by the fund's prospectus, and was stopped with Mr. Gabelli's approval 5-1/2 years ago, in August 2002, over a year before the SEC began investigating the mutual fund marketplace for market timing issues," according to the firm.

"Mr. Gabelli never violated any rule or regulation and always managed the mutual funds under his direction lawfully and in the best interests of shareholders."

Gabelli himself issued the statement: "I intend to clear my name by responding vigorously to this allegation in court."

Asset Management M&A On a $50 Billion 2008 Roll

Including lift-outs and partial deals, investment firms have shelled out more than $50 billion so far this year to acquire mutual fund companies and other asset management firms, totaling a record 241 deals this year, according to Jefferies Putnam Lovell, a division of Jefferies.

Sales of alternative investment firms account for a majority, 40%, of the deals in the global investment management business thus far in 2008, according to the investment banking firm, which specializes in asset management and financial IT transactions.

"We expect record demand for alternative asset managers to continue throughout 2008, motivated by buyers' search for absolute returns and innovative products in challenging capital markets," said Aaron H. Dorr, managing director of Putnam Lovell and based in New York.

Indeed, the firms chasing down the deals are predominantly cash-rich insurance giants, banks looking to infuse capital into their coffers by shedding their asset management units, or private equity firms attracted by mutual fund companies' large upfront sales loads and annual fees. Some of the funds offered by Phoenix Investment Partners, for example, carry a 5.75% sales load and annual fees of 1.4%.

The asset management industry is also known for high margins ranging in the 17% to 35% range, particularly hedge funds.

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