By Jason Zweig | 12:33 pm ET Jan. 23, 2012
This weekend’s Intelligent Investor column looked at The Money Navigator, an investing newsletter jointly owned by personal-finance guru Suze Orman and money manager Mark Grimaldi of Wappingers Falls, N.Y. It raised questions about the accuracy of some of the information on Grimaldi’s investment performance. In a statement to the Journal, Orman called Grimaldi “my trusted partner in The Money Navigator” and said he is “ethical, honest and achieves stellar results that consistently outperform the market.”
In addition to the points raised in the column, the December issue of the Money Navigator also said Grimaldi is “a 5-star Morningstar-rated fund manager.”
According to Alexa Auerbach, a spokeswoman for Morningstar, the investment-research firm rates funds but not managers.
Grimaldi was a co-manager of what was then called the Aviemore Fund for 13 months in 2008 and 2009. For the last three months of his tenure, the fund was rated five stars by Morningstar; the rest of his time there, it was rated three or four stars. Furthermore, Morningstar’s ratings are based on the average of risk-adjusted returns over multiple years, she says, so a manager with a 13-month tenure can’t be credited with driving up a fund’s long-term rating.
Under Morningstar’s guidelines, any mention of a star rating in marketing materials, says Auerbach, must be based on performance through the end of the latest month, not from a period that ended years earlier. “How this was portrayed is definitely not consistent with our policies,” she says.
Barry Barbash, a former director of the division of investment management at the Securities and Exchange Commission and now a partner at Willkie Farr & Gallagher, declined to comment on specific questions about the newsletter. But he said, “Has the SEC ever brought cases with respect to statements in newsletters that might not give a full picture to people seeking financial advice? Yes, absolutely, because the SEC believes that incomplete statements can rise to the level of fraud.”
Orman’s spokeswoman declined to address specific questions about how Grimaldi markets his performance in the newsletter.
“I was never aware of that [Morningstar policy] until today,” Grimaldi said last week, “and I will take it off the newsletter.”
Source: WSJ.com, Total Return blog