The Unsung Hero Of Fund Investors

Who is Mercer Bullard? And just what does Mercer Bullard want? Those aren't questions I ever dreamed would occur to me--or interest you. But they drove me the other day to hear him out over coffee and orange juice. A couple hours of intense, nonstop talk later, I had a crushing headache and two convictions: First, few investors will ever know the name Mercer Bullard. Second, if you own a mutual fund, you will likely end up in his debt.

Bullard is the founder of something called Fund Democracy. Right now, that amounts to a home office, a Web site, and some startling ambitions. "I'd like Fund Democracy to be the leading advocate for mutual fund shareholders--an effective advocate for change," Bullard said. "And I want to make a living doing it."

Since leaving his legal post in the Securities & Exchange Commission's fund-regulation division last January to start Fund Democracy, Bullard has made notable headway toward that first goal. Most remarkably, he intervened last May in a case involving Barclays Global Investors, which manages $833 billion in assets, to enhance disclosure of risks in "iShares," a group of exchange-traded funds BGI rolled out with much fanfare. Now, he's helping speed along a pending SEC rule to make funds invest at least 80% of assets in the way their names imply, so a municipal bond fund would be at least 80% in munis. "He knows how to push the right buttons," said Barry Barbash, a Shearman & Sterling partner. Barbash, who hired Bullard in 1996, when he ran the SEC's fund division, added: "He's a tenacious, pig-headed person--and that's a compliment."

Not everyone who has encountered Bullard admires him as much, although they're careful to stay anonymous. His criticism of the SEC has angered some former colleagues, and the Investment Company Institute, an industry group Bullard opposes on many issues, declined to discuss him. A fund industry attorney explained why: "I don't think the ICI is prepared for somebody like him. They tend to view the SEC as their private jurisdiction. They're of the view right now that he's just a speck."

STRATEGY. Bullard made his way to the SEC after touching the right academic bases, clerking for a U.S. Appeals Court judge, and spending five years at a big-name Washington law firm. He also worked four years at a Pentagon consultant, studying options in limited nuclear warfare and picking up strategic smarts.

Hearing all of this, though, I couldn't help wondering who, after a long bull market, craves such a champion? But Bullard rightly sees funds as they are and knows how much better they might be. The law demands funds be run for the benefit of investors, not fund companies. His prime target is changing the law to make fund directors bargain harder with fund managers over fees. Directors' roles, plus such issues as how often funds should disclose their holdings, came up in October, when Fund Democracy sponsored a symposium that put Paul Roye, the SEC's current top fund regulator, right on the hot seat. Roye said later that he was happy to have the chance to hear from the investor advocates.

For all the hell Bullard is raising, he has made only scant progress toward his second ambition--making a profit from Fund Democracy. He aims to create a publishing operation and data base on fund governance that financial advisers will find valuable. He's trying to raise capital from the likes of investment researcher Morningstar. "He wants to capitalize on [having made] a name for his organization," Morningstar CEO Don Phillips told me. Yet, as Phillips said Morningstar has learned, "advocacy doesn't necessarily translate into revenues. It's something you do because it's right."

That's why the fund world's Old Guard may be happy to hope they can wait Bullard out. My bet: Mercer Bullard will keep causing them headaches far more wicked than the crusher he put on me.

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