Most fund firms will be prepared for 2000, survey shows

Mutual fund companies, aware of the severe consequences offailure, are on the right path for solving Year 2000 computerglitches. But this doesn't mean the industry is out of the woodsyet.

That seems to be the emerging consensus from mutual fund sourcesabout the industry's ability to handle the date change at the startof the new millennium.

"We are fairly confident that the vast majority of the mutualfund industry will meet the goal of (Year 2000) compliance before thenext century," wrote Susan Belden, editor of the No-Load FundAnalyst, in the newsletter's August issue.

At the root of the Year 2000 problem is the old practice incomputing circles of denoting years using just two digits. That hascreated the potential for some computer functions to grind to a halton Jan. 1, 2000, if they read the double zeros not as 2000 butanother 1900.

With all of the account record-keeping that fund companies doby computer - to say nothing of highly quantitative investmentresearch at certain firms - the industry has much to lose if systemscrash.

The cost of failure is that "you'll be out of business," saidBrian Mattes, a spokesman for the Vanguard Group in Valley Forge,Pa.

Even well-prepared fund groups could suffer from weak links incomputer chains that connect them to clients and suppliers.

Vanguard already has installed software in its main computersthat will enable it to handle the Year 2000 rollover. Now the firmis working to identify and solve snags with the companies with whichit shares information. The list includes "thousands" of employersfor whom Vanguard provides 401(k) investment services, said Mattes.

The No-Load Fund Analyst, which queried Vanguard and more thana dozen other fund companies, isn't predicting serious disruptionsfor the industry in general.

"The visibility of the problem is so high and the consequencesof failure so dire that there is a huge incentive to get thisright," wrote Belden.

The "No-Load Fund Analyst" posed questions about Year 2000readiness to the three largest discount fund supermarkets - CharlesSchwab, Fidelity Investments and Jack White - and was assured by allthree firms that they expect to be ready by the end of this year.The newsletter received similar responses from nearly 20 investmentcompanies whose mutual funds it recommends, including Vanguard.

But the responses indicated that readiness varies. Newer fundgroups that rely mostly on up-to-date personal computers or outsourcemuch of their operations to reliable partners are in better shape.

Larger, older firms that rely on mainframe computers and havemore complex ties to customers and suppliers might have a toughertime, said the newsletter. It included Schwab, Fidelity andVanguard in this camp. Yet the newsletter noted that large firmsalso have more resources to throw at the problem. Schwab, Fidelityand Vanguard each have more than 100 people working on the Year 2000challenge.

Vanguard Chairman and Chief Executive Officer John Brennanalready has ordered the company's senior executives to be at theirdesks on Jan. 2, a Saturday.

"We won't be having managers toasting the new millennium onboats somewhere in the Pacific," Mattes said.

Belden sees little need for fund shareholders to cash in theirchips despite worries among some analysts that Year 2000 snafuscould spark a global recession.

"For now, we think the probability of a disastrous outcome istoo small to warrant a significant change in your long-terminvestment strategy," she wrote.

Russ Wiles is a financial writer and columnist for the ArizonaRepublic and author of How Mutual Funds Work (Prentice Hall, $15.95).Direct questions and comments to Russ Wiles, Business News, theArizona Republic, P.O. Box 1950, Phoenix 85001.

Most fund firms will be prepared for 2000, survey shows

Mutual fund companies, aware of the severe consequences offailure, are on the right path for solving Year 2000 computerglitches. But this doesn't mean the industry is out of the woodsyet.

That seems to be the emerging consensus from mutual fund sourcesabout the industry's ability to handle the date change at the startof the new millennium.

"We are fairly confident that the vast majority of the mutualfund industry will meet the goal of (Year 2000) compliance before thenext century," wrote Susan Belden, editor of the No-Load FundAnalyst, in the newsletter's August issue.

At the root of the Year 2000 problem is the old practice incomputing circles of …