Heritage Asset Management

Our Policy

The bedrock principle of the mutual fund industry is that the interests of investors always come first. The recent news that certain individuals put their own interests above the financial wellbeing of fund shareholders shocked and dismayed us at Heritage, as I’m sure it did you. Actions that range from illegal late trading to allowing questionable market timing, even if limited to a small number of individuals, can destroy investor confidence and jeopardize a record of good behavior and investor trust established over the past 70 years.

We would like you to know that no officer or director of the Heritage Family of Funds or its investment adviser is engaged in market timing activities in shares of our funds. In fact, while we can’t guarantee that we will always be successful in identifying those attempting to “time” our funds, we do have a policy of discouraging timers, and work aggressively to enforce it. Furthermore, to the best of our knowledge and belief, no Heritage fund portfolio manager has engaged in any trading or timing practice detrimental to our shareholders.

We have conducted an extensive internal review of our company’s activities to reassure ourselves and industry regulators that we are in compliance with the mutual fund industry’s extensive regulatory structure regarding fund trading activities. We are now using the information gathered during this review to reinforce our existing policies and further strengthen our practices.

We share your concern for the serious breaches of fiduciary responsibility of a small group of individuals in the mutual fund industry, and want to assure you that such wrongdoing is not part of Heritage’s business practices. Your trust and confidence are of utmost importance to us, and we will continue to do everything in our power to guard your financial interests.

You may be interested in knowing…

Heritage does not condone or knowingly allow late trading in Heritage Funds and does not enter into agreements to let anyone engage in these activities. Late trading is against the law and is not permitted at Heritage. Although we know of no instances in which investors were allowed to engage in “late trading” in our funds, we are asking the brokerage firms and retirement plans that sell our funds to confirm their compliance with our 4:00 pm trading deadline.
Heritage does not knowingly allow market timing in our funds. Many of us at Heritage are long-term investors ourselves, so we realize the negative impact that market timing can have on a mutual fund portfolio and its shareholders. We have procedures in place that are designed to detect and discourage market timing activity, and work aggressively to stop those engaged in it. That said, when fund shares are sold through a financial intermediary, Heritage sometimes doesn’t have information on each shareholder’s identity. This makes it difficult to detect all market timing activity, but we do use a variety of detection methods that we have found to be successful. To further discourage market timers and make our funds unattractive to them, we are in the process of instituting a 2% redemption fee on fund shares held for a short time.
Heritage officers and trustees have not engaged in market timing in Heritage Funds. Heritage employees take their fiduciary responsibility to shareholders very seriously. They do not engage in market timing in our funds. To do so would be a violation of our belief that we should always put our shareholders’ interests ahead of our own.
Heritage has no agreements, formal or informal, to allow anyone to engage in market timing or make frequent trades in Heritage Funds. We certainly don’t engage in deals to let some investors trade at the expense of the other shareholders.
Heritage does not disclose fund portfolio holdings to arbitragers so they can trade against our funds and potentially affect our funds’ performance. At Heritage, access to fund portfolio holdings is limited to designated “access persons” within our company. These individuals have agreed to comply with our code of ethics, which requires them to keep confidential this and other important information. Although we provide this data to fund information services, such as Morningstar and Lipper (which are bound to confidentiality agreements to protect the information), we do not release this information to those who may use it to trade against our mutual funds.
Heritage’s senior staff and many other Heritage employees invest in Heritage Funds because we believe in the quality of our funds and the integrity of our colleagues. We understand the concerns and needs of our shareholders because we, too, are shareholders in our funds. Our financial futures are at stake along with yours, and this gives us yet another incentive to ensure that our funds are run in an honest and forthright manner worthy of investors’ trust.
Are mutual funds still a good investment? Since the first mutual fund was formed in 1924, mutual funds have served investors well, providing diversification, professional management, daily liquidity, and convenience to both large and small investors. These attributes have helped mutual funds become the investment of choice for more than 95 million shareholders. We believe that Heritage Funds are an excellent choice for your investment needs, and look forward to the opportunity to prove that Heritage Funds are worthy of your trust and confidence.

What is market timing?

Market timing is the practice of frequently buying and selling mutual fund shares with the intent of capitalizing on short-term price movements. While it is not illegal, if used in certain ways it can be disruptive to mutual fund portfolios. For this reason, many funds groups actively discourage the practice.

What is late trading?

Late trading is the illegal practice of buying or selling mutual fund shares after that day’s price has been determined. Under federal law all mutual funds must determine their net asset values (the per-share value of a mutual fund, which is calculated by subtracting the fund’s liabilities from its assets and dividing by the number of shares outstanding) at a set time of the day, which is usually 4:00 pm Eastern Time. Purchase or redemption orders received after 4:00 pm must be priced at the following day’s net asset value.