<body.content> <block> <p>NEW YORK, Nov. 30 /PRNewswire/ — The case of fund manager Gary Pilgrim is perhaps the most startling example of alleged abuse of investors to come out ofthe mutual-fund scandal, reports Wall Street Editor Allan Sloan in the December 8 issue of Newsweek (on newsstands Monday, December 1). Pilgrim’s PBHG Growth Fund dropped 65 percent from March of2000 through November of 2001, the period covered in suits filed by New York Attorney General Eliot Spitzer and the Securities and Exchange Commission. That’s a loss of 45 percent a year. But duringthat same period, according to Newsweek’s calculations based on information in the suits, Pilgrim made 49 percent a year on his stake in PBHG Growth. His profit: $3.9 million.</p><p>(Photo: <a>http://www.newscom.com/cgi-bin/prnh/20031130/NYSU005</a> )</p> <p>Pilgrim owned his stake by investing through an outsider: a hedge fund called AppalachianTrail. Appalachian profited by betting against Growth. Newsweek has learned that Appalachian, which regulators say bought and sold Growth a total of 240 times during this period, made most or all ofits profit by betting that the value of the fund’s stock portfolio would fall. Regular investors, by contrast, profited only if Growth’s investments increased in value.</p> <p>Pilgrim, asthe fund’s manager, had a legal and moral fiduciary obligation to look after his investors’ money and place their interests ahead of his own. But instead, he seems to have profited from hisinvestors’ misfortune. Pilgrim’s lawyer had no comment on the regulators’ suits or on Newsweek’s analysis. His defense, people involved in the case say, will apparently be that he was a passiveinvestor in Appalachian and didn’t help it bet against Growth.</p> <p>The Pilgrim story is part of the almost-daily revelations about mutual-fund misdeeds that are driving home a messagewe can no longer ignore: even when we hire professional managers to look after our money and give us a diversified portfolio, we can get eaten alive. “Mutual funds have become the bank of necessityfor middle Americans,” says Massachusetts Secretary of State William Galvin. “But what they’re discovering is that the mutual funds have screwed them.”</p> <p>(Read Newsweek’s newsreleases at</p> <p><a>http://www.newsweek.msnbc.com/</a>. Click “Pressroom.”) </p> <media media-type=”image”>
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<media-caption class=”picture”>Photo: NewsCom: <a>http://www.newscom.com/cgi-bin/prnh/20031130/NYSU005</a><br/>AP PhotoExpress Network: PRN1<br/>PRN Photo Desk, <virtloc idsrc=”dummy” value=”dummy”>photodesk@prnewswire.com</virtloc>
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