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U.S.. Bancorp Fund Services and Stephens Become XBRL Pioneers

Fund administrator is coaxing mutual fund clients such as Stephens to file XBRL reports to the SEC, to provide better transparency to worried investors.

Yesterday, U.S. Bancorp Fund Services and one of its clients, Stephens Inc., filed their first electronic Schedule of Investments (a list of investments a mutual fund has made) to the SEC.

Technically, mutual funds are not required to file their SOIs digitally — so far, the SEC has said only that they will have to file risk and return summary data in XBRL format to by 2011 — but at least 20 mutual funds are active in the SEC's voluntary XBRL reporting program. Why jump the gun to meet a requirement that has yet to exist?

"We thought with the volatility of market right now, a lot of our clients would want to get information out to investors," said Eric Falkeis, chief financial officer and senior vice president of technology, U.S. Bancorp Fund Services, in an interview yesterday. "We wanted a voluntary filing solution that was transparent to the shareholders and also accurate."

The SEC has set up a site for investors who want to view mutual fund risk and return data from voluntary participants in this program, such as Stephens. Here investors can peruse individual performance reports and compare data for up to three funds side by side.

"Investors see the same information that's been provided through third parties, but they'll see it more quickly and more accurately, because in the past a lot of the third parties have manually entered this information," Falkeis explains. "The information is also easier for them to get at. The information is tagged so that people can search for a specific piece of information."

Yesterday's filing was the May 31, 2009 Schedule of Investments for the Stephens Small Cap Growth Fund and the Stephens Mid Cap Growth Fund, managed by Stephens Investment Management Group. In a statement, Stephens' chief operating officer Michael Nolte said, "We embrace the emerging XBRL technology that we believe will ultimately provide investors with the information they need to make better informed decisions. We are eager to take a leadership role in the SEC's initiative to bring a greater level of transparency and accuracy to investors in the marketplace."

The filing went smoothly, Falkeis reports. "It went well from our side, we used a single template to create the SOIs and tags and apply them across both funds," he says. The SEC sent back a message saying the file had been received, but as yet has not returned any comments on it. Falkeis says U.S. Bancorp Fund Services is encouraging others among its 300 mutual fund clients to take this route.

There's no immediate benefit to U.S. Bancorp Fund Services to joining this voluntary filing program, Falkeis says. "It's good for our clients to do the voluntary filing, to reach out to their shareholders and say they're doing this," he says. However, when and if the SEC mandates mutual funds' Schedules of Investment to be filed electronically, U.S. Bancorp Fund Services will already have at least some of its mutual fund clients tagging content electronically, which will help the firm avoid having to pay fees to financial printers for the tagged data. Using an add-on module to the Unity fund administration software it uses from Confluence to automate performance, benchmark, holdings and financial statement reporting on behalf of their clients, the firm will use one template to obtain and aggregate XBRL data from all participating customers.

The SEC is the party most likely to benefit from XBRL reporting. Not only will it be easier for the regulator to collect and aggregate information, they will be able to use the data more easily to run comparisons across funds, instruments and firms and "work with that data with real agility," notes Kirk Botula, executive vice president and chief operating officer of Confluence. "If they can do that, that in turn will be available to investors and the public as well. Right now, if you look at Edgar data, it's all packed in a single, big ASCII file." Hypothetically, the SEC could set up rules that perform automated tolerance checks across the data, he suggests, and thus automate some oversight.

"Over time, we fully expect XBRL to be the standard for information delivery across all aspects of fund reporting, allowing for more consistent information disclosure, more frequent updates, greater comparability across funds, and lower information delivery costs," says Botula.

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