Nationwide seeks OK to merge two short-duration investment-grade funds

By Toni Weeks

San Luis Obispo, Calif., Aug. 14 – The board of trustees of Nationwide Mutual Funds is seeking shareholder approval for the reorganization of the Nationwide Enhanced Income Fund into the Nationwide HighMark Short Term Bond Fund, according to a 497 filing with the Securities and Exchange Commission.

The board said that because the income fund’s short portfolio duration of six months to one year, it has been difficult for the fund to generate other than negligible yields. For this reason, the funds’ investment adviser, King of Prussia, Pa.-based Nationwide Fund Advisors, has redeemed all of the shares of the fund and reinvested the proceeds into the HighMark fund.

Following this redemption, only about $14 million of assets remain in the income fund, not enough to market the fund successfully, the adviser said. For this reason, merging the target fund into the acquiring fund will provide shareholders with a fund that invests in investment-grade bonds with an average portfolio duration that is long enough to give higher yields. The HighMark fund maintains a portfolio duration of one to three years and also invests up to 10% of its assets in high-yield bonds.

The proposal is part of an effort by the adviser to eliminate product redundancies and to offer a single short-duration investment-grade product that operates more efficiently and provides shareholders with the potential for lower operating expenses due to economies of scale.

A meeting to vote on the proposal will be held on Sept. 25.

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