Your fund manager may not be clueing you

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If you are familiar with mutual fund rules, you probably never would have thought that a waiting game could happen. Mutual funds are required by law to examine every stock and bond they have in a fund, and report to the public exactly what each is worth at the end of each day. This process is called "marking to market," or reflecting the exact value of the investments that make up your mutual fund portfolio at a point in time.
The rule is supposed to give you clarity – to allow you to see what you own in a fund and if you have made or lost money on any single day, week or month. It bans wishful thinking.
But the process is a lot more complicated with subprime mortgage securities than with your typical Treasury bond or a stock. That’s because no one knows exactly what the mortgage securities – or collateralized mortgage obligation (CDOs) are worth. One reason: The Wall Street concoctions are relatively new, and they have never been tested during a time when so many lenders faked mortgage applications and tossed mortgages freely to people who clearly could not afford them. The values of the securities depend on how many people default on mortgage payments. So under the circumstances, investors aren’t sure if the depressed securities will improve a little once the media attention dies down, or weaken a lot as more financially-stressed homeowners give up on making payments. In other words, just what are these things actually worth?
Also, the mortgage related securities don’t trade on an exchange like a stock does. So when fund managers have CDOs in portfolios and try to "mark them to market," they guess what they are worth. They look at other investors that have been buying or selling similar securities lately. Each offers, or settles, on a different price. So there is no clarity. And sometimes there are few transactions to observe.
In a situation like today’s – with investors fretting about subprime mortgages – many investors presumably are sitting tight and not selling. So the ugly prices they might have had to accept if they sold today, don’t actually show up.
This is not illegal, of considered deceptive, if the fund has a solid rationale for the price that is used at the end of the day when the security is "marked to market," according to Robert A. Robertson, a Newport Beach securities lawyer and leader in the American Bar Association.
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http://newsblogs.chicagotribune.com/marksjarvis_on_money/2007/07/subprime-in-mut.html