![OGE Logo and Address: U.S. Office of Government Ethics, 1201 New York Ave., NW, Suite 500, Washington, DC 20005-3917](https://webarchive.library.unt.edu/eot2008/20090510092624im_/http://www.usoge.gov/images/oge_ltr_hd.gif)
August 25, 2000
DO-00-030
MEMORANDUM
TO: Designated Agency Ethics Officials
FROM: F. Gary Davis
Acting Director
SUBJECT: Diversified and Sector Mutual Funds
The Office of Government Ethics (OGE) is issuing this
memorandum to provide guidance concerning the distinction between
diversified mutual funds and sector mutual funds. This distinction
is important for purposes of certain regulatory exemptions issued
by OGE under the authority of 18 U.S.C. § 208(b)(2). OGE has
received a number of requests from agency ethics officials for
advice in this area. Moreover, OGE recently concluded a survey of
agency experience and satisfaction with the regulatory exemptions,
which are codified in subpart B of 5 C.F.R. part 2640. It was
apparent from several of the responses that there was demand for
legal and practical guidance concerning the application of the
rules pertaining to diversified and sector mutual funds. The
advice contained in this memorandum is an effort to meet that
demand.
We note at the outset that this memorandum is intended only to
provide general guidance. It is impossible not to take notice of
the great number and variety of mutual funds on the market today.
Moreover, one can easily imagine that new variations will continue
to appear in the future, as fund managers respond to new investment
opportunities and other developments in the economy. OGE's attempt
in this memorandum to list representative types of sector and
diversified funds is necessarily tentative and incomplete.
Moreover, although OGE has been able to identify some common
features of certain types of funds, we also have encountered
occasional exceptions where, for example, the name of a fund would
not be a conclusive indicator of the fund's investment
concentration, for purposes of part 2640. Consequently, employees
and ethics officials always will need to consider the
characteristics of any given fund, including the nature and scope
of any "sector" in which the fund manager may purport to specialize.
We also want to make clear that nothing in this memorandum is
intended as an endorsement or disparagement of any particular
mutual fund or type of mutual fund. For this reason, the
discussion below generally omits specific fund names. Federal
employees remain free to invest as they choose, subject to any
prohibited financial interest restrictions, as described in
5 C.F.R. § 2635.403, and any disqualification obligations, as
described in 5 C.F.R. part 2640.
Exemptions under 18 U.S.C. § 208(b)(2)
Section 208(a) of Title 18, United States Code, prohibits an
employee from participating in any particular matter in which the
employee, or any other person specified in the statute, has a
financial interest. The prohibition has been interpreted as
applying to financial interests in official matters affecting the
underlying holdings of a mutual fund. See, e.g., OGE Informal
Advisory Letter 93 x 27. OGE has authority, however, to promulgate
regulations exempting certain types of financial interests from
this prohibition, where OGE determines that the interest is too
remote or inconsequential to affect the integrity of the services
of the Government employees to whom the exemption applies.
18 U.S.C. § 208(b)(2). Subpart B of part 2640 contains a number of
such exemptions, several of which are applicable to interests in
mutual funds.(1) The distinction between diversified and sector
mutual funds is particularly important for certain of these
exemptions.
A. Exemption for Diversified Mutual Funds
Subpart B contains a relatively broad exemption for any
disqualifying financial interest arising from the ownership of a
"diversified mutual fund." 5 C.F.R. § 2640.201(a). Provided that
the fund meets the definition of "diversified," set out in
section 2640.102(a), an employee may participate in any matter
affecting any of the underlying holdings of the mutual fund,
without regard to the magnitude of the employee's interest in the
fund. Such an expansive exemption was deemed justified because,
among other reasons, diversified funds hold "securities of issuers
who are engaged in a variety of businesses or industries." 60 Fed.
Reg. 47207, 47211 (September 11, 1995) (preamble to proposed rule).
Under such circumstances, it is likely that any Government action
affecting a given issuer would have only a diffuse or negligible
effect on the employee's financial interest in the overall fund.
The definition of diversified, obviously, is of critical
importance. Basically, as OGE stated in the preamble to the final
rule, "the exemption for diversified mutual funds applies to all
mutual funds except sector funds." 61 Fed. Reg. 66829, 66833
(December 18, 1996) (emphasis added). Recognizing that sector and
diversified might mean different things in different contexts, OGE
specifically described the kind of sector/diversified distinction
it had in mind: "Diversified means that the fund . . . does not
have a stated policy of concentrating its investments in any
industry, business, single country other than the United States, or
bonds of a single State within the United States . . . ." 5 C.F.R.
§ 2640.102(a).
If a fund does have a stated policy of concentrating its
investments in such a sector, OGE determined that the broad
exemption of section 2640.201(a) would not apply because of
heightened conflict of interest concerns. The possible effect of
some particular matters on certain sector funds is much more
focused and potentially substantial than would be the case with a
diversified fund. Indeed, it is quite common for a sector fund
prospectus to include some cautionary statement indicating the
greater risk of volatility resulting from concentration in areas
affected by Government regulation or spending. A Federal employee
could participate in an important rulemaking proceeding that
impacts many or all members of a given industry, thus affecting not
only a number of the underlying holdings of a relevant sector fund
but even the overall economic outlook for the sector in which the
fund specializes. Employees whose duties affect companies in a
discrete industry, business, etc., can have an appreciable conflict
of interest if they invest heavily in mutual funds that specialize
in that very sector.
B. Exemptions Applicable to Sector Mutual Funds
Nevertheless, OGE has promulgated certain other exemptions
that may apply to interests in sector funds. For those mutual
funds that do not meet the diversification standard, three
exemptions are especially important.(2)
First, section 2640.201(b) expressly applies to certain
interests in a sector mutual fund. For purposes of this exemption,
sector mutual fund is defined essentially by contrast with the
definition of diversified fund: "Sector mutual fund means a mutual
fund that concentrates its investments in an industry, business,
single country other than the United States, or bonds of a single
State within the United States." 5 C.F.R. § 2640.102(q). With
respect to such funds, section 2640.201(b) permits an employee to
participate in any particular matter where the disqualifying
interest arises solely from the "non-sector" holdings of the fund,
i.e., those incidental holdings that are outside of the fund's
express area of concentration. Thus, for example, an employee who
owns a telecommunications sector fund may participate in certain
energy matters, notwithstanding the fact that the fund may hold
securities of an affected energy company.
Second, because part 2640 currently treats sector funds as
"publicly traded securities," interests in such funds are covered
by the $5,000 de minimis exemption for particular matters involving
specific parties. 5 C.F.R. §§ 2640.102(p) & (r); 2640.202(a).
Thus, for example, an employee owning up to $5,000 in a financial
services sector fund may participate in the investigation of a bank
whose stock is held by the fund. The $5,000 limit would apply to
the aggregated value of all affected sector funds held by the
employee, the employee's spouse, and the employee's minor children.
5 C.F.R. § 2640.202(a)(2). Moreover, as with all of the de minimis
exemptions discussed here, it should be noted that the value limit
applies to the value of the person's interest in the fund as a
whole, not the pro rata value of any underlying holding of the
fund. See 61 Fed. Reg. at 66835-36.
Third, by the same token, the current de minimis exemption for
particular matters of general applicability covers interests in
sector mutual funds. 5 C.F.R. § 2640.202(b). An employee may
participate in a matter of general applicability where the
disqualifying interest arises from aggregated holdings of up to
$25,000 in any one affected sector fund and $50,000 in all affected
sector funds owned by the employee, the employee's spouse, and the
employee's minor children. Thus, for example, an employee who owns
$10,000 in one health sector fund and $20,000 in another health
sector fund may participate in a Medicare policy decision affecting
a certain class of healthcare providers, including issuers of
securities held by the two funds.
Finally, in connection with the subject of de minimis
interests, we note that OGE anticipates proposing a new de minimis
exemption in the near future specifically for sector funds. The
exemption, if adopted, would create a higher limit of $50,000 for
all particular matters. The $50,000 de minimis level would apply
to all interests in affected funds focused on the same sector,
whether owned by the employee, the employee's spouse, or the
employee's minor children. OGE believes that such an exemption
would be justified because interests in the underlying holdings of
a sector fund are more remote and inconsequential than direct
ownership by the employee of securities in an affected issuer.
Nevertheless, the basic distinction between diversified and sector
funds will remain, since OGE does not intend to propose an
unlimited exemption of the type that currently exists for
diversified funds.
Distinguishing Sector and Diversified Funds
As indicated above, the distinction between sector and
diversified funds turns on whether the fund has an express policy
of "concentrating its investments in any industry, business, single
country other than the United States, or bonds of a single State
within the United States." 5 C.F.R. § 2640.102(a) (emphasis
added). This standard differs somewhat from other rules that
establish the requisite degree of diversification for different
purposes, and any guidance herein should not be confused with
guidance pertaining to those other standards of diversification.
Compare 5 C.F.R. § 2634.1003(c)(1) (permitted rollover property for
certificates of divestiture); § 2634.310(c)(3)(excepted investment
funds); § 2634.404(b)(2)(diversified trusts). Unlike some of these
other standards, the focus of part 2640 is not whether a fund
concentrates on a broadly defined "economic," "geographic" or
"regional" sector, but rather a somewhat narrower "industry,"
"business," "single country" or "bonds of a single State."
A. Industry or Business Sector
Agencies occasionally have questions about whether a
particular fund really concentrates on an "industry" or "business,"
as opposed to a broader economic sector that includes a significant
variety of independent industries or businesses. Determining what
is an industry or business sector, therefore, is crucial for
purposes of the relevant exemptions. Moreover, such determinations
necessarily involve the exercise of some judgment, taking into
account the stated policies of the fund and any common features of
the companies in which it specializes.
OGE is aware of no universally accepted criterion for what
constitutes an "industry" or "business" that would be useful for
this purpose. Any conceivable classification of the economy by
industry groupings would involve numerous judgments about what
degree of similarity in operations or interests among firms would
be sufficient to place them within a single industry. One can
distinguish among companies on so many different levels, and with
such varying degrees of detail, that it is possible to describe a
virtually infinite number of classes and subclasses. For example,
the North American Industry Classification (NAIC) system, used by
the United States for a variety of statistical and other purposes,
now divides the economy into twenty broad "sectors," whereas the
Standard Industrial Classification (SIC) system, which was used
until recently, had only ten sectors. Even under NAIC, some
sectors are defined very broadly (e.g., "Manufacturing," which
includes a great diversity of manufacturing operations), whereas
other sectors are seemingly more narrow (e.g., "Health Care and
Social Assistance"). Moreover, under both systems, there are
several levels of subdivision within each sector, thus indicating
the possibility of ever more refined distinctions among industries
and sub-industries.(3) More important, some ways of grouping
industries and businesses, while relevant for certain statistical
and other purposes, may be wholly inadequate for conflict of
interest purposes. For example, according to NAIC, medical
equipment and pharmaceuticals are not only separate "industries,"
but they are in different "industry groups" and even different
manufacturing "sub-sectors" altogether; from a Federal conflict of
interest perspective, however, drugs and medical devices are not
only regulated by the same agency (the Department of Health and
Human Services) and subject to many related regulatory
requirements, but it has been recognized that certain medical
devices and drugs may be complementary or even competing products
for the same medical condition.
Therefore, in addressing the question of what constitutes an
industry or business, for purposes of identifying a sector fund,
OGE has attempted to take a pragmatic approach. In doing so, OGE
has taken into account both the need for clarity and the need for
criteria that are relevant to the purposes of the executive branch
ethics program. In some respects, the best guidance in this area
would be examples of decisions OGE has already made in applying the
standard, rather than abstract statements of general principle.
Nevertheless, before setting out a list of examples of
representative types of sector and diversified funds (see below),
we believe there is at least some utility in articulating the
general approach that governs OGE's application of the
diversification standard.
B. Basic Approach
Basically, OGE approaches such questions by examining the
degree of relatedness and overlapping interests and operations
among the types of companies in which a given mutual fund
specializes. As suggested above, this inquiry also is performed in
the context of realistic conflict of interest considerations, as
well as the need for some measure of common sense. Given the
latter considerations, OGE will deem certain arguably discrete
types of companies to be part of one industry or business sector
if, for example, they share a common regulatory environment or if
Government decisions affecting one type of company would be
expected to affect the other, given their interdependence or
competition with each other.
This approach is embodied in part 2640 itself. In example 2
following section 2640.202(b), OGE indicates that a particular fund
is not diversified because "it is invested in health-related
companies such as pharmaceuticals, developers of medical
instruments and devices, managed care health organizations, and
acute care hospitals." See also 61 Fed. Reg. at 66833 (preamble to
final rule cites "Vanguard Specialized Portfolios: Healthcare" as
example of sector fund). OGE acknowledges that, for certain
economic and other purposes, one could argue that this fund does
not describe a single sector but rather a cluster of discrete types
of businesses, each occupying an identifiable niche within the
multifaceted sphere of health care and health science. Primarily
for conflict of interest reasons, however, OGE has chosen to focus
rather on the common denominator of health to describe the relevant
sector. Despite their differences, the types of companies in which
this fund specializes are significantly interdependent, and
Government decisions affecting one type often will affect the
others. For example, Government decisions concerning the
reimbursement of health care providers (e.g., hospitals) for
certain services can have an impact on the manufacturers of the
medical products (e.g., drugs and medical devices) specifically
used in connection with those services.
In a similar vein, example 2 following section 2640.201(a)
indicates that a fund "that expressly concentrates its holdings in
the stock of utilities companies" is not diversified. OGE is aware
that utility funds may define their concentration as including
companies involved in such areas as electricity, gas, water,
sanitation systems, telecommunications (mainly telephone service),
and cable television. As diverse as these areas may be for some
purposes, OGE generally believes that utility funds are properly
treated as sector funds. Many of these types of utility companies
have common interests in the use of rights of way for transmission
and distribution, are sensitive to energy prices, and may even
compete with each other in some respects. Moreover, according to
one prospectus OGE reviewed, "telephone and electric companies
dominate the utility stock market," thus indicating a further
degree of potential concentration within the sector. (See the
discussions below concerning "dual industry" funds and "real focus"
vs. miscellaneous sectors.) OGE also recognizes the practical need
to draw a line that can be easily understood and applied in various
situations; utility funds are fairly common, and OGE believes that
historically they have been regarded as sector funds within the
ethics community.
We want to emphasize, however, that a fund will not be deemed
a sector fund where the manager describes essentially generic
categories of concentration. Relatively general or superficial
similarities among a group of disparate industries or businesses
will not be sufficient to trigger the stricter treatment OGE has
reserved for sector funds. Several examples would be
"entertainment," "leisure," "consumer products," "cyclicals," and
"venture capital" funds. Another common example would be generic
"science" or "technology" funds. Most of the science and
technology funds we have reviewed do not focus on any particular
scientific or technological industry, but rather a variety of
industries, including biotechnology, computers, telecommunications,
environmental services, aerospace, etc., which have little in
common except a commitment of resources to research and development
in scientific fields.(4)
In some cases, of course, the distinction between a sector and
a diversified fund can be difficult to draw because the
distinctions among certain industries may be blurred. The case of
"financial services funds" illustrates this problem. On the one
hand, there is little question that "banking funds" should be
treated as sector rather than diversified funds; prospectuses for
such funds often indicate a fairly specific focus, such as
companies engaged in accepting deposits and making commercial and
principally non-mortgage consumer loans, including state chartered
banks, savings and loan institutions, and banks that are members of
the Federal Reserve System. On the other hand, the question is
somewhat closer with respect to the broader category of financial
services funds. Some of the prospectuses for these funds define
the financial services sector as including, in addition to the
types of banks described above, such companies as: "brokerage and
advisory firms;" "leasing companies;" "insurance firms;" "publicly
traded, government-sponsored financial enterprises;" "home, auto,
and other specialty finance companies;" "electronic trading
networks;" "electronic transaction processors for financial
services companies;" and "diversified financial companies."
Nevertheless, OGE has determined that financial services funds
generally should be viewed as sector funds. See 60 Fed. Reg. at
47213. As one fund prospectus notes, "the financial services
industries . . . can be subject to relatively rapid change due to
increasingly blurred distinctions between service segments," and
all can be "significantly affected by availability and cost of
capital funds, changes in interest rates, and price competition."
OGE believes that there is enough potential for competition among
the types of companies within the sector, as well as potential for
certain particular matters to affect more than one type, that funds
focused on financial services companies should not be treated as
being diversified, for purposes of part 2640.
Along the same lines, OGE generally considers "dual industry"
funds to be nondiversified. These funds are expressly marketed as
being concentrated in two industry or business sectors, such as
"defense and aerospace," "telecommunications and utilities," or
"media and telecommunications." OGE usually treats such dual
industry funds as being sector funds, under part 2640, for
essentially two reasons. First, rarely would two unrelated
industries be yoked together arbitrarily. Usually, one would
assume that the fund manager perceives that the two sectors are
related in some significant way. Indeed, in many instances, one
could argue that the prospectus really describes only two aspects
of a single industrial sector. Second, we believe that a fund that
is expressly focused on two sectors is still sufficiently
concentrated in each sector to pose the kinds of risks associated
with sector funds.
Determining a Fund's Investment Policy
Before providing a list of examples of how OGE has applied
this general approach to several types of sector and diversified
funds, it is necessary to address one last issue that has generated
some confusion. Agency ethics officials commonly ask what it means
for a fund to have a "stated policy" of concentrating its
investments in a sector. In other words, where and how can one
find the concentration policy of a particular fund?
On one level, this involves the very practical question of
where to look for such a policy. The rule notes that whether a
mutual fund meets the diversification standard "may be determined
by checking the fund's prospectus or by calling a broker or the
manager of the fund." 5 C.F.R. § 2640.102(a) (Note). Many fund
prospectuses are readily available to employees and ethics
officials through various means, including the Internet.
Typically, such prospectuses have statements indicating the
"principal investment strategy," "fund objective," or other
provisions that make reference to any sector concentration policy.
Moreover, as we have advised in the past, "[o]ften, it is possible
to learn whether a fund is a sector fund simply from the fund's
name (i.e., Vanguard Specialized Portfolios: Healthcare)." 61 Fed.
Reg. at 66833. OGE also has found that other convenient resources,
such as publications and certain online mutual fund guides, can
provide quick and understandable descriptions of many fund
concentration policies, although such aids may not be as current or
reliable as the fund prospectus in some instances.
We must emphasize that OGE's focus is on the stated policy of
the fund manager, not on the actual breakdown of fund holdings at
any given point in time.(5) The actual portfolio of investments in
a particular fund is subject to change, including the relative
concentrations in certain sectors. Therefore, OGE has determined
that a more reliable and consistent measure of concentration, for
purposes of the exemptions in part 2640 anyway, is the fund's
express statement of overall concentration philosophy. The
relevant starting point, therefore, is not a printout of a fund's
recent holdings or even a list of the fund's top five or ten
holdings, but rather the fund's statement of basic concentration
policy.
OGE is aware that ethics officials sometimes may note an
apparent "disconnect" between the level of diversification espoused
in a fund's policy statement and the level of concentration
reflected in the fund's actual holdings at a given time. For
example, OGE recently reviewed the prospectus of a particular
"science and technology fund," whose statement of concentration
policy described a significant diversity of businesses and
industries: "electronics; communications; e-commerce; information
services; media; life sciences and health care; chemicals and
synthetic materials; and defense and aerospace." At the same time,
the fund's top ten holdings seemed disproportionately weighted in
computer and computer-related industries. The ethics official who
brought this to our attention asked whether computer procurement
specialists at her agency could own such a fund without risking
problems under 18 U.S.C. § 208; we advised that this fund was
covered by the exemption for diversified mutual funds. In such
cases, the definitions of "diversified" and "sector mutual fund,"
in part 2640, require that the focus remain on the stated policy in
the prospectus, not the actual fund portfolio at any historical
point. Not only is this result compelled by the rule, but it is
consistent with the reality that relative sector concentrations may
change frequently and with little or no notice, within the limits
of the stated fund policy.
Occasionally, there also may be issues concerning the central
focus of a fund, as described in the prospectus. For example,
agencies sometimes may question whether references in a prospectus
to "other" or miscellaneous sectors are sufficient to render a fund
diversified when it would otherwise appear to be a sector fund. In
this connection, OGE recently reviewed the prospectus of a self-
described "internet fund" that included a fairly typical
description of an Internet sector concentration policy: "companies
. . . engaged in the research, design, development or
manufacturing, or engaged to a significant extent in the business
of distributing products, processes or services for use with
Internet or Intranet related businesses." However, the prospectus
then went on to state that the fund "may also invest in other 'high
tech' companies," which it defined as "firms in the computer,
communications, video, electronics, office and factory automation
and robotics sectors." OGE determined that the main thrust of the
stated concentration policy of this fund remained Internet-related
companies, notwithstanding the discretion of the fund manager to
"minor" in other areas of technology that are more or less
tangential to the core Internet focus. Obviously, such questions
are matters of degree, and a fund should be regarded in light of
the overarching investment strategy articulated in the prospectus
and any other statements from the fund manager. Moreover, as a
practical matter, the name by which a fund is marketed (e.g., "ABC
Internet Fund") sometimes may help to settle close questions as to
the core focus.
Examples of Sector and Diversified Funds
As stated above, the best guidance in this area probably is
OGE's experience with specific types of mutual funds. Subject to
the caveats expressed earlier, particularly the need to consider
any peculiarities of a given fund and its prospectus where
appropriate, the following lists provide examples of common types
of funds with respect to which OGE generally has been able to
discern a policy of sector concentration or diversification.
Please note that these lists are not intended to be comprehensive
or static.
A. Sector Fund Examples
OGE's general experience has been that mutual funds promoted
as having the following areas of concentration are likely to be
sector funds:
Utilities
Telecommunications
Energy
Health Care/Health Sciences
Life Sciences
Financial Services
Banking
Brokerage & Investment Management
Precious Metals
Gold
Biotechnology
Food & Agricultural Products
Media
Automotive
Chemicals
Computers
Electronics
Internet
Japan/Mexico/etc.
California/Maryland/etc. Bonds
GNMA
Real Estate
REIT
Defense & Aerospace
Transportation
Housing & Construction
Note that some of the above sectors are not mutually exclusive
but may overlap to a significant degree or even subsume others,
depending on how the fund manager defines the concentration policy.
For example, depending on the focus described in the prospectus, a
biotechnology fund might significantly overlap with the health
sciences or life sciences sector, or a utilities fund might
significantly overlap with either the energy or telecommunications
sector. In some cases, therefore, ethics officials and employees
still may need to look beyond the fund name to the prospectus, in
order to determine whether there is a conflict between the sector
fund's actual focus and an employee's expected duties.
B. Diversified Fund Examples
The following types of funds generally have been found by OGE
to be diversified for purposes of the exemptions in Part 2640:
Leisure/Entertainment
Research
Generic "Science"/"Technology"(6)
Venture Capital
Pacific/European/South Asian/etc.
Generic "Index"/"S&P"/etc.
Generic "Growth"/"Income"/"Capital Appreciation"/"High
Yield"/"Value"/etc.
Generic "Equity"/"Bond"
Generic "Municipal"
Generic "Tax-Free"
Emerging Markets
Cyclicals
Small Cap/Mid Cap/Large Cap
Balanced
Consumer Products/Services
Natural Resources
Basic Materials/Industrial Materials
Money Market(7)
U.S. Treasury
_____________________________________________
1. For purposes of part 2640, "mutual fund" is defined as "an entity
which is registered as a management company under the Investment Company
Act of 1940, as amended (15 U.S.C. § 80a-1 et seq." 5 C.F.R. § 2640.102(k).
This includes open-end, closed-end and exchange-traded mutual funds, and
registered money market funds.
2. Depending on the circumstances, other exemptions in subpart B may
apply to certain interests in sector funds, but the three exemptions
discussed here are the most commonly applicable. Note, however, that no
regulatory exemption applies to any mutual fund that is a prohibited
interest, pursuant to 5 C.F.R.2640.204, although many agency-specific
prohibitions make some exception for the holding of funds not focused
on a sector that is problematic for the particular agency.
See, e.g., 5 C.F.R.3401.102(c)(1) (Federal Energy Regulatory Commission).
3. NAIC uses six-digit codes breaking the economy down according to
sector, subsector, industry group, industry, and U.S. industry. SIC
used a four-digit system indicating division, major group, industry group,
and industry code.
4. We should caution, however, that we have reviewed the prospectus for
at least one self-described "technology" fund that expressly focused on
computers and electronics, and another prospectus for a "high technology"
fund that expressly focused on computer and related companies; we believe
such funds are not diversified, despite their names.
5. This approach differs, for example, from the financial disclosure
rule applicable to excepted investment funds, which defines "widely
diversified" according to the actual portfolio composition at a specific
time in the reporting period. See C.F.R. § 2634.310(c)(3).
6. But note the caution at footnote 4 above.
7. This includes only money market mutual funds, not bank deposit money
market accounts, which are not mutual funds. See 60 Fed. Reg. at 47213.