Alternative investments

Over the past year, as the S&P 500 has hit 1997 levels, the U.S. gross domestic product shrank 6.2% in the fourth quarter of 2008 and investors' retirement savings have been severed in half, we have hailed the resilience of investors' faith in the markets. Our customers have continued to believe in the soundness of investing in mutual funds, the premise of long-term investing and modern portfolio theory, and the overall wisdom of saving for retirement.

In order to achieve meaningful reform of the financial services industry, Congress should create two key regulatory positions to oversee financial markets, according to a proposal last week by the Investment Company Institute.

Mutual fund companies are finding that it's not too early to start tagging fund data with the international extensible business reporting language (XBRL) code the Securities and Exchange Commission has required them to begin using in July, though companies may find it's easier to outsource the job.

In this brutal market, mutual funds that have kept a large stash in cash have performed best, according to Morningstar. Plus, these funds are best-positioned to take advantage of the market once it turns around. "Many of the funds that held up the best in this brutal market have one thing in common-cash," said Greg Wolper, a Morningstar analyst.

Fidelity Investments is expanding its capital markets division by 20%, or 80 positions, in trading, sales, prime brokerage and operations to serve clients trading mutual funds and hedge funds.

Reports of the death of stocks and equity mutual funds have been greatly exaggerated.

NEW YORK - The Securities and Exchange Commission has given U.S. companies more time to comment on its proposal to adopt international financial reporting standards (IFRS), but this extension may be creating uncertainty among those who thought the conversion was a done deal.

Putnam Investments will waste no time reinvigorating its defined contribution business, and its long-struggling equity funds will have to earn their way into the mix, according to Robert Reynolds, its president and chief executive."We're going to run an open platform," he said. "Yes, it would be great if Putnam was part of the choices, but if not, for whatever reason, that's fine."Reynolds, who took over the company in July, started Fidelity Investments' 401(k) business from scratch and turned it into an industry giant. He is now trying to work quickly to create similar magic at Putnam."Competing for Fortune 100 companies may not be a goal right out of the chute, but we definitely want to be out there this year with a competitive product offering," he said. "This is not a five-year game plan; I think we can be a player in a relatively short period of time."Leading the charge will be Edmund Murphy, a Fidelity veteran Reynolds hired early last month as the head of defined contribution. He will report to Putnam's global marketing and products head, Jeffrey Carney, a Fidelity and Bank of America Corp. veteran Reynolds hired in October. "I think the team we've put together thus far is pretty impressive," Reynolds said.Success in defined contributions would give Putnam some badly needed good news. On Feb. 11 it announced plans to cut 260 jobs, or 11% of its work force, as part of a changed distribution strategy. Its assets have dropped more than 60% in the past six years, to $101 billion as Jan. 31. A 2003 market-timing scandal, several years of poor equity mutual fund performance, and last year's market meltdown have left it battered.Marsh & McLennan Cos. Inc. sold Putnam in 2007 to Canada's Great West Lifeco Inc. for $3.9 billion.Reynolds' earliest initiatives at Putnam were aimed at reversing the losses in its equity funds, which he admits were performing "to no one's satisfaction." A restructuring of the equity investment division announced in November put responsibility for each fund in the hands of a specific manager and created a pay-for-performance system.Putnam has also hired dozens of fund managers, analysts, and others on the investment side.It also pruned its fund lineup, and early this year it announced the industry's first suite of target absolute return mutual funds. The funds, which Reynolds said he envisions as a component of Putnam's 401(k) offering, are designed to provide positive returns over time in rising or falling markets.Tom Modestino, a senior analyst with Cerulli Associates Inc. in Boston, said in-house management of a large number of 401(k) assets is increasingly important in the 401(k) business, since asset management, not record keeping, drives profits. "Record keeping in the 401(k) industry is expensive, and it never gets cheaper," he said.A spokesman for Putnam said it will target plans with $1 million to over $500 million in assets. It was a power in the 401(k) market in the 1980s and 1990s, but Mr. Reynolds said after the dot-com bust, it backed away from the administrative side of the business to focus more on distribution of its funds.The sinking stock market does not change the fact that 70 million baby boomers are set to retire, he said, and the number of 401(k) administrators is poised to shrink.Reynolds said Putnam wants to be a major player in asset management and product development, plan administration and education, and service delivery for sponsors and participants. "If you are going be a player in the 401(k) business, you have to have a commitment to all three legs of the stool," he said.

Cash influxes into municipal bond mutual funds slowed a bit again last week as muni prices continued to cool off.Investors entrusted $470 million to muni funds that report weekly numbers during the week ended Feb. 25, according to AMG Data Services. That represents a dip from $535.9 million the previous week and more than $700 million the two weeks before that.Still, this was the eighth consecutive week of inflows following 15 weeks of outflows at the end of 2008.Fund managers are now enjoying steady cash flow following a period when assets at all muni funds - including those that report monthly - shriveled to $342 billion from $391 billion, reflecting both outflows and market declines.Earlier this year, funds enjoyed their biggest inflows since May. They followed a red-hot rally in munis during which the yield on the triple-A in 10 years, based on the Municipal Market Data scale, compressed from 4.21% on Dec. 15 to as low as 2.84% on Feb. 12.That rally has since stalled, with the yield creeping back up to about 3.1%, according to MMD.

Since the onset of the credit crisis in August 2007, the financial services industry has lost 325,000 jobs around the world, according to the International Labor Organization.

MIAMI - In their frantic efforts to cut costs, many financial services companies have been jettisoning everything that isn't absolutely necessary to stay afloat. This may work in the short term, but senior leadership is starting to realize the continued need for expertise in regulation and compliance and customer service to provide seamless risk management, transparency and communication.

RiverSource Investments has launched the RiverSource Recovery and Infrastructure Fund, an open-end mutual fund that will seek long-term opportunities around the world.

As the global financial landscape continues to reshape, mergers and acquisitions this year will be led by those firms seeking capital or those that have capital in hand to put to work, according to Jefferies Putnam Lovell.

The mutual fund industry has seen significant changes in the traditional third-party distribution model, especially this past year with the collapse of several major wirehouses and a spate of merger and acquisition activity. Alongside these changes, more broker/dealers are taking on the responsibility for recordkeeping mutual fund subaccounts.

The 17 exchange-traded funds Northern Trust Corp. has decided to close will have plenty of company in the exchange-traded fund graveyard before the year is out, experts predict.

BOSTON - For decades, annuities were shunned by money managers for their high cost and lack of liquidity.

BOSTON - Like gambling addicts who just need one more big win before they cash out, millions of Baby Boomers on the verge of retirement took extremely risky bets with their life savings, hoping to score that big jackpot that would make up for all their past mistakes.

Genworth Financial Wealth Management has selected State Street Global Advisors to run six of its tactical asset allocation portfolios using exchange-traded funds.

Infrastructure funds may have been building interest ever since President Barack Obama announced his commitment to rebuilding America's infrastructure, but the managers of the First American Global Infrastructure fund have been laying the groundwork for years.

Defined contribution plans have been hammered by dropping equity markets, and this chain of losses has caused a ripple effect throughout the fund management industry.