Money Management Executive Latest News

In light of increased investor interest in money market funds and fixed income investments, Northern Trust has introduced the Northern Tax-Advantaged Ultra-Short Fixed Income Fund and the Northern Ultra-Short Fixed Income Funds.The funds are designed to offer higher yields than money market funds but less volatility than short-duration bond funds, and will invest in securities with maturities of six to 36 months. They have a minimum initial investment of $1 million and are designed for investors looking for a time horizon of at least one year. Both will make dividend distributions monthly.“As we continue to face uncertainty regarding an economic and financial market recovery,” said Colin Robertson, managing director of fixed income investments at Northern Trust, “investors have become increasingly interested in the potential benefits of having fixed income assets in their investment portfolios. For investors looking to get back into the market, the new funds are designed to provide opportunity for both higher yields than money funds and capital appreciation with minimal volatility.”

A significant number of older workers 50 or older, 44%, have decided to delay their retirement age, and 34% overall have upped their target date for leaving the workforce, Watson Wyatt found in a February survey of 2,200 employees. By comparison, only 25% of those under age 40 have changed their plans for years in the workforce.Nonetheless, among all workers 65 is still the average age at which they expect to retire.Among the older workers, when asked what factors have impacted their decision to delay retirement, 76% said declining 401(k) balances, followed by 63% citing high healthcare costs and 62% pointing to high costs of living.“The economic crisis has affected many workers’ retirement plans and nest eggs, but those nearest to retirement have been especially hard hit,” said Dvid Speier, senior retirement consultant at Watson Wyatt. “Older workers do not have the time to offset declining retirement account values, either by recouping their investment losses or significantly increasing their savings rate. For many, the only choice is to delay retirement.”With older workers remaining on the job longer, that could present hiring issues for employers along with higher benefits costs, noted Lisa Canafax, another senior retirement consultant at Watson Wyatt. For that reason, employers might want to reconsider defined benefit plans.

Ivy Funds has introduced the Ivy Municipal High Income Fund, to be managed by Michael Walls, who has been with the firm for the past 10 years.“We believe that the tax relief potential, coupled with the income potential that accompanies higher-yielding municipal bonds, makes this category an attractive one for investors building a diversified portfolio,” said Thomas W. Butch, president and CEO of Ivy Funds Distributor.In selecting investments for the fund, Walls said, he studies the macro-economic environment and credit risk associated with issuers. “We also look at interest risk and call risk as we attempt to maximize the potential reward for a given level of risk,” he said.Ivy Funds also noted that municipal bonds have structural characteristics that are different from other types of fixed income securities, and respond differently to changes in market conditions, such as changes in credit quality and interest rate policy—which help to reduce a portfolio’s volatility if properly diversified. Also, because the credit rating of municipalities is lower than the federal government, municipal bonds have a capacity to deliver higher yields.

Hedge funds returned 4.06% in May, the largest monthly gains since February 2000, according to the Credit Suisse/Tremont Hedge Fund Index. Year-to-date, hedge funds tracked by the index have risen an average of 6.72%.In the month, emerging markets funds were the strongest performers, delivering 6.96%. “The emerging markets sector has experienced a significant turnaround over the last three months, as risk appetite seems to be returning to the markets,” said Ovlicer Schupp, president of Credit Suisse Index. “Investors are encouraged by positive signs of global growth and risking commodities prices.”Year-to-date, emerging markets hedge funds are up 12.43%. Convertible arbitrage also did well in May, rising 5.81%; the category is up 19.12% YTD.

Long-term equity and bond mutual funds saw net inflows for the 13th week in a row, taking in $12.48 billion in the week ended June 10, bringing the total net flows for the past 13 weeks to just under $140 billion, the Investment Company Institute said.Flows to stock funds were $5.04 billion, up from $4.66 billion in the previous week. In this category, $2.03 billion went to U.S. stock funds, with foreign stock funds taking in $3.01 billion.Bond funds took in $6.92 billion, down quite a bit from the $8.46 billion they took in for the week ended June 3. Of this category, taxable bond funds saw inflows of $5.46 billion, and municipals saw $1.46 billion.Assets in money funds continued to decline, losing $62.9 billion, the highest level since last September, when investors yanked $120 billion from money funds in a single week due to the Primary Fund breaking the buck.

Lawmakers on the House Education and Labor Committee voted 13-8 each on two measures concerning 401(k) plans Wednesday, one that would require them to clearing disclose fees and break them down, another that would only permit investment advice to come from independent advisers.Fees would have to be displayed in all four categories: administrative, investment management, transaction and other.“The lack of transparency in the 401(k) system is unacceptable and must end now,” subcommittee Chairman Robert Andrews (D-N.J.) told Dow Jones.

While the financial services industry largely embraced most of the Obama administration’s financial services overhaul, the idea of removing money funds’ $1 net asset value is causing widespread concern in the mutual fund industry.“If you float the value of a money fund, you’ve essentially destroyed the product,” said Investment Company Institute President Paul Schott Stevens. “We’re going to explain clearly why we believe a fluctuating [NAV] is a very bad idea.”The Securities and Exchange Commission is expected to propose new money fund rules next week, including a floating NAV for money funds. Another idea is disclosing the $1 NAV to the third decimal, which the ICI also opposes.But the Obama administration believes a floating value for money funds, along with imposed limits on risk, capital requirements and access to emergency liquidity facilities from private sources, will prevent a run on money funds that could endanger the entire capital markets, as what occurred last September when the Primary Fund broke the buck. In addition, the administration is calling on the President’s Working Group on Financial Markets “to assess whether more fundamental changes are necessary and to address systemic risk more directly.”The administration is asking for the Working Group to prepare its report by Sept. 15.At the same time, it warns that additional regulations on money funds, which are vital to the capital markets system and the day-to-day operations of corporate America, could have the opposite effect of driving investors into unregulated or less regulated money market investment vehicles.

Ninety percent of American investors are frustrated about financial losses in the past year, according to “Make the Move,” a survey by the Charles Schwab Corp. One in four is considering leaving their current financial services firm and/or financial adviser.

A U.S. district court has given investors in the Reserve Funds’ Primary Fund until July 22 to object to the Securities and Exchange Commission’s plan to distribute assets on a pro rata basis. Of the fund’s original $63 billion in assets, $4.55 billion has yet to be returned to investors.

The rapid increase in bankruptcies in the U.S. could result in more abandoned retirement plans, which occurs when a company goes out of business and assets in a defined contribution plan are left at a custodian or mutual fund company that is not authorized to distribute the monies.