Money Management Executive Latest News

Hedge fund executives are bracing for a dramatically different outlook on their industry in the year ahead, with 84% expecting increased competition, 82% bracing for increased costs and 99% believing regulation is inevitable.

Equity mutual funds suffered redemptions in 2008, only the third time in their history that they have had outflows. Actively managed funds lost $221.08 billion, while index funds took in $17.6 billion. "Some people who get their hands burned by these market drops move from active to passive [management], and every time some of them stay there," Scott Burns, an analyst with Morningstar, told Dow Jones. Passive investing "gains more converts" each time the market crashes.

Investors continued to seek safety in cash as money market mutual fund assets crept closer to $4 trillion, rising $17.94 billion for the week ending March 4 to $3.906 trillion, according to the Investment Company Institute.

Justin Leverenz, manager of the Oppenheimer Developing Markets fund, says emerging market economies are more agile than developed nations, and will likely soar out of the recession.

In response to the market downturn and wide confusion among investors about what they should do, Charles Schwab has published a number of articles on its website offering guidance. Schwab is also holding seminars at its branches, town hall discussions and webcasts.

For the first time in seven years and after the sorry lessons of Enron and WorldComm, investors poured more money into company stock, $65 million, than they did any other investment category in January, according to Hewitt Associates.Betting on one’s own company’s success at a time of massive job layoffs is not seen as a terribly wise decision. “In this economy, you’d expect people to move in the other direction, trying to diversify their risks,” Pamela Hess, director of retirement research told The Wall Street Journal.“Obviously, they’re not understanding what they’re buying,” added Shlomo Benartzi, an economics professor at the University of California, Los Angeles.Today, two-thirds of employees in 401(k)s with more than 5,000 employees are offered company stock, and about 8% of employees invested in company stock have 80% of their portfolios invested in it.It is possible that instead of matching employee’s contributions in 401(k)s, employers are offering stock, experts said.

Legg Mason announced Thursday that it has sold all $1.8 billion of the structured investment vehicles held at par value by its money market funds, the company and through a total return swap with a bank. The sale includes $1.4 billion of SIVs held by the money funds, $57 million by the company and $355 in the swap. All told, Legg Mason spent $1.2 billion on the transactions. It retains only $49 million in SIVs.“With the sales announced today, our money market funds are now completely SIV-free,” said Legg Mason Chairman and CEO Mark R. Fetting. “We are pleased that our business teams were able to resolve this issue and protect our money market franchise while our investment teams have focused on [their] goal of providing principal stability, credit quality and current income.”Fetting added: “In persistently difficult markets, we took this final proactive step not only to resolve the SIV issue, but also to keep our balance sheet strong. With the expected tax refund, we will have $1 billion in available cash” which will help “protect Legg Mason’s profitability.”

In spite of the market downturn, the trading services that Fidelity Investments provides for intermediaries is doing a brisk business, the company announced Thursday.Daily average commissionable trade, new breakaway brokers joining the platform, equity order flow, prime brokerage and adviser-sold 401(k) plans are all doing well. Combined, the divisions serving these markets had $1.1 trillion in assets under administration by the end of last year.Daily commissionable trades rose 18% in 2008 and averaged 259,000 and 314,000 in September and October. Fidelity also sold 702 new Fidelity Advisor 401(k) plans in 2008, up 36%. Money market assets rose 44% to a record $137 billion, and 102 breakaway brokers selected Fidelity as custodian.Assets in Fidelity’s prime brokerage services also rose, by 127%, aided by a 57% increase in new clients. “Despite arguably one of the most volatile business environments in recent memory, we repeatedly demonstrated our ability to help intermediary clients navigate challenging financial markets,” said Michael K. Clark, president of Fidelity Institutional Products Group. “Our ability in 2008 to achieve record trading volumes, equity order flow and institutional money market flows, among others, was a direct result of the trust our diverse base of clients placed in the strength and reputation of Fidelity,” Clark added.Even in this challenging market environment, Fidelity plans to continue to invest in these businesses’ technology, trading tools and services in 2009.“We are in an unprecedented business environment that is rapidly transforming the financial services industry, and those firms which do not have all the pieces to serve these converging markets and new financial business models will be at a competitive disadvantage,” Clark said.

Global hedge funds assets declined more than 30% in 2008 to $1.8 trillion, according to a report issued by publisher HedgeFund Intelligence. The sharpest declines occurred in the second half of last year.

Nearly 30% of long-term care costs are paid for out-of-pocket, according to research by Avalere Health, far higher than the 10% widely estimated previously. One of the reasons for the discrepancy, according to the public policy and research firm, is that Avalere has included assisted living costs.