Money Management Executive Latest News

Wachovia wired a $3.8 million payment to scandal-tainted Frederick J. O’Meally, a move the former broker claims will untangle his name form accusations of market-timing abuses, according to The New York Times. The payment, a result of NASD arbitration, represents the value of a bonus promised to O’Meally when he was a broker for Prudential Securities, which has since been folded into a joint venture with Wachovia. O’Meally’s bonus was withheld because of questions surrounding his market-timing practices. His system, O’Meally boasted, allowed him to execute “a few hundred trades a minute.” Once funds caught on, they began trying to block his trades. “No one told me to change anything, and no one said I was doing anything wrong,” he said, describing an internal review process he likened to an audit. The process worked for him, too, since he took home about 40% of his $5 million annual production. O’Meally, 48, says that the fact he has been paid by his old firm proves his market-timing practices breached no rules. O’Meally has not received compensation for slander, wrongful termination, or attorney fees, all of which he asked the NASD panel to consider. The case is not closed. In August, Prudentialagreed to pay the Securities and Exchange Commission $600 million as part of a market-timing settlement. The same day, the SEC announced a civil action suit against O’Meally and three other Prudential colleagues, claiming the four’s market timing cost 25 mutual funds a total of $2.5 billion. That investigation is pending, according to David Bergers, who leads the SEC’s Boston Office. “The SEC hasn’t heard my full testimony. Once someone hears the story, we feel confident that they’ll think everything I did was appropriate,” he said. After he was fired, O’Meally told the Times he became depressed, drank, and sought medical attention. He sold off assets to pay legal bills, he said, but retained his home and still managed to have $2 million with which he launched a hedge fund, Kismet Capital Advisors. The Bay Shore, N.Y.-based fund now has $12 million in assets under management. “I like what I’m doing better—owning my own hedge fund instead of being a broker,” he said. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Morgan Stanley expects the benefits of its recent acquisitions will take time and that margins in its asset management division will be slim for several more quarters, The Wall Street Journal reports. And if the firm sticks to its intention of making additional acquisitions, those could continue to lower earnings.

Nationwide Financial Services has started a new retirement plan offering, Retirement Innovator, designed for smaller business with fewer than $10 million in assets to begin defined contribution plans for employees. Retirement Innovator is a comprehensive plan that provides plan sponsors with tools and services typically reserved for larger plans, such as resource-filled websites and comprehensive educational materials. Also, plan sponsors have the option to receive personalized and interactive service from a local investment professional. The program is tailored to individual needs of participants. It also offers access to more than 300 mutual funds from multiple fund companies, asset-allocation funds, managed accounts, self-directed brokerage and several fixed account options. Eighty-seven percent of companies with five to 500 employees don’t offer a retirement plan, and each year around 45,000 small plans look for a different provider that can better meet their needs.

U.S. mutual fund managers are feeling more optimistic. A Merrill Lynch survey of fund managers found a significant change in tone by pros investing domestically, MarketWatch reports. Fifty-five percent of those queried said it was very unlikely that the economy will experience two straight quarters of negative gross domestic product growth in the next 12 months. A month earlier, only 12% felt that way. “The economy is in pretty good shape in our view,” said John Kornitzer, a portfolio manager and president of Kornitzer Capital Management. “Takeover activity is still going on, so you know someone is still finding value in stocks.” More than half of the managers surveyed now believe economic fortunes in the U.S. will get stronger. That compares to slightly less than a third a month ago. This month, 40% said they think it’s likely that corporate earnings will rise 10% or more in the next 12 months. It was at 12% in October. The sentiments come as the market keeps moving into positive territory. The typical large-cap core stock fund is up more than 11% in 2006, according to Morningstar Inc. In the past three months, it has returned 13%-plus and in the past month better than 1.5%. “The macro views we’re seeing are definitely working more in our favor these days,” said James Breen, co-manager at Symphony Wealth Management Ovation Fund. The new balanced fund entering November had 68% of its assets in stocks with another 30% in short-term bonds. The rest was in cash. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Kansas State Treasurer Lynn Jenkins announced Thursday that after reviewing a number of proposals from investment management firms, the state has re-hired American Century Investments to run its 529 college savings plan, Learning Quest. American Century has been running the plan since it was launched six years ago. “It was a long and difficult process, but after all the proposals were reviewed on their own merits and evaluated against each other, it was determined that American Century would continue to best meet the needs of Learning Quest's more than 93,000 account owners and combined assets of nearly $1.5 billion,” Jenkins said. American Century is expanding the investment options and lowering fees, with the program management fee dropping from 39 basis points to 20 basis points. New offerings are from The Hartford Mutual Funds, OppenheimerFunds, Principal Financial Group and Riversource Investments.

Vanguard on Thursday announced its new High Dividend Yield Index Fund, available to individual investors, institutions and financial advisers in both traditional and ETF shares.The fund will track the FTSE High Dividend Yield Index, a new index of U.S. stocks with higher-than-average yields taken from the FTSE Global Equity Index that FTSE Group created exclusively for Vanguard.

Ameriprise Financial will begin selling its RiverSource funds outside of its financial adviser network through banks and broker/dealers, the Pioneer Press reports. Although Ameriprise has historically sold its funds through its captive sales force, it formed a distribution agreement with Securities America, a related firm, earlier this year. The company has not yet named its bank and B/D partners. “There is a limit to what we can [get] out of our adviser network. That third-party distribution becomes a very necessary thing,” said Ted Truscott, chief investment officer at Ameriprise. Truscott said that selling off of different platforms might also help retain and attract strong portfolio managers. But because the funds’ performance hasn’t been strong in the past, the firm will have stiff competition, noted Ryan Shannon, an investment adviser with Webb Financial Group. That has changed this year, however, with 73% of the RiverSource funds above the median of their respective peer groups year-to-date through Sept. 30, according to Lipper data. In addition, outflows have slowed. In the third quarter of this year, Ameriprise saw $800 million walk out the door, compared to $2.7 billion in the third quarter of 2005. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

While the media has been making a fuss over the fact that it looks like Bill Miller’s Legg Mason Value Trust Fund won’t beat the S&P 500 this year—meaning his 15-year winning streak will end—the firm’s chairman says the celebrated portfolio manager will, once again, deliver stellar returns, Reuters reports. “I know everyone is beating on Bill Miller now, but I don’t know how many of you have beaten the market 15 years,” Legg Mason Chairman and CEO Raymond Mason told a banking conference. “He will be back. His numbers are coming back now.” So far this year, Miller is up 4.12%, after his fund was in the negative 10% territory for some time. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

European hedge funds don’t need any more regulation, the European Commission said Thursday. The transparency of their holdings is also adequate, and any additional regulation could stifle their growth and their innovation, the Commission added.

The European Commission unveiled plans in a white paper on Thursday to overhaul mutual fund rules to make it easier for both money managers and investors to do cross-border business. Among other changes, the new rules would allow asset managers to run funds in other countries. The Commission also wants to ensure that fees and performance are presented in a uniform way, and that regulators cooperate more frequently. The net result, the group hopes, will be lower costs for investors since investment managers won’t have to comply with so many different rules. The Commission plans to study these changes over the next several months and propose new rules in the fall of 2007.