American Century Acquires $225M of Kopp Assets
American Century Investments has acquired the mutual fund assets of Kopp Investment Advisors. Terms of the deal were not disclosed, but American Century has merged the small-cap Kopp Emerging Growth Fund into the American Century New Opportunities II Fund, and assets of the large-cap Kopp Total Quality Management Fund into the American Century Equity Growth Fund.
Together, the acquisitions represent $225 million in new assets for American Century. The boards of both companies unanimously approved the transaction.
American Century Senior Vice President of Business Development David Tucker said the acquisition will allow the New Opportunities II Fund to lower its shareholder fees. Because the Kopp Emerging Growth Fund has capital losses, the New Opportunities II Fund will also benefit from greater tax efficiency through the acquisition, he said.
Lee Kopp, founder and chief investment advisor for Kopp Investment Advisors, said that shedding the two retail funds will help his company focus on managing private accounts.
Bayou Investors Can Sue Those Who Bailed Out
A federal bankruptcy judge has ruled that investors in Bayou Management, a collapsed, fraudulent hedge fund, are able to sue investors who cashed out before the fund failed in 2005, according to The Wall Street Journal.
One trustee suing the hedge fund, Jeff Marwil, is attempting to recover $142 million from a range of investors who cashed out before the fund's closing. Sixteen million of the sum is profit and $126 million is the original money investors poured into Bayou.
The judge ruled that Marwil could try and get back the entire amount. As an alleged "fraudulent conveyance," the money was possibly given back to investors by the hedge fund manager in order to perpetuate the fraud, wrote Adlai Hardin, Jr., a judge in the U.S. Bankruptcy Court for the Southern District of New York. He denied defendants' motions to dismiss dozens of lawsuits brought by Marwil.
Marwil is suing the fund manager of hedge fund Sterling Stamos, as in early 2005, it withdrew tens of millions of dollars from Bayou, according to people close to the matter. Additionally, Marwil has sued family trusts, individuals and hedge funds-of-funds, and he intends to sue several more, as well. The suits contend that money was unfairly paid out as part of the scheme by the managers to defraud investors.
"I call it the Hotel California' syndrome for hedge funds," said Timothy Mungovan, an attorney at Nixon Peabody, who represents clients in five hedge fund failures in which redemptions by some investors are an issue. "You can check out anytime, but you can never leave."
The case is raising interest as investors often pull their money out of hedge funds when they see warning signs of danger. If investors have to pay back money after leaving a fund, it would increase the risks of investing in hedge funds.
Fund Firms Diversifying Lifecycle Fund Portfolios
Following a rash of acquisitions of asset management firms by fund companies, many are now populating their lifecycle funds with new offerings from their target acquisitions, The Wall Street Journal reports. Three such companies to do so include Legg Mason, Amvescap and Principal Financial.
Certainly, there is a need to differentiate these increasingly popular products, as more fund companies rush to bring them to market; last year alone, fund companies introduced an additional 50 lifecycle funds, bringing the total to about 200, according to Morningstar data.
At the end of January, for example, Amvescap's AIM Investments division introduced six lifecycle funds that invest in exchange-traded funds from its parent company's recent PowerShares acquisition.
Putnam Investments Taps Into Consumerism Abroad
While American consumers are accustomed to traveling by air and buying new cars, travel and leisure sectors have become a real growth area in many developing countries, and a trend Putnam Investments' Shigeki Makino and Bradford Greenleaf bet will continue, according to MarketWatch.
The co-managers of the Putnam Global Equity Fund have $2.1 billion, or roughly half of their portfolio, invested in U.S. companies, with the remainder abroad, mirroring the MSCI World Index. Only a small portion, 4%, is invested in emerging markets.
Lipper data shows the fund has gained 14.6% on average annually in the past three years, compared to 13.7% among its peers.
In the past 12 months, the portfolio's A shares are up 23.5%, compared to 20.6% average gains among its peers.
Makino likes Air France-KLM airlines, which has many routes between Europe and various emerging markets.
"Their planes are very full, and the outlook for supply and demand is positive," he said. "We like all airlines around the world, and Air France-KLM is one of the largest with a strong balance sheet, and the company is bringing down costs and is one of the cheapest on valuation," Makino said.
The fund also has a stake in Petroleum Geo-Services, a geo-physical company in Norway that makes seismic maps used by oil drillers.
"Oil prices are high, and with the lack of previous exploration, companies are now scrambling for new reserves," he said.
Likewise, automobile companies, which have been struggling here in the U.S., are enjoying better growth abroad. Suzuki Motors, for example, he said, depends upon emerging markets including India and Indonesia for about half of all sales, he said.
E*Trade Financial Making It Easier to Invest Overseas
E*Trade Financial is upgrading its website to make it easier for Americans to buy and sell non-U.S. shares online, taking advantage of the growing interest of investors in foreign stocks.
Now a pilot program, the brokerage company plans to make the trading platform widely available in the second quarter.
The new Global Trading Platform will allow individual investor clients in the U.S. to buy, hold and sell foreign shares in their local currency in six key markets.
Countries such as Canada, France, Germany, Hong Kong, Japan and the U.K will be available for online trading stocks. Broker-assisted trading in additional countries will be added, and E*Trade hopes to eventually include as many as 42 international markets and related currencies in the online system.
Trading commissions will be charged in the local currency. In France and Germany, online trades will cost 15.84 Euros, higher than the commission of $6 to $12.99 that E*Trade advertises online for trading U.S. stocks.
R. Jarrett Lilien, E*Trades's president, said the company is seeing increased demand from investors to access foreign stocks directly for reasons such as portfolio diversification. He thinks this will prove appealing to two groups of investors that are important to the company: active traders and wealthy investors with $50,000 to $500,000 in investing assets.
"This is a big opportunity," Lilien said, adding that a recent survey of the company's brokerage customers found two-thirds of those polled are interested in trading stocks on exchanges outside the U.S.
However, the expanded access does raise questions about the suitability of foreign stocks for U.S. investors. Americans may find that countries have different standards in areas such as corporate disclosure, accounting and regulation.
JPMorgan to Acquire IIS, Fund Services Business
JPMorgan announced last Monday that it is buying Integrated Investment Services from Western & Southern Financial Group. Terms of the deal, which is expected to close in the second quarter, were not disclosed.
IIS provides fund accounting, fund administration and transfer agency services. The acquisition adds TA services to JPMorgan's fund services suite, which also includes compliance reporting and investment analytics.
"This transaction underscores our commitment to growing our fund services business and delivering best-in-class products, services and technology to clients," said Mark Kelley, head of JPMorgan's U.S. fund services business. "We welcome IIS into our firm and look forward to delivering a full suite of U.S. transfer agency services, directly to clients of various sizes."
Barclays Sees Big Returns From Securities Lending
Barclays Global Investors has been a leader in the exchange-traded funds business, but it also actively engages in another lucrative aspect of the business-securities lending, which in Barclays case, involves loaning out the stocks and bonds in its iShares ETF portfolios, according to The Wall Street Journal.
The loans bring in millions of dollars a year for Barclays in addition to the fees it gets for managing the funds.
The practice is not new, but it is growing more common in the industry, and it has particular appeal for ETF providers. The profits can boost an ETF's returns, and a small amount of additional income can make performance appear significantly better.
Barclays' loans boost its profit from some of the index-tracking funds by double-digit percentages, typically near 10%. For ETF investors, the income that iShares funds receive from lending generally increases returns by one to 15 basis points, according to Barclays.
Barclays said it runs its program in the interest of fund shareholders and complies fully with Securities and Exchange Commission rules when setting up its lending process. It splits proceeds 50-50 between the fund management company and its iShares ETFs.
China's Market Decline Leaves Managers Unfazed
Calling last week's steep market declines in China a long overdue correction, most fund managers maintained their faith that the market will rebound due to a number of positive factors, Reuters reports. China's market continues to boom, regulators continue to impose reforms and investors have a great deal of cash on the sidelines that they are anxious to invest, fund managers said.
"It is more of a reality check. Things have run up far too quickly," said Bratin Sanyal, head of Asian equity investments for ING Investment Management. "In the medium to long term, is the market going to do well? Yes. Is it going to remain an important market for investors? Yes. Will people remain interested in China? Yes."
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