Vanguard Takes Top Spot from American Funds
Vanguard has bumped American Funds from its six-year run as the biggest-selling fund company in the U.S., reclaiming the leading role that Vanguard last held in 2001, the Financial Times writes.
Vanguard benefited from a surge of investment into money market funds in 2007 as risk-averse investors looked to secure their cash, as well as from the company's push into the exchange-traded funds market, taking its total assets under management to $1.3 trillion.
American Funds has approximately $1.0 trillion AUM and does not have a strong presence in money market funds.
Vanguard, American Funds and Fidelity are by far the three biggest U.S. mutual fund companies. Collectively, the three companies hold more than a third of U.S. fund assets.
Retirement Income Industry Gears Up for Exciting Year
This year will be a pivotal and exciting year of opportunity for the retirement income industry as more Americans start planning for the future, say industry experts.
"In 2007, we built upon our 2006 start-up efforts to further define ourselves in the industry and to discover in more detail what our membership wanted from us as a leading edge association," said Francois Gadenne, chairman of the Retirement Income Industry Association. "As we start 2008, our focus will be on scaling up our member-selected, member-tested, value-added programs and services. In addition, we'll continue to be a complementing companion to other associations."
The RIIA's education committee will continue to build on its body of knowledge, add curriculum for the retirement income expert designation and incorporate "cross silos" of industry expertise.
The association plans to steadily grow their membership and add new board members and new committees, and plans to hold more conferences and networking meetings to bring together top industry executives, financial advisors, leading academics and other experts.
The RIIA will hold its fourth-annual summit on managing retirement income Feb. 11-13 at the Doral Country Club and Resort in Miami, Florida.
Morningstar Warns Investors to Read the Fine Print in Ads
In a recent critique of mutual fund advertisements, Morningstar said many funds have improved their ads by emphasizing research, expenses and consistency over short-term returns, but there is still additional room for improvement.
Previous ads focused too much on short-term performance by listing big gains for various funds, but many customers expected the returns would be repeated. Even with a disclaimer that past performance does not guarantee future results, some investors were disappointed and turned elsewhere.
Morningstar looked at five recent print ads in the Wall Street Journal for Fidelity, Janus, American Century, T. Rowe Price and Vanguard. Some of the ads touted that their high returns were because of research, while other ads cited positive reviews from Morningstar and Kiplinger magazine.
To their credit, most ads had disclaimers listed in fine print, and savvy investors should continue to read the fine print and do their homework before purchasing any mutual fund, Morningstar said.
Fidelity Reopens Magellan
After 10 years in isolation, the Fidelity Magellan Fund has reopened to new investors, effective today.
"I strongly believe that reopening the fund is the right step for Magellan's shareholders at this time," said Harry Lange, who has managed the Magellan Fund since October 2005.
"Magellan's shareholder base has matured and, in the normal course of investing, many shareholders have continued to redeem assets as they've met their financial goals," said Walter Donovan, president of the Equity Division for Fidelity Management & Research Company.
"In fact," he added, "85% of the fund's assets are earmarked for retirement, and the Baby Boomer generation has now begun to retire and tap those dollars."
Reopening the fund will generate new sales and offset future redemptions, helping to stabilize cash flows, Donovan said.
Target-Date Funds: Friend or Foe?
Target-date funds recently got government approval as the default option in 401(k) plans. On the other hand, a recent study by Compass Investors, finds fault with the structure of these funds.
A recent study from the Compass Institute, a think tank affiliated with Compass Investors, criticizes the structure of target-date funds. It advocates shifting asset allocations based on market and other trends, instead of on a fixed schedule.
While critics say target-date funds are a better long-term investment than money-market funds - the former default option when workers didn't specify a choice - some say investors would fare better taking an active role.
The funds, which gradually shift out of stocks and into bonds to reduce risk, have mushroomed from 23 funds with $8 billion in 2000, to more than 250 with $160 billion under management, writes Andrew Clark, head of research for Lipper.
Tony Blair Takes Job at JP Morgan Bank
Tony Blair, the former prime minister of the United Kingdom, has taken a part-time job in a senior advisory capacity with the investment bank JP Morgan, according to BBC News.
Blair will advise the firm's senior management team and chief executive, "drawing on his immense international experience to provide the firm with strategic advice and insight on global political issues and emerging trends," the bank said.
His annual salary for the job was not disclosed, but is estimated by many to exceed $1 million.
"I have always been interested in commerce and the impact of globalization," Blair told the Financial Times. "Nowadays, the intersection between politics and the economy in different parts of the world, including the emerging markets, is very strong."
Blair stepped down as prime minister in June 2007 and has been serving as an unpaid envoy for the Quartet of Middle East peace negotiators.
Morgan Keegan, Manager Named In $2 million FINRA Claims Case
The newly-formed FINRA was asked to adjudicate two arbitration complaints against brokerage firm Morgan Keegan and fund manager James C. Kelsoe for two high net worth clients. The actions were filed by the Stoltmann Law Offices.
The arbitration statements of claim allege fraud, misrepresentations and omissions related to the failure of the firm and Kelsoe to fully disclose risks associated with the Morgan Keegan mutual fund investments in subprime related sectors, according to Andrew Stoltmann, of Stoltmann Law Offices, in Chicago.
Believed to be the largest individual claims filed to date against Morgan Keegan and the first filed against Kelsoe personally, the claims seek recovery of losses of $285,000 for one client and losses of $1.8 million for another, along with attorney's fees, interest and punitive damages.
The claims are the first of approximately 15 investor claims that Stoltmann Law Offices expects to file against Morgan Keegan in upcoming weeks.
The funds owned by the complaining investors include Morgan Keegan Select Intermediate Bond Fund, Regions Morgan Keegan Select High Income and closed-end funds RMK Multi Sector High Income Fund, RMK Strategic Income Fund, RMK Advantage Income Fund and the RMK High Income Fund.
According to the FINRA statements of claim, the Morgan Keegan funds were heavily invested in collateralized bond obligations, collateralized loan obligations, and collateralized mortgage obligations, collectively referred to as "collateralized debt obligations" or "structured financial instruments."
These securities are typically thinly traded - in other words, market quotations for these securities are not readily available - and are practically illiquid. As a consequence, the values of these securities can only be estimated by Morgan Keegan.
NYSE May Buy Amex
The New York Stock Exchange may buy its rival, the American Stock Exchange, according to a report in the Wall Street Journal. The deal could be priced at as much as $350 million.
The privately-held American Stock Exchange, known as the Amex, is also reported to be pursuing talks with exchanges in Canada and Europe. However, local competitor NYSE is thought to have the inside track.
At $350 million, an Amex buy would be cheap compared to another prospective target for NYSE, the commodities-oriented New York Mercantile Exchange, which is said to be capable of fetching $11 billion.
A NYSE-Amex hook-up would be the first big move by NYSE Chief Executive Duncan Niederauer, who replaced former NYSE head John Thain when he left the exchange in late 2007. Under Thain, the NYSE bought electronic exchange operator Archipelago Holdings Inc. and the European exchange operator, Euronext NV.
Last year, Nasdaq bought the Philadelphia Stock Exchange for $650 million.
Foreign Funds Will Continue Growth in 2008
U.S. individual investors will continue to chase the high returns in foreign-stock mutual funds in 2008, at the expense of domestic funds, according to the Los Angeles Times.
Investors poured a net $129 billion into foreign funds through November, reaching total assets of $1.68 trillion, according to the Investment Company Institute.
Domestic stock funds, by comparison, had a net outflow of $37 billion during the same period, with assets totaling $4.92 trillion through November.
Thanks to the weak U.S. dollar and booming economic growth abroad, foreign-focused funds have outperformed domestic stocks funds every year since 2002, according to Morningstar Inc.
Big-name U.S. growth stocks had a big comeback in 2007, with the Fidelity Magellan fund posting a total return of 18.8% last year, more than three times the gain of the Standard & Poor's 500 index.
From 2001 to 2006, Magellan averaged gains of just 3.4% a year, but Magellan's holdings in Google Inc., Schlumberger Ltd., and tech and energy issues gave the fund a long-needed break.
Dan Culloton, an analyst at Morningstar, said patient investors will see positive long-term results.
"We think those who stay the course here will be rewarded," he said.
Buffett Enters Bond-Insurance Market
Warren Buffett's Berkshire Hathaway is stepping into the municipal bond insurance sector and using its name to charge higher premiums than its rivals, according to Financial Times.
While Ajit Jain, head of the reinsurance unit at Berkshire, has been eyeing the multi-billion dollar bond insurance industry for nearly two decades, he has been reluctant to commit because of the sector's history of low payments.
The credit crisis of 2007 changed this, and Jain now believes Berkshire can use its triple-A credit rating and excess capital to command a higher premium among investors and borrowers.
"Having talked to some of the issuers and having talked to some of the dealers on (Wall) Street, it became clear to us that if we got into the market with our name, we'd be able to command a premium price," Jain said.
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