Spitzer Resigns After Prostitution Scandal
New York Governor Eliot Spitzer, the former New York State attorney general who was instrumental in waging war against Wall Street corruption and the mutual fund industry's after-hours trading and market-timing activities, resigned his post effective March 17, after a highly publicized scandal last week that linked him to a prostitution ring.
"I have acted in a way that violates my obligations to my family ... I apologize first and most importantly to my family [and] to the public," said Spitzer, 48, during a press conference last week in response to an article in The New York Times that implicated him as a client in a prostitution ring in Washington, D.C.
Lt. Gov. David Paterson was scheduled to be sworn in as governor on Monday.
As attorney general, Spitzer, who has been called the "Sheriff of Wall Street," first uncovered and then prosecuted hedge funds, brokers and mutual fund advisory firms for their part in the after-hours fund trading and market-timing scandal in September 2003.
Those revelations rocked the financial services industry and resulted in a shakeout of several top executives at mutual fund advisory firms and billions of dollars in fines being levied, as well as concessions by several fund advisors to cut their fund management fees for several years.
Spitzer was also the man behind the 2002 so-called $1.4 billion "global settlement" among 10 Wall Street firms accused of biased analysts' reports and improperly allowing investment analysts to influence initial public offering business.
Judge Grants $14M Settlement Against New York Life
A federal judge in Pennsylvania has given final approval to a $14 million settlement against New York Life Insurance Co. by employees who said the company's retirement plans were improperly invested into mutual funds owned by New York Life.
According to the order, an independent consultant advised New York Life's board that their pension plans could save more than $7 million in fees by moving its investments from proprietary funds to a separately managed program. Despite this advice, the trustees did not take action until the plaintiffs filed a class-action lawsuit.
The plaintiffs, who are current and former New York Life employees, charged that the company breached its fiduciary duties under the ERISA act.
A statement by the board of trustees said the plan's investments and menu of investment options have always been prudently selected, and the fees are appropriate.
Blackstone Profit Drops 90%
Global alternative asset manager Blackstone Group reported a 90% drop in profit during the fourth quarter of 2007 compared to the same period in 2006 and warned that conditions will remain difficult for the rest of the year or longer.
Net income fell from $808 million to $88 million, due to falling market conditions in the United States, Western Europe, Asia and other parts of the world.
The credit crunch has made banks reluctant to lend out large amounts of money, damaging the profitability of private equity companies and putting a halt to private equity deals.
"Lack of available financing in the U.S. and Europe for large leveraged transactions limited our transaction fees," said founder and Chairman Steve Schwarzman. "Difficult market conditions in the U.S. and Europe continue in 2008 and there is little visibility on when these conditions might improve."
March Payroll Job Losses Could Top 200,000
TrimTabs Investment Research said the U.S. economy lost 78,000 jobs in February, based on daily income tax deposits to the Treasury from salaried taxpayers. This number is higher than estimates from the Bureau of Labor Statistics, which reported 63,000 job losses in the same period.
Stock markets plunged upon hearing the news.
"According to our data, February's job loss is the fourth monthly job loss in the past five months," said TrimTabs CEO Charles Biderman.
TrimTabs estimates that job losses could continue to soar to 150,000 to 200,000 lost jobs for the month of March, if an eight-day period ending March 5 continues at the same pace.
From October 2007 through February, TrimTabs said the economy has lost 205,000 jobs due to the collapse of the housing market, though the BLS said the economy added 197,000 jobs during the same period.
Nationwide Parent Offers Buyout
Nationwide Financial Service Inc. has received an offer from its parent company Nationwide Mutual to buy its publicly held shares for $2.2 billion.
Nationwide Mutual is offering $47.20 for each Class A share of the insurance and financial services provider, a 24% premium over last week's closing price of $37.93.
Nationwide Mutual includes Nationwide Mutual Insurance Co., Nationwide Corp. and Nationwide Mutual Fire Insurance Co.
Van Kampen Plans New Retirement Funds
Van Kampen Retirement Strategy Trust has filed for 10 new target retirement date funds with the Securities and Exchange Commission.
Each fund is structured as a fund-of-funds and will invest primarily in a combination of Van Kampen-managed mutual funds and six open-architecture, multi-firm managed funds advised by Russell Investments. This structure will allow for broad levels of internal and external manager diversification.
"The Van Kampen Retirement Strategy Funds are easy for investors to understand and for plan sponsors to implement, yet they offer strategic asset allocation, access to global markets, broad diversification and sophisticated risk control," said Timothy Sweeney, managing director and director of Van Kampen's defined contribution business.
Some of the funds will have the ability to include allocations to international equities, real estate and inflation-indexed securities. The funds will operate on a glide path to actively manage asset allocation over a participant's entire accumulation phase, and to protect against longevity risk, another 15 years beyond the retirement date.
Schwab Launches New Retirement Funds
Charles Schwab has announced a new suite of funds designed to generate a targeted annual payout for retirees.
The Schwab Monthly Income Funds are comprised of three funds with varying annual payout targets to provide investors with an indication of projected annual income.
"The Schwab Monthly Income Funds are a simplified solution for people who want help replacing the income they left behind at work but have no desire to manage a portfolio of this complexity," said Patrick Waters, director of retirement income products at Schwab. "The Schwab Monthly Income Funds are designed so that retirees can receive monthly income without chipping away at their nest egg. And to help protect future income from inflation, each of the funds includes a degree of equity exposure for growth potential."
The portfolio managers will monitor markets and adjust the investment mixture to keep the funds in line with their objectives of income and capital growth.
The Moderate Payout Fund offers an annual target income payout of 3% to 4%, the Enhanced Payout Fund has a target of 4% to 5%, and the Maximum Payout Fund has a target payout of 5% to 6%.
ING Releases 403(b) Guide for Schools
ING is providing 403(b) plan documents that public schools can use in order to meet new IRS requirements by next January.
"One size fits all' does not work for clothing and it does not work for retirement plans either," said Linda Segal Blinn, ING's vice president of technical services. "One public school may give their employees the chance to make Roth after-tax contributions, while others may make employer contributions to their employees' retirement accounts. The ING 403(b) Plan has the flexibility to let public schools tailor their plan document to meet their needs."
ING said that once a school adopts the ING plan, ING will provide them with updates and enhancements to the plan document.
ING has been a 403(b) service provider to schools and their employees since 1967 and has partnered in key education associations, including the Association of School Business Officials International, the American Association of School Administrators, and College and University Professional Association for Human Resources.
ING is also the sponsor of the National Teacher of the Year and the Unsung Heroes programs.
UK Considers Mutual Fund Tax Changes
The British government is considering an overhaul of their tax code for mutual funds that could put the responsibility for declaring income from funds directly on investors, according to foreign news reports.
The proposal to pass tax charges on interest income from fund managers to investors would be tax-neutral, but would put liability for declaring income on the shoulders of basic-rate taxpayers.
Interest on income is currently taxed at a corporation tax rate of 20% and is paid by the fund manager, while basic-rate taxpayers pay no charge.
The proposal seeks to transfer the tax to individual investors, requiring basic-rate taxpayers to pay 20%.
Experts say few basic-rate taxpayers complete a tax return and fail to declare income from funds. Advisors will be responsible for explaining new regulations to clients.
Chinese Mutual Funds See Small Rebound
Chinese mutual funds posted moderate gains in February after declining more than seven percent in January, according to a recent report.
The six-month average for all types of mutual funds is still in the red, due to China's struggling stock market, according to Lipper Fund Market Insight Reports.
"Good February performance of small and medium shares made up for that of blue chips and bolstered fund returns," said Zhou Liang, head of research for China at Lipper. "But the growth was modest, and the half-year returns ended February were still negative."
Mutual funds invested in stocks posted a 1.2% growth last month, and mixed stock/bond funds saw a growth between 1.04% and 0.66%, depending on the combination.
Qualified Domestic Institutional Investor products outperformed their domestic peers, with an average growth of 3.32% for February.
Qualified Foreign Institutional Investor products reported a loss of 1.26%, due to deteriorating global economic prospects.
Mutual fund investors should pursue safer products like bond-invested funds that could beat inflation growth, Zhou said, and avoid looking for big profits.
Canadians Go Back to Mutual Funds in February
Canadian investors purchased between $5.9 billion and $6.5 billion in mutual funds during the month of February, a significant jump from January sales, according to the Investment Funds Institute of Canada.
"With preliminary sales estimates at close to $6.2 billion for February, Canadian investors have sent a signal that they are still committed to RRSP investment in 2008," said Pat Dunwoody, vice-president of member services and communications with IFIC.
Canadian investors bought a net $460.5 million in mutual funds in January, favoring short-term money market funds.
IFIC said investors have started to look longer term, with 50% of estimated February flows going into long-term funds.
IFIC estimated net assets of the mutual fund industry are currently between $676.2 billion and $681.2 billion.
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