Conn. Fails to Pass Hedge Fund Bill
The Connecticut House of Representatives ran out of time last week to vote on a hedge fund transparency bill, continuing the state's days as a hedge fund haven. The bill would have required hedge funds that have not voluntarily registered with the Securities and Exchange Commission to reveal any conflicts of interest to shareholders, be licensed in the state, undergo audits and disclose fees.
Ryan Barry, chairman of the joint banks committee and a member of the House who was the main supporter of the bill, said he had enough votes to pass the measure but that representatives from districts heavily populated with hedge funds maneuvered the docket so that the legislature would not be able to vote. The bill will now have to wait until next year, he said.
Yet, he had harsh words for hedge funds: "I wouldn't want any company in Connecticut if they're afraid of disclosing the truth. If they don't want to comply with that, then leave. We don't want you here."
Recovery Expected in 2009 But Unemployment to Lag
The U.S. economy will begin to recover by the end of the year but unemployment is another matter, fund managers speaking at the Morningstar conference said.
Growth will be sluggish, however, and more financial services regulations will be put in place, they said.
As consumers continue to pay down their debt, the nation's GDP will grow at 1% to 2% a year, rather than the historical 2% to 3%, said Bill Gross of PIMCO. "Our inclination to shop and to consume basically was exaggerated to an extreme proportion," he said. Going forward, he said, "Growth will be stunted. It will be a different type of world, and we have to get used to that."
Gross added that 401(k) balances will take years to recoup the average 41.4% losses experienced since the Dow reached a record high in October 2007.
Other speakers, however, were far more optimistic about the market outlook, citing bargain prices. "The reset button was hit in September," said Tom Marsico of Marsico Capital Management. "Valuations, especially in financials, are as compelling as I've ever seen."
Jeff Mortimer, chief investment officer of Charles Schwab, added, "The market is clearly saying the worst may be behind us, "though that doesn't mean good times are ahead."
SEC Begins $78 Million AIM Fair Funds Payment
The Securities and Exchange Commission began repaying more than 590,000 AIM investors $78 million in a fair funds distribution for the market timing that hurt their returns.
The fair fund includes $50 million in disgorgement and penalties collected from AIM Advisors and AIM Distributors following a case brought in 2004. This also includes $11 million in disgorgement, penalties and interest from Bank of America Capital Management Distributors and Bank of America Securities and $12.4 million in disgorgement, penalties and interest from Bear Stearns.
Asset Managers' Bonuses Seen Declining 25%-35%
With investment banking earnings set to improve this year, many executives will, despite government intervention, get bigger bonuses this year, but that will not be the case for mutual fund or other asset management executives, according to compensation consultant Johnson Associates.
On the other hand, the firm predicted, other bonuses may rise as much as 20% to 30%, helped by improvements in commodities, currencies, derivatives and interest-rate products. However, those who work in underwriting and advising may not fare as well, with their bonuses decreasing between 15% and 20%, according to Johnson Associates. And bonuses for those who work in asset management may drop 25% to 35%.
SEC Selects Members of Investor Advisory Group
The Securities and Exchange Commission has announced members of its newly created Investor Advisory Committee, to give investors a greater influence over its work. The co-chairs are Richard "Mac" Hisey, president of AARP Financial, and Hye-Won Choi, head of corporate governance for TIAA-CREF.
The other members are: Mark Anson, president and executive director of Nuveen Investments; Mercer Bullard, founder of Fund Democracy; Jeff Brown, SVP of legislative and regulatory affairs at Charles Schwab; Stephen Davis, senior fellow at Yale University's center for corporate governance; Abe Friedman, global head of corporate governance and proxy voting at Barclays Global Investors; Mellody Hobson, president of Ariel Capital Management; Dennis A. Johnson, managing director of Shamrock Capital Advisors; Adam Kanzer, general counsel of Domini Social Investments; Mark Latham, director of Proxy Democracy, a not-for-profit organization helping individual investors; Barbara Roper, director of investor protection at the Consumer Federation of America; Dallas Salisbury, president and chief executive officer of the Employee Benefit Research Institute; Kurt Schacht, managing director of the CFA Institute; Damon Silvers, associate general counsel for the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO); Kurt Stocker, chairman of the individual investors advisory board of the New York Stock Exchange; and Ann Yerger, executive director of the Council of Institutional Investors.
Only 59% Aware of Health Savings Accounts
Six years after health savings accounts were introduced, only 59% of the population has heard of them, only half of these people actually understand them, and only 14% of the overall population own them, Guardian Life Insurance found in its Spotlight on Consumer-Driven Health Plans Survey.
"Because these plans offer compelling benefits for both employers and their employees, we wanted to uncover the obstacles to increasing participation, identify key motivators and develop Guardian resources to expand ownership of HSAs," said Tim Bireley, vice president of group medical at Guardian.
Fifty-two percent did not know that contributions to HSAs are tax deductible, and 55% did not know that withdrawals used for qualified medical expenses are also not subject to taxes. In addition, 60% did not know that they can take the HSA with them when they switch jobs.
For their part, employers also mistakenly think that HSAs are complex. Many also do not contribute to employees' HSAs, and Guardian found that would make the plans more attractive to 61% of employees. Fifty-seven percent of workers also said that if insurance for critical illness were included, that would make HSAs more compelling.
"As the economy, coupled with rising healthcare premiums, forces business owners, employees and benefit decision makes to make difficult financial choices regarding their healthcare offerings, consumer-driven health plans can provide a solution," Bireley said.
Only 33% of Parents Investing in 529 Plans
Only 33% of parents are investing in college savings 529 plans, and only 20% of households earning $150,000 or more are taking advantage of them, according to a Gallup survey commissioned by Sallie Mae.
"I'm surprised at how many people think everyone gets some financial aid," financial planner Linda Leitz told Dow Jones. Of the wealthier families that are not using 529 plans, Leitz said she expects many of them are relying on grandparents to pick up the college tab. But given the average annual $50,000 price tag at private college, Leitz said, parents may be overly optimistic about other family members' generosity.
Nothing can beat the federal and state tax advantages of 529 plans, said Joe Hurley, founder of savingforcollege.com. To raise awareness about 529 plans, suggest Andrea Feirstein, managing director of AKF Consulting, which works with 529 plans, the industry should tout the plans' tax advantages and low-risk choices available.
Right now, because of the market volatility, a lot of parents are investing in money market funds, she said. They would stretch their money further if they invested in money market funds within a 529 plan, she said.
New AARP CEO Touts Commitment to Savings
In an interview with the Newark Star-Ledger, AARP Chief Executive Officer A. Barry Rand said he is intent on alleviating the "shock and pain" that is causing some people to believe it's no longer possible to achieve the American dream.
"Our answer at AARP has been: We can't let that happen," Rand said. "We must make sure the American dream continues as it always has."
To that end, AARP is promoting the benefits of hiring older workers, in an effort to help those in or near retirement who lost a considerable amount of their savings manage day-to-day finances. And to help older Americans continue to feel useful, AARP is also encouraging those who don't need to work to volunteer.
Healthcare is another big concern of AARP, Rand said, which is why AARP is encouraging the government "to study every possible way to cut healthcare costs and simplify the overall system."
And given the tremendous decline in the markets over the past year, AARP is very glad the government did not privatize Social Security, which AARP lobbied against, Rand said. "Just imagine where Americans would be today if Social Security were in the same shape as their 401(k)s," he said.
Citi Governance Portal Free for Regulatory Clients
Citi has launched a free Fund Governance Portal for its regulatory administration services clients.
It includes compliance and regulation data, documents and links, including key connections to the Securities and Exchange Commission, to help a fund firm's board and legal team manage its governance program.
Duane Dewey, executive vice president of corporate banking and wealth management at Trustmark Investment Advisors, which runs the Performance Funds, has been using the portal, and said of it, "I applaud Citi on introducing the Fund Governance Portal. It provides enhanced efficiencies through technology that will enable our team to access, review and share current and past documents." In addition, it has key security features, Dewey said.
As Citi Managing Director of Regulatory Administration and Compliance Bruce Treff noted, given current economic conditions and the fast-moving regulatory environment, the entire investment management industry is under pressure to realize operational efficiencies.
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