47% of Asset Managers Expect to Expand Product Management Staff

Asset managers evidently are optimistic about renewed growth in assets under management, with 47% saying they plan to expand their full-time product management staff over the next 12 months, FUSE Research Network found in surveys conducted over the past two months. However, since 80% laid off staff over the past year, employment levels are not likely to return to pre-crisis levels anytime soon.

Another 7% plan to add freelance contractors, and 13% said they might lay off additional staff in 2010.

"Clearly, most firms have completed their business rationalization and are now strategically adding to staff," said Michael Evans, president of FUSE Research. "We believe product management is an underserved function at asset managers. Many firms recognize this and are adding incremental resources to staff."

Evans noted how critical it is to have robust product management teams as the economy begins to recover and investors once again become enthusiastic about the markets and fund offerings, saying, "Understaffing the product function at an asset manager will compromise the group's ability to effectively do their job" and create innovative offerings.

18% Plan to Save More

Sensing that the recession is nearing an end but that the recovery will be a long road ahead, Americans are planning drastic changes to the way they approach money, saving and investing, with 18% planning to save more, Country Financial found in a survey of 3,000 people.

Sixty one percent said they have been adversely affected by the recession, yet 48% said their family has coped with the economic downturn excellently or well. Still, 52% of this group said it will take at least two years for their financial situation to recover.

Twenty-eight said they have had to find additional sources of income to help pay bills, be it through a second job (30% of this group) or with their spouse returning to work (14%).

Looking ahead, 25% said they will be less reliant on credit and debt, 21% plan to continue sticking to a strict budget, and 18% plan on saving and investing more.

"Americans are incredibly resilient, and it's encouraging to see people are really trying to change," said Keith Brannan, vice president of financial security planning at Country Financial. "Making permanent, positive changes in how we all handle our money will make a big difference in achieving long-term financial security. Despite the financial setbacks that may have been outside of our control, most families can still build a financially secure future for themselves with proper planning.

"While many think it will take several years to get back on track after the recession, with time and discipline, most can achieve their financial security goals," Brannan added.

Long-Term Funds Take in $357 Billion Year-to-Date

Long-term mutual funds enjoyed their 35th straight week of inflows, totaling $8.42 billion for the week ended Nov. 11, according to the Investment Company Institute. Year-to-date, equity, fixed income and hybrid fund sales now total $357 billion.

In the latest week, stock funds experienced $1.24 billion in outflows, down from the $4.78 billion they lost the week before. Continuing a trend for 2009, investors redeemed $2.7 billion from U.S. stock funds and placed $1.46 billion into foreign stock funds.

Bond funds continued to be popular with investors, taking in $8.88 billion, up from $7.5 billion the previous week. Hybrid funds netted $782 million, more than double the previous week. Assets in money market funds continued their decline, losing $8.01 billion in the latest week, according to iMoneyNet. 

PIMCO Creates Enhanced Short Maturity ETF

PIMCO has launched an actively managed exchange-traded fund, the Enhanced Short Maturity Strategy Fund, to help cash investors earn better yields than the near zero percent money market funds now offer.

Jerome Schneider, deputy head of PIMCO's money market desk, will manage the fund. Employing strict risk controls to preserve capital and offering ready liquidity and transparency of holdings, the fund will invest in high-quality short-term investments, as money market funds do, but also expand its horizons by investing in longer maturity bonds and investment-grade fixed income.

In making these investment, the fund will take both a top-down and bottom-up approach.

Wealthy Still Skeptical of Economic Rebound, Stocks

Only 6% of wealthy investors with $500,000 or more in investable assets characterize themselves as enthusiastic about investing, while a full 49% are either reluctant or tentative about returning to the market, PNC Wealth Management found in its sixth annual Wealth and Values Investors' Outlook survey of 1,046 investors.

However, affluent investors were evenly split on their outlook for an economic rebound, with 40% expecting the economy to remain stagnant for another full year, and 51% anticipating improvement within the next six months. Among the ultra-wealthy, the outlook is slightly dourer, with 52% foreseeing the economy remaining stagnant for another year.

The crisis of the past two years has evidently taught wealthy investors that their self-assessed risk tolerance is not nearly as high as they had thought, and that they must focus on their needs rather than their desires through a properly integrated wealth management program, said Thomas P. Melcher, executive vice president and managing director of Hawthorn, a PNC Wealth Management division serving investors with $20 million or more in investable assets.

"There is no doubt that the last year has taken its toll on wealthy investors. Unfortunately, it often takes a severe crisis and a significant loss of capital for investors to discover their true risk tolerance," Melcher said. "The survey results validate the value of an integrated wealth management model, one that combines estate, financial and tax planning with investment management."

Average 401(k) Balance Rose 13% to $61K in 3Q09

Continued contributions to 401(k)s and a 34% rally in the S&P 500 in the second and third quarters have propped up average balances quite strongly, Fidelity found in an analysis of the 11 million individual 401(k) accounts it serves.

While the S&P 500 rose 16% in the third quarter, the average 401(k) balance rose 13% to $60,700. Since the end of the first quarter, when the average balance was $47,500, the average rebound in 401(k) balances has been 28%.

Participants' personal rate of return over the past year is 0.4%.

Managers Don't Foresee Rate Hike Until Late 2010

Seventy-five percent of fund managers do not expect the Federal Reserve to increase the Fed funds rate until the second half of 2010 or later, according to the November BoA Merrill Lynch survey of 218 fund managers with $534 billion in assets under management. Twenty percent think this might not happen until 2011.

While 66% believe that the existing monetary policy is "about right," 47% fear that inflation could rise within the next 12 months, up from 39% who thought so in October. Thus, 25% of the panel is overweight commodities as a hedge against inflation, up from 11% in October. Fifty-three percent is overweight emerging markets, up from 46% the month before.

"Investors see inflation as a greater risk than deflation and are hedging that risk with overweight positions in emerging markets and commodities, and an underweight position in the U.S. dollar," fixed income and utilities, said Michael Hartnett, chief global equity strategist at BoA Merrill Lynch Global Research. "We are seeing a vivid and extreme bent towards high-beta markets, such as Russia, and movement away from lower beta markets, such as Chile and Malaysia."

Fund managers also expressed a higher tolerance for risk, with only a net 1% saying they are taking lower than normal risk, down from a net 16% in September.

Caterpillar Pays $16.5M To Settle 401(k) Fee Suit

In an unusual move for a large corporation regarding lawsuits claiming excessive 401(k) fees, construction equipment manufacturer Caterpillar decided to repay $16.5 million to 80,000 former and current plan participants. The company also agreed to replace retail mutual funds in the plan with lower-cost institutional funds and hire an independent consultant to review the plan for the next two years.

Certainly, while it is difficult for investors to unearth the fees they pay in a plan, the 2009 401(k) Fair Disclosure Act now sitting in the House of Representatives could force administrators to reveal fees more clearly, and, ostensibly, this higher scrutiny could force administrators and sponsors to offer lower-cost choices. It would also encourage 401(k) plans to offer at least one low-cost index fund option and require them to disclose potential conflicts of interest.

A similar measure is now sitting in the Senate Special Committee on Aging, and the Department of Labor is working on similar rules.

73% of Retirees Looking For Ways to Invest to Replenish Savings Coffers

Americans, including retirees, are looking to return to stocks to regain the steep losses they suffered in 2008 and are optimistic they will accomplish this, Prudential Financial found in a survey of 1,001 Americans aged 45 to 75 with $100,000 or more in retirement savings.

On average, these investors say they lost more than 33% of their assets last year, but 62% are confident they can grow back this lost money by participating in their workplace retirement plans. Sixty-six percent believe they will accomplish this within the next five years.

Seventy-three percent of retirees said they are exploring new ways to grow their assets, and 75% said a product with guarantees for lifetime income, protection of principal and opportunities to lock in market gains is an attractive option.

However, their reaction to stocks is far more skeptical than it was to years ago, with 70% saying that being too aggressive with investments is riskier than being too conservative. In 2007, 50% said that was true.

"There's no doubt that investor confidence suffered over the last year, which left Americans a bit shaken as they absorbed the shock to their account balances," said Jacob Herschler, senior vice president of development for Prudential Annuities. "As a result, many investors have shifted their focus from that frustration to planning. They are using what they've learned from this period to carefully evaluate their next financial moves so that they can rebuild their retirement savings."

Thus, as a positive sign, 77% said they will pay more diligent attention to their investments following the recession, 66% would likely invest in a guaranteed income product, and 66% said they would likely turn to a financial professional for information and guidance.

Fidelity, PIMCO Among Morningstar Nominees for Manager of the Decade

Among the nominees for Morningstar's Fund Manager of the Decade, a new award program that recognizes performance, perseverance and shareholder dedication, are managers from Fidelity, PIMCO, Oakmark and American Funds.

"The past 10 years have been the most brutal period for investors since the 1930s," noted Karen Dolan, director of mutual fund analysis at Morningstar. "The nominees for this award excelled by relying on their own original research, preserving capital and having the patience to stick with their approaches."

Nominees for Domestic Stock Fund Manager of the Decade are:

* Bruce Berkowitz, Fairholme

* Charlie Dreifus, Royce Special Equity Investment

* Steve Romick, FPA Crescent

* Joel Tillinghast, Fidelity Low-Priced Stock

* Don Yacktman, Yacktman

Nominees for International Stock Fund Manager of the Decade are:

* American Funds EuroPacific Growth A-the team

* Manning & Napier World Opportunities A-the team

* Jean Marie Eveillard, First Eagle Global

* David Herro, Oakmark International Small Cap and Oakmark International

* Dennis Stattman, BlackRock Global Allocation

Nominees for Fixed Income Fund Manager of the Decade are:

* Dodge & Cox Income-the team

* Dave Fuss, Loomis Sayles Bond Retail

* Bill Gross, PIMCO Total Return Institutional

* Jeffrey Gundlach, TCW Total Return Bond

* Christine Thompson, Fidelity Municipal Income and Fidelity Advisor Municipal Income.


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