Invesco Investors Get $418M in Fair Funds

The Securities and Exchange Commission has announced the fair fund distribution of approximately $418 million to more than a million Invesco Funds investors harmed by market timing. The distribution includes $325 million in disgorgement and penalties after the Commission settled proceedings with Invesco in 2004, plus $39 million in accrued interest.

The distribution also includes approximately $45.8 million in disgorgement, penalties and accumulated interest from Banc of America Capital Management, BACAP Distributors and Banc of America Securities, LLC Fair Fund; and approximately $8.7 million in disgorgement, penalties and accumulated interest from Bear Stearns.

The SEC has returned approximately $7 billion in fair funds to investors since gaining increased authority by the passage of the Sarbanes-Oxley Act of 2002.

Many Target-Date Funds Juice Returns With Junk

Many target-date retirement funds are still heavily invested in risky, high-yield junk bonds in order to give investors the yields they promise.

Six of the top nine target-date fund providers contain high-yield corporate bonds in their 2010 portfolios as of September, according to Morningstar data.

The John Hancock Lifecycle 2010 Fund had 35% invested in below-investment-grade bonds, followed by the Principal LifeTime 2010 Fund, with 21%; the Fidelity Freedom 2010 Fund, with 17.1%; the T. Rowe Price Retirement 2010 Fund, 13.1%; American Funds' American 2010 Target Date Retirement Fund, 11.4% and the TIAA-CREF Lifecycle 2010 Fund, with 6.6%.

"People are uninformed of the massive amount of risk they're undertaking," Tim Wood, a Portland, Ore.-based retirement plan fiduciary, told Bloomberg. "Participants accept that someone has gone through these things and they're reasonable."

Vanguard, Wells Fargo and ING don't have any junk bonds in their 2010 or 2015 target-date funds.

"I am extremely disturbed by the amount of junk bonds found in many 2010 target-date funds," said Sen. Herb Kohl (D-Wis.), chairman of the Senate Special Committee on Aging. "Stronger regulation is needed to ensure that participants on the brink of retirement are not exposed to such excessive risk."

Fidelity Expands 401(k) Investment Lineup

Fidelity Investments has expanded the investment options on its advisers' 401(k) platform. Under the leadership of Rich Linton, the new head of the firm's adviser 401(k) business, Fidelity's platform additions include mutual fund giants Franklin Templeton, Aberdeen, Calamos and MFS.

Fidelity added over 550 mutual funds from nine new fund families in 2009, giving advisers access to more than 2,000 funds from over 40 firms, including 1,100 institutional class shares. Fidelity has seen a growing demand for institutional class offerings, especially among larger plans.

"We want to continue to allow our adviser retirement business to grow in the marketplace," Linton said. "We have seen over the last few years that the trend in the 401(k) recordkeeping space has been open architecture. And we want to add as much choice and flexibility to our advisers as possible."

Fidelity's adviser retirement platform has grown its plans by 15% over the last three years, and 16.5% in terms of participants. The additions made to the platform's investment options were done based on demand from Fidelity's advisers. Linton expects to add some additional fund families to the platform in 2010, but not at the clip that it did this year. The additions made in 2009 represent a 25% increase year-over-year from 2008 for Fidelity.

Putnam's Absolute-Return Funds Reach $1 Billion

Putnam Investments' suite of target Absolute Return Funds has surpassed $1 billion in assets, less than a year after they were launched.

"This marks the emergence of a major new category in mutual fund investing in America," said Putnam President and CEO Robert L. Reynolds. "Reaching this milestone so quickly reflects the very strong appetite in the marketplace for products that are designed to produce more steady investment returns over time to address volatility, longevity, inflation and income concerns."

Reynolds believes absolute-return strategies will become a major part of the investment landscape in the coming years and will have a place in 401(k) plans, 529 plans, target-date funds and other savings vehicles.

"Less than a year after the funds were launched, over 350 brokerage and wirehouse firms and 4,800 financial advisers are already using the Putnam Absolute Return Funds with their clients," Reynolds said. "With a reawakened awareness of risk across all asset classes, as well as approximately $11 trillion in cash still sitting on the sidelines of the markets, we think there is enormous potential for the continued growth of these strategies among mainstream investors."

Bank of New York Mellon Buys Structured Products Analytics Firm Portsmouth

Bank of New York Mellon has purchased Portsmouth Financial Systems, a developer of modeling and analytics for structured credit transactions, so that it can give clients and investors more transparency in structured credit portfolios, including actual or predicted security cash flows and loan-level historical data analysis. The service will initially focus on analysis related to U.S. residential mortgage-backed securities and will eventually expand to include other structured assets globally. The deal price was not disclosed.

Schwab Adds to Suite of Low-Cost Exchange Funds

Charles Schwab Investment Management has unveiled two new exchange-traded funds, with no online trading commissions for Schwab clients and low operating expense ratios.

The two new funds are the Schwab U.S. Large-Cap Growth ETF and the Schwab U.S. Large-Cap Value ETF, which are in addition to Schwab's four other ETFs launched in November: U.S. Broad Market, U.S. Large-Cap, U.S. Small-Cap and International Equity.

As of Dec. 9, Schwab had $209 million in assets under management in the first four Schwab ETFs, and trading volume across the four ETFs has averaged approximately 555,000 shares per day since they started trading.

Two additional Schwab ETFs, covering emerging markets and international small-cap equity, are scheduled to launch this month.

Peter Crawford, senior vice president at Schwab, said clients have indicated an interest in ETFs as a way to invest in and trade entire segments of the market: "These two new ETFs allow investors to tilt their portfolios based on whichever style, growth or value, they think will lead the market in the future."

Charging a mere 15 basis points, the new Schwab ETFs have some of the lowest expense ratios in the market.

Commission-free online trading of Schwab ETFs is also available for individual investors at Schwab, independent investment advisers who use Schwab's custodial services and through Schwab retirement accounts that permit trading of ETFs.

Symetra Life Launches 'Retirement Passport'

Symetra Life Insurance has launched a group variable annuity for the 403(b) and 457 marketplaces, with schools and not-for-profits in mind.

The Retirement Passport Group Variable Annuity is a tax-deferred solution that offers managed portfolio options from some of the top funds, including American Funds, Fidelity and Vanguard.

Passport's initial fund lineup includes 60 portfolio options from 13 well-known money managers.

"With a team fully dedicated to the 403(b) business-including experts to offer plan design and compliance coaching, experienced service personnel to answer customer and distributor questions, and SPARK file reporting capability-Symetra is positioned to be a 'go to' resource for advisers and third-party administrators serving the education retirement market," said Richard Lindsay, senior vice president of the life and annuities division at Symetra.

 

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