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DALLAS – As the subprime mortgage crisis unfolded in the latter part of 2007 and took its toll on the municipal market – specifically the bond insurance industry – one sector of tax-exempt mutual funds was quietly outperforming all other categories.

Dow Jones Indexes has launched a new faith-based index that looks to the principles of Hinduism and Buddhism, similar to traditional sin sector filters.

According to Morningstar, four formerly closed foreign small/mid-value funds have opened their doors to investors.

Women who have gone through major life events, typically widows and divorcees, are often better prepared to deal with their own finances and retirement plans because they have been forced to sit down with an adviser, according to a recent study by OppenheimerFunds. "Financial planning shouldn't have to happen during times of crisis," said Lauren Coulston, assistant vice president, advocacy and training manager at OppenheimerFunds. "We need to engage women as early as possible to start saving for retirement," Coulston said. "Eighty to 90% of women are going to be responsible for managing their own finances at some point in their lives, due to longer life expectancies and higher divorce rates." OppenheimerFunds has conducted an annual survey of women's investing habits since 1992. This year's survey interviewed 1,050 men and women between the ages of 35 and 54 and separated them by gender and marital status. It found that 44% of women said retirement plans will be their primary source of income during retirement, but half said they were not participating in a plan. Fifty-two percent of widowed respondents were very confident about how they manage their money, compared to 23% of single and 20% of married women. In addition, the survey found that 46% of widows have visited a financial adviser, whereas only 16% of single and 24% of married women have. Furthermore, 43% of widows have no debt other than a mortgage, whereas 34% of single and 20% of married women reported no debt. "I have found that traumatic life events like a divorce or death of a spouse often bring someone into my office," said Harold Evensky of wealth management firm Evensky & Katz. Women are fundamentally better investors, Evensky said, not because they are more knowledgeable than men, but because they are more likely to listen to advice without letting their egos get in the way. In the old days, "money was a very dirty topic that women were protected from," said Barbara Steinmetz of Steinmetz Financial Planning. "The vast majority of women deferred involvement for various reasons." A married couple typically finds that each person has a different set of skills, Steinmetz said. Some people are better at money management, but it isn't gender-based. Evensky said most of his clients are married, but often only the husband will come in on the first visit. Getting Involved "We encourage them to bring their spouse in, and often we'll schedule a meeting with the wife, independent of the husband," he said. "We try to create a more comfortable environment where we discuss the philosophy of saving, markets, the nature of investments and how decisions are made. I find that women are much more receptive." Many women still rely on their husbands to take care of everything, but eventually, due to a variety of reasons such as illness, divorce or death of a spouse, women are being forced to take on that role, said Debra Neiman of Neiman & Associates Financial Services. The OppenheimerFunds survey found that 68% of widows listed retirement as their primary investment goal and were less likely than single, married or divorced women to cite a lack of extra money as a reason for not participating in a retirement plan. Forty-one percent of widows rely on a financial adviser for investing advice, while only 17% of divorced women, 17% of married women and 11% of single women rely on an adviser. Women are extremely goal-oriented and need to make retirement and healthcare needs their top long-term priorities, according to OppenheimerFunds, but many women have a difficult time getting started. A Clear Goal "You have to have a goal and work toward it," Steinmetz said. "If you don't have a goal, you don't know if you're getting closer. Wanting to retire wealthy is nice, but it's not a goal." "The thing I'm hearing all the time is, We need money now. We can save later. I've got a lot of years to go, and I don't even know if I'm going to be here,'" she said. "I have to explain to them in cold, hard numbers that if they don't do something now, they are not going to have a retirement." Even saving $50 a month over several decades could provide an investor with more than $500,000 by the time they retire, according to OppenheimerFunds. When informed of this, more than half of single and married respondents said they were strongly motivated to start saving, while widows were least likely to find this motivating. When female respondents were asked if they would use an extra $1,000 toward a vacation or retirement, more than half said they'd spend it on vacation. "It appears that women investors say one thing but do another when it comes to retirement savings," Coulston said. "This presents a good opportunity for advisers to try to engage women as early as possible." (c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com

Asset Management Firms Hiring More Aggressively Although the sell side has virtually halted all of its recruiting efforts due to the subprime crisis, the buy side is aggressively hiring, in anticipation of the oncoming wave of retiring Baby Boomers and the increasing internationalization of markets, according to Russell Reynolds. "This has been an historic year in the asset and wealth management industry," said Russell Reynolds Managing Director Cornelia L. Kiley, who is with the firm's asset and wealth management practice. "The mid-year market turbulence was not a signal to retrench, but, rather, to set the performance bar even higher. The relentless pursuit of alpha has led to upgrades from the C-suite to portfolio management to the back office." Russell Reynolds found that turnover in the C-suite this year has been 15% higher than in 2006, due to boards' impatience with underperformance, coupled with a large number of executives reaching retirement age. There is incredible demand for chief investment officers, leading to generous compensation packages. As firms diversify their investment holdings, they are particularly interested in CIOs with experience in a broad array of asset classes. Emerging markets has also been a hot topic this year, particularly real estate development. "Investment professionals with a track record of high performance in these markets-who understand the real estate aspects of a deal and can accurately underwrite the risk-are exceptionally scarce," according to Russell Reynolds. In addition, hiring for technology and operations executives continues to be robust, particularly those who can seamlessly connect the back office to the front office. Thus, "there is an increasing emphasis on candidates with firsthand understanding of investment management business processes, ranging from risk management and financial reporting to specific product strategies and portfolio management," Russell Reynolds said. Rafferty Fined $400K-Plus For Late-Trading Troubles The Financial Industry Regulatory Authority has fined brokerage Rafferty Capital Markets more than $400,000 for failing to prevent its hedge fund clients from late trading and market timing mutual funds between January 2001 and August 2003. The fine is $350,000, along with $59,605 in restitution that Rafferty must repay to two mutual fund families. In addition, FINRA said, Rafferty helped the hedge fund clients escape detection by opening multiple customer accounts and different brokerage branch codes. Besides being prevented from opening new mutual fund brokerage accounts for new or existing clients for 90 days, Rafferty must review its compliance and operations procedure to prevent any other occurrences of late trading or market timing, and retain electronic communications and record the times of receipt and entry of mutual fund orders. "Funds must implement systems to ensure that mutual fund orders processed after the market close reflect orders received from customers during regular trading hours," said Susan L. Merrill, FINRA executive vice president and chief of enforcement. "Otherwise, they can gain an unfair advantage." Hedge Funds Brace for Government Lawsuits With New York regulators investigating 30 hedge funds for potential conflicts of interest and insider trading, California attempting to require them to register and the credit markets threatening to wreak further havoc, hedge fund executives are bracing for a wave of action against them in 2008, The National Law Journal reports. "Anytime a hedge fund blows up, you are going to see class actions, and a lot of cases are going to end up in [SEC] receivership and bankruptcies," said Ross Intelisano, whose law firm, Rich & Intelisano, is representing investors in the now-defunct Bayou Group. "We see this as a growing area of our practice. Absolutely, in 2008, this will continue as more hedge funds sink." U.S. District Judge Tosses Lawsuit Against Salomon Judge Paul A. Crotty of the U.S. District Court for the Southern District of New York ruled that defendant Salomon Brothers sufficiently proved that the fees it charged on nine of its mutual funds were justifiable in light of the funds' superior performance and customer service, Dow Jones reports. In so doing, he dismissed a lawsuit against the investment advisors and distributors to the funds. "Plaintiffs allege that the performance of these funds was not up to par with other similar funds in the industry,'" the judge ruled. "According to plaintiffs, this failure belies defendants' argument that their superior quality and performance justifies their high fees. Performance is only one measure, however, and plaintiffs fail to allege anything about the array of services offered to fund customers, such as telephone or web assistance or the ease with which transactions are effected," the judge continued. "Instead, they ask the court to extrapolate deficient services from allegedly substandard investment returns." The lawsuit, originally filed in 2004, said that the fees charged by the funds' distributors were disproportionate, given that they had not been negotiated at arm's length but granted to a transfer agent subsidiary of then-parent company Citigroup. In May 2005, Citigroup, then owner of the Salomon Smith Barney funds, settled Securities and Exchange Commission fraud charges against its Citigroup Global Markets and Smith Barney Fund Management units over an alleged windfall of nearly $100 million in transfer agent fees that the units pocketed, by distributing $208 million to investors. PowerShares Applies to Offer Three Active ETFs There are rumblings, once again, over the possibility of creating the first actively managed exchange-traded fund. PowerShares Capital Management has filed with the Securities and Exchange Commission to offer three such funds and has plans to offer an actively managed bond ETF, as well, The Wall Street Journal reports. "We're hopeful these funds will create a tremendous new market for ETF investors," said PowerShares CEO Bruce Bond. "We're expecting this will open a lot of interest among active managers in ETFs." Matt Hougan, editor of IndexUniverse.com, agreed: "It's certainly going to create a lot of excitement among investors who haven't up to this point been interested in ETFs." International Fund Skippers Begin to Cool on China Exposure A number of managers of international and emerging markets mutual funds who had invested heavily, and successfully, in China are now cutting back on their holdings, the Associated Press reports. Noting that China's domestic A shares have risen nearly 500% in the past two years, Justin Leverenz, manager of the Oppenheimer Developing Markets Fund, said he expects the bubble to burst soon-and fast. "2008 will be an incredibly difficult year for Chinese equities," Leverenz said. The market is in the "later, waning stages of a bubble," he added. Although Antoine van Agtmael, chief investment officer of Emerging Markets Management, believes in economic growth in China, he says the stock market there has been clouded by a buying frenzy. Van Agtmael, who is credited with coining the term emerging markets, has been so nervous about the Chinese market for a while now that he cut back on his holdings quite some time ago, which he now regrets as being too hasty. "I don't trust this phenomenal rise in the A share market and now the H share market [on the Hong Kong exchange] at all," van Agtmael said. "Like all bubbles, it will end in tears. I believe this is going to be sooner rather than later," he said, estimating that the market could fall as much as 70%. One data point that troubles van Agtmael in particular is China's GDP growth rate. Over the past 20 years, it has averaged between 8% and 10% but recently rose to 11%. Six of the top 10 best-performing funds so far this year through Nov. 20 have a China focus, the No. 1 fund, AIM China A, up 86.12%, according to Morningstar. Bill Gross Likens Subprime Crisis to Great Depression Bill Gross, chief investment officer at PIMCO, said the effects of the subprime crisis have yet to be felt-and they will be devastating, the Financial Times reports. "We haven't faced a downturn like this since the Depression," he said. "[The] effect on consumption, its effect on future lending attitudes, could bring [America] close to the zero line in terms of economic growth. It does keep me up at night." And Gross is not alone. Other asset managers are echoing the sentiment that the subprime crisis could dampen the economy for years, and investor confidence is beginning to show its cracks. The subprime crisis has created three key problems, the first of which is escalating estimates of losses. Originally, Federal Reserve Chairman Ben Bernanke said losses would be $50 billion, but this month, he increased that to $150 billion-but some experts say it could be even double that, or more. As a result, investors could default on as much as $300 billion in other types of debt. "Investors are now starting to worry that the subprime crisis will broaden out into other forms of consumer and real estate lending," Goldman Sachs, which estimates subprime losses will top $445 billion, said in a recent report. The second problem is uncertainty about how this will affect the financial services industry as a whole, due to the fact that many types of assets have been securitized. "Grenades keep going off in the system, and nobody quite knows what to think or expect," said a policymaker. Thirdly, banks are expected to cut back on lending, which will definitely slow economic growth. "Three months ago, it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth," said Lawrence Summers, former U.S. Treasury secretary. But now it appears very likely there will be a "U.S. recession that slows growth significantly on a global basis." 41% of Ultra-Wealthy Say They're Assertive Investors In spite of the belief that very wealthy investors are most interested in preserving their wealth, 41% of those worth $25 million or more describe themselves as "aggressive" or "most aggressive" investors, according to a report from Spectrem Group, "The $25 Million Plus Investor." Two-thirds of their assets are in stocks, alternatives, mutual funds, separately managed accounts, hedge funds, private equity, venture capital or other investable assets. Only 6% of those worth $25 million or more consider themselves conservative, and only 9% of those worth $5 million or more consider themselves conservative. "Even in the face of intense financial market turmoil, investors with the most to lose are willing to roll the dice with risky investments," said George H. Walper, Jr., president of Spectrem Group. "This raises eyebrows, given that they have two-thirds of their wealth tied up in investable assets." (c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com

NEW YORK-Millions of Baby Boomers in their 50s are woefully unprepared for retirement, but it's not too late to convince them to start planning. "Boomers need to manage their savings to create a dependable income stream," said Lynn Ford, senior vice president and managing director of the retail retirement group at Wachovia. "They will need a lot of advice from the financial services industry. We need to be better prepared to offer advice about the products we deliver." Many 55-year-olds haven't started building the bulk of their savings and vastly underestimate how far their savings will stretch, said Suzanne Priebatsch, senior vice president and wealth management financial adviser at Smith Barney, last week at a conference titled "Market and Product Development in Retirement Services," hosted by Marcus Evans. "Forty percent of Americans near retirement lack the ability to replace more than half their income," said Bill Feldmaier, director of distribution and strategy for retirement services at Comerica Bank. "The average investor is thinking, How am I going to pay my bills this week,' not, When am I going to retire?'" Despite this lack of preparation, many investors are still assuming they will retire at age 65 and withdraw 10% of their savings every year, Priebatsch said. "We have a serious problem with assumptions," she said. A much more realistic withdrawal rate is between 4% to 6% a year. If you want to withdraw $50,000 a year, you will need $1 million in savings, she said. Even a million dollars doesn't stretch as far as it used to. Priebatsch said she recommends her clients take a trip to England to see how inflation can diminish the value of their savings. For example, she said a sandwich that would cost $5 in the U.S. ends up costing $15 in England, when you factor in the exchange rate. It gives a whole new meaning to the term "mind the gap," she said, referring to the famous warning on the London subway system. Investors should "mind the gap" in accumulation of assets versus their ability to maintain their standard of living, she said. "Boomers have high expectations for retirement," said Elizabeth Butler, director of IRA and income planning product management at Merrill Lynch. "The key is to manage their expectations." Butler said 70% of high-net-worth investors are dissatisfied with their financial adviser. Dissatisfied clients have an average of 17 or fewer contacts with their adviser in a year, while satisfied clients have an average of more than 28 contacts. Sixty-five percent of U.S. millionaires are over the age of 55 and will transfer trillions of dollars in wealth in the next few decades, she said. Providers can take advantage of dissatisfaction to capture more assets. But not everyone approaching retirement will be as prepared, she said. Many Boomers expect to work longer and will be carrying debt into retirement, Butler said, but this isn't realistic. "There are not going to be enough jobs for 90-year-olds who can't afford to retire," Feldmaier said. For older investors who no longer have the luxury of time, there are still ways to keep them from being penniless when they're too old to work, but they'll need to act quickly and visit with a financial planner. First, they'll need to start saving as much as possible by cutting back on expenses and paying off any debt. They can also save more by working longer. Some retirees may be relying on payments from Social Security, but many fear the 78 million Boomers will break the system. In the next 10 years, 50 million Boomers are expected to retire. If they can afford to, a retiree can defer Social Security benefits for a few years to increase their future benefit amount. "Longevity should be a blessing, but it could be a curse, not just to the Boomer generation but to the generation below it," Priebatsch said. By 2025, 32 states will have the same demographics that Florida has now, said Bryan Hodgens, senior vice president and director of sales of the retirement and investment products group at Wachovia. "We can solve this crisis fairly easily by either raising taxes on the workforce or extending the age at which people can draw benefits," Hodgens said. "It's easy to say, but hard to implement." The benefit withdrawal age has already been raised de facto, said Donald Mazzella, chief operating officer for HSAfinder.com. He said 34% of Americans age 65 did not draw retirement last year in order to get a higher payment in the future. Rising healthcare costs are another expense that will be very hard for Americans to absorb, Hodgens said. (c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com

Standish Becomes Director At Fisher Wealth Mgmt. Fisher Investments' wholly owned U.K. subsidiary, Fisher Wealth Management, has hired Miles Standish as managing director. "I am delighted to have the opportunity to realize some very exciting prospects for Fisher in the U.K. as the wealth management market as a whole experiences unprecedented levels of growth," Standish said. He spent the last 25 years of his career with Towry Law, a wealth management, financial planning and employee benefits company. "Fisher Investments has experienced tremendous growth in recent years, in large part due to the strength of our investment process, supported by our distinctive marketing approach," said Ken Fisher, chief executive officer of Fisher Investments and chairman of Fisher Wealth Management. "Miles' wealth of experience in the industry and track record of business success makes him the ideal person to drive the next phase of growth in our U.K. operations." SEC Deputy Director Joins Simpson Thacher as Partner Peter Bresnan has just left his post as Securities and Exchange Commission deputy enforcement director to become a partner with Simpson Thacher & Bartlett. Bresnan has been with the SEC since 1995, served as lead trial counsel in the lawsuit against WorldCom and was responsible for finalizing the SEC's financial fraud actions against Fannie Mae and Freddie Mac. "Peter has been an eloquent and passionate advocate for investors' interests," said SEC Chairman Christopher Cox. "His strong leadership of our national enforcement program has upheld the SEC's preeminence as the gold standard of securities law enforcement. Investors large and small, America's capital markets, and the entire nation have had a courageous champion in Peter Bresnan. His many years of outstanding public service place all of us deeply in his debt." Integrity Hires Corrigan as Illinois, Wisconsin Director Bob Corrigan has joined Integrity Mutual Funds as regional wholesaling director for Illinois and Wisconsin. Previously, he was an institutional sales manager for Caterpillar Investment Management, where he played a key role in increasing assets from $2.8 billion to $4.1 billion. He has also held positions with Santa Fe Trust, Fidelity Investments and Federated Investors. Standish Mellon Appoints Lukens to Oversee Products Standish Mellon Asset Management, a fixed-income subsidiary of The Bank of New York Mellon, has hired James W. Lukens as senior product manager, in charge of product management and marketing communications, managing product specialists and the firm's graphics and proposal-writing teams. He reports to Alex Over, managing director of sales, marketing and client service. Lukens has nearly 20 years of experience in fixed-income investment management, communications and client service, the last 11 of them spent with Putnam Investments, where he was senior vice president and head of the fixed-income institutional portfolio management team. Lukens held a similar product management and communications position with Keystone Investments, and he was previously an officer with the endowments of Brown and Yale universities. Earlier, he was on the faculty of the English department at the University of Wisconsin, where he taught marketing communications to graduate and undergraduate business students. (c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com

The subprime crisis has proved that mutual fund executives should reassess their risk management procedures, according to a Tower Group report called "Multifunctional Integration: The Positive Side of Risk." "Risk analyses that are siloed' in one area of an institution may exaggerate the danger attached to new products or services, thus leading institutions to stifle innovation and forgo growth opportunities," said Guillermo Kopp, executive director and global research fellow at Tower Group and the author of the report. The report's thesis is that the subprime crisis has exposed structural deficiencies in the financial system globally, especially in risk management. Many financial institutions cope with change in a reactive way, with their main orientation being the avoidance of threats that may have a negative impact in the future, according to Tower Group. While this is an understandable reaction, institutions should understand and manage risk and financial exposure more holistically, the report said. Asset management companies should consider the risk in subprime debt and collateralized debt obligations from the perspective of the way any one product interacts with the companies' holdings in their entirety. In addition to subprime debt and CDOs based on these mortgages, another area of potential vulnerability for the mutual fund industry is the dozen or so money-market mutual funds that are likely to be holding structured investment vehicles (SIVs). In many cases, SIVs raise money by selling short-term debt and using it to buy longer-term securities that carry higher yields. They have become difficult to sell during the recent market turmoil. Kopp argued that "poor integration of risk management across an organization masks the interdependence of risk and financial indicators." This may potentially expose financial institutions to severe losses. He goes on to say that many institutions only become aware of their risk management deficiencies once a lapse in controls or unforeseen interdependencies between events causes a major business problem. Events triggered by the subprime crisis are examples of this type of interdependency. Kopp said the credit crisis that started this summer serves as a harsh reminder that such financial risks as liquidity and credit problems are deeply and globally interdependent. He suggested that organizations work to integrate the management of financial functions with operational and other risk types such as brand damage, business continuity, disruption of the supply chain and geopolitical unrest. But beyond avoiding trouble, Kopp says this multi-faceted approach to risk management can enhance overall business operations. He said that leaders of financial institutions must understand the changing variables in today's interconnected world. "Proactive leadership, in which chief financial officers and risk managers play key roles, is critical to achieving integration and sustaining competitive advantage," he said. A more integrated approach to risk management can drive other businesses and client-centric benefits, including improved quality and transparency of information, Tower Group said. It should also assist in relationship pricing, process simplicity and efficiency, more effective decision-making and overall organization resilience. One industry expert, Carl Frischling, a partner at the law firm Kramer Levin Naftalis & Frankel, said one outgrowth of the subprime crisis is more discussions at mutual funds' boards and at the Securities and Exchange Commission, to make sure there is increased transparency with respect to valuation. Although Frischling hasn't seen any money market funds in danger of "breaking the buck," he said discussions are ongoing to keep this a remote possibility. Frischling noted that it is relatively easy to value securities, but less easy to put a price on instruments that are marked to market such as those based on subprime mortgages. It is important for industry players to determine who is ultimately the owner of the security they have invested in, he said. Another issue for the industry going forward is what is the level of counter-party risk of instruments in their portfolio. Frischling said one of the lessons for mutual fund companies emerging from the subprime crisis is that principals should worry about what they don't know. "No one had the foresight to see the subprime problem developing." He said the experience has raised the awareness of other risks that fund managements and boards might encounter. One other risk boards are more closely evaluating, he said, is the problem in determining what some of a fund's holdings are worth. The process of manufacturing and selling subprime debt led to the creation of a number of financial instruments with misleading credit ratings. But he pointed out that improved risk management for mutual funds isn't as simple as condemning some of the new products. Frischling argues that it isn't that CDOs are bad, but how they are used that can present risk management challenges. Lewis Altfest, president of financial advisory firm Altfest, said the next crisis that the asset management industry is likely to face will grow out of its exposure to leveraged buy-out debt purchased during the private equity boom of the last few years. "We're going into an economic downturn, and there will be defaults. It could hit the mutual fund industry as hard as the subprime crisis has," Altfest said. (c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com

NEW YORK-Millions of Americans will be looking for 401(k) investment advice as they prepare for retirement, but until gaps are filled in relation to conflict-of-interest liability, most 401(k) administrators and sponsors will remain reluctant to offer guidance. "The new regulations have lot of holes right now that haven't been cemented," said David Cesareo, director of product strategy for CNA Financial, at a Marcus Evans conference, "Market and Product Development in Retirement Services," here last week. "This opens up liability in an enormous way." The Employee Retirement Income Security Act of 1974 (ERISA) was designed to help individual investors and enable the switch from the traditional defined benefit pension plans to defined contribution plans, Cesareo said. Employees were required to opt-in to their plan to take advantage of building their own retirement savings, but it soon became clear that most employees did not have the drive to do this on their own, Cesareo said. Last year, the Department of Labor passed the Pension Protection Act to bring ERISA up to date and allow employers to automatically enroll employees in a 401(k) plan, he continued. Employees can choose to opt-out of the plan if they wish. "The Pension Protection Act made auto' the answer to everything," said George Revoir, senior vice president of distribution for John Hancock. "It built a very systematic approach to retirement. Now it's virtually impossible to lose a lawsuit, but does it really solve the problems?" Although lifecycle funds are gaining traction in 401(k) plans, the automatic, default option typically puts an investor into a very conservative plan with a low contribution percentage, Cesareo said, regardless of the investor's age, income or risk tolerance. At that rate, most 401(k) participants' balances won't be nearly enough to retire on-the average 401(k) account balance at the end of 2006 was $66,500, according to Fidelity- but the rationale is that at least it will be something. But as accounts grow, participants in default plans will eventually need personalized investment advice, speakers stressed. Before the PPA, only independent, third-party advisers were allowed to give investment advice. "A major change the PPA made is that now fiduciaries can give advice," Cesareo said. They have two methods by which they may provide this advice, first, directly, as long as they disclose potential conflicts of interest and the fees they receive from the advice remain level, regardless of which investment they recommend, or second, through a neutral, computer-generated model. Conflict of Interest Allowing a fiduciary to give advice may seem natural due to their financial knowledge and contact with the client, but it's inherently problematic for a mutual fund or insurance company to provide investment advice when they offer their own products as investment options in the plan, speakers said. In fact, David Kudla, chief investment strategist at Mainstay Capital, recently outlined the predicament. The rules within the PPA to permit 401(k) advice "are as elaborate as they are ambiguous" and faulty, he said. Thus, because the potential for litigation is enormous, most fund companies have yet to embrace 401(k) advice. On top of that, there is the added problem of who will foot the bill for this advice, whether it is the administrator, the 401(k) sponsor or the investor. Many in the 401(k) industry believe the DOL needs to provide further interpretive guidance to protect fiduciaries from liability and return to the formula of providing advice from an independent third party, speakers said. "No one wants to take a stand until the DOL does, and the DOL doesn't want to," Cesareo said. But advice is crucial to the well-being of Americans in retirement, speakers stressed. Automatically enrolling employees into 401(k) plans is a great start to improving the problem of Americans not saving enough for retirement, but at some point, the employee needs to take the initiative and customize their portfolio. "From a human resources standpoint, auto enrollment really works well," Revoir said. "But auto plans without an auto type of goal aren't going to work for everyone." Getting employees to take an interest in their own future will also require educating them in plain language about plan provisions and benefits through seminars and workshops, speakers said. "Leadership should come from senior management, not HR," said Donald Mazzella, chief operating officer for HSAfinder.com. "Providing a retirement plan is smart in terms of adding profitability, because employees are happier if they have a plan. The industry should be educating leaders in the company as to the value of planning to increase employee morale. A happier workforce stays longer and works harder." (c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com

NEW YORK-The process of selecting mutual funds is changing as wholesalers' clout diminishes, according to panel members who spoke at a National Investment Company Service Association seminar for distribution executives here last week. Best practices for adjusting to the changing distribution landscape and getting past gatekeepers were noted, as distribution experts made suggestions about how to navigate in the new environment. As traditional salespeople become less important to brokers and advisers in selecting funds, distribution executives must adjust their strategies. In addition, there are some areas where the gatekeeper role is actually being played by different entities, not the relationship manager at a broker/dealer. "You have to use a different approach for some of the traditional gatekeepers. In some cases, you have to go around them," said Scott Garsson, vice president of product and channel strategy at JPMorgan Funds Management. As gatekeeping becomes more institutionalized, distribution strategies are changing. In a world of about 550 mutual fund companies, it is essential for asset managers to make sure their funds maintain visibility. But that doesn't mean inventing new products in response merely to the direction in which assets are flowing. "We don't except managers to change their approach," said Jeff McConnell, a senior investment consultant at Morningstar. He noted that because no asset manager does everything well, brokerage sponsors should pick and choose when constructing their portfolio of offerings. It can be appropriate to have a mix of well-known names and boutique offerings. The best strategy in developing new products will be the one that is consistent with an asset manager's investment management strengths. For example, not all strategies are suitable for an exchange-traded fund, although many are launched each month. Nor should fund executives design offerings just to conform to a box in the Morningstar stylebox. Participants described the recent onslaught of 130/30 funds as an example of some asset managers aiming too broadly because a category is perceived to be "hot." Preferred List Status Only the Start While getting a company's funds on a brokerage's preferred list is the common goal, it can be approached from a number of perspectives. Michael Dowhan, director of institutional business development at Morningstar, said there are various ways for fund companies to achieve maximum distribution. Some take a quantitative approach by reverse engineering a platform and assess how their funds fit in. Others take a more qualitative approach and attempt to fit their fund offerings to a target audience. Another approach recommended by panel participants is that fund companies attempt to leverage what they do well across new categories of products. McConnell said that the best broker/dealers and registered representatives have a clear idea of who they are serving, and fund companies can use this information to tailor their offerings to them. Brokerages "know if they specialize in, for example, high-net-worth individuals at certain income levels. Fund companies should package their offerings toward this specific audience," McConnell said. Jeremy Held, director, product distribution at Alps Fund Services, said that asset managers should shift their thinking from products to solutions. Noting that the marketplace is moving toward best-of-breed, open-architecture choices, he emphasized that gatekeepers will pick the best provider in each asset class. Panel members agreed that sometimes the choice of funds that a broker makes can be surprising. Speakers said that it is no longer as simple as picking a five-star fund over more lowly ranked offerings. What matters is how the products fit together and complement each other. McConnell said fund providers should avoid surprising partners with problems like capacity constraints and changes in fund selection. He ticked off style drift as another problem that can jeopardize funds remaining on preferred lists. "You should keep consultants and advisers in the loop if things are changing. There may be a good reason for these changes, but it should be communicated," McConnell said. Garsson said that the more wholesalers are institutionalized, the more important research becomes. Fund salespeople must emphasize the unique characteristics of each product or solution. Among other changes mentioned by panelists is that fund companies must now support not only direct wholesalers, but also national accounts. As a result, fund companies' relationships come more to resemble a consulting process than live sales. An additional function that is expected to increase in importance as wholesalers' influence shrinks is a thorough due-diligence process. Although much of the efforts of asset managers are directed toward getting on gatekeeper's primary lists, Dowhan cautioned that this is only the beginning of the process. Getting on a brokerage's preferred list will not in itself drive shareholder dollars into the vehicle, Dowhan said. It is still necessary to promote the identity of the fund. (c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com

MassMutual will be the exclusive sponsor of a documentary on preparing for retirement that will air nationally on PBS stations across the U.S. this coming April. Produced by WTTW National Productions, a division of Chicago public broadcasting station WTTW11, "Retirement Revolution" is meant to give viewers thought-provoking insight into how various needs in retirement have evolved over the past several decades and how they can prepare for retirement in years ahead. "With this program, MassMutual and PBS share a similar goal: to help educate the millions of Americans approaching retirement by giving them the tools and insight needed to assess how to secure their own financial future," said Ian Sheridan, corporate vice president and chief marketing officer for the retirement services division of MassMutual. "This sponsorship is a natural fit for MassMutual, as our financial professionals are committed to helping consumers prepare for various financial goals, including retirement, by listening to their needs, demystifying the process and guiding them to the next steps in building a more secure financial future." The two-hour "Retirement Revolution" program will be augmented with a companion website equipped with online financial tools and information on various retirement issues. WTTW11 and WTTW National Productions have produced TV programs for more than 50 years. (c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com

After 10 years in isolation, the Fidelity Magellan Fund has reopened to new investors, effective today.

A little-known hedge fund was a big contributor to last summer’s subprime mortgage crisis, while the fund itself profited from its skillful swaps, writes the Wall Street Journal.

Early estimates for domestic individual annuity sales for 2007 show they are on a record-setting pace, growing 6% through the first three quarters of the year to reach $189.4 billion, according to LIMRA International.

As asset managers gear up for Baby Boomers' retirement years, Richard "Mac" Hisey, chief investment officer at AARP Financial, took some time out last with to speak with MME Senior Editor Brent Shearer about how investment firms are trying to reach out to Boomers.

The Treasury Department will begin offering Social Security recipients the option of receiving payments by debit card instead of traditional checks, signaling a further effort by the government to move toward electronic technology.

Hedge Fund Managers Add Billions to Bottom Line

Kenyon Switches From Goodwin to Dechert

In a move that could change the way brokers and advisers sell mutual funds, the Securities and Exchange Commission has released a new report examining public and industry perspectives on investment advisors and broker/dealers.

Two lawsuits and two FINRA arbitration claims filed against the executives, directors, chief compliance officer, portfolio managers and independent auditor of three open-end funds and four closed-end funds managed by an affiliate of Memphis, Tenn., broker/dealer Morgan Keegan & Co., may be the tip of the subprime iceberg for the mutual fund industry.