Special Program Root Tag

Fundamental indexing has had the mutual fund excited about the investment idea, but early returns from one of the most major fundamental indexing shops, WisdomTree Investments, have not been stellar, according to Dow Jones. Conventional index funds have been around for 30 years and aim to match market results, betting that they will be able to beat most stock-picking mutual funds over time. Recently, a number of prominent index fund critics have argued that these funds are flawed because traditional indexes weight companies by market capitalization, or the total number of their outstanding shares, instead of fundamental measures such as company’s earnings or dividends. Last month, WisdomTree gave a glimpse into how the 20 original ETFs actually performed since their one-year inception. The results showed that WisdomTree may have to wait awhile longer before putting conventional indexing company giants such as Barclays, State Street Corp. or Vanguard Group out of business. However, the returns are preliminary, and ideally investors should look three to five years to make a sound judgment. WisdomTree’s basic domestic style funds lagged ETFs that track conventional indexes from those three competitors basically across the board. The international funds performed better than domestic funds, outperforming other popular ETFs in a number of categories, but still returns were mixed. For the domestic funds, results were the same whether WisdomTree funds were compared to competitors’ balanced funds or value-oriented funds. Critics of fundamental indexing commonly state that fundamental ETFs are similar to value funds. The international funds were compared only to competitors balanced funds because there are few international value ETFs available to investors. The company is “very, very pleased” with its one year results, said Bruce Lavine, president of WisdomTree. He emphasizes what he considers strong returns by a number of its international funds. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

One British data hub is banking on the idea that its location—a former military nuclear bunker site—will assure customers that their top-secret trading data is safe. The Bunker Secure Hosting, based in Kent, provides round-the-clock database and web hosting services. London-based youDevise, which offers web-based portfolio management to institutional investors, including hedge funds, has partnered with The Bunker since launching the Trade Idea Monitor in 2005. In 2006, youDevise and The Bunker partnered to launch the Hedge Fund Information Provider. The tools have 4,000 subscribers worldwide, who access these databases from their desktops in hopes of getting an edge on competition. “We handle highly sensitive positions and trading recommendations on behalf of clients that are accessible all over the Internet, so each investment bank or asset manger has to be confident that The Bunker meets their security demands,” said Colin Berthoud, managing director of youDevise in a recent joint release. Five youDevise clients have tested the Bunker and found no fissures in its foundation, he said.

U.S. equity funds rose 4.8% in the second quarter thanks, in part, to a recent spate of corporate takeovers, according to Bloomberg News. Energy-oriented funds also did well, while real estate funds lagged. With more than $1.5 trillion in merger and acquisition deals in the works last quarter, the Standard & Poor’s 500 Index and Dow Jones Industrial Average each hit record highs. “There’s a lot of money sloshing around, and that’s driving the takeover activity,” said John Coumarianos,an analyst with Morningstar in Chicago. “Long-term mutual fund investors shouldn’t make too much of that because that’s not always going to be the case,” he said. But for now, funds, including the $71 billion Fidelity Contrafund and the $26 billion T. Rowe Price Equity Income Fund, are benefiting, increasing 6.2% and 5.9%, respectively. In the case of the Contrafund, the $29 billion pending buyout of credit-card payment processor First Data by Kohlberg Kravis Roberts played a major role, while The News Corp’s $5 billion bid for Dow Jones helped push the T. Rowe Price fund upwards. But the quarter’s record goes to the Direxion Nasdaq-100 Bull 2.5X Fund, which gained 17%, beating its benchmark—the Nasdaq 100—which gained 7.8%. “Market direction is everything for these funds,” said Direxion Chief Executive Ron Fernandes. The Winslow Green Growth fund gained 15%, since a good portion of its $216 million in assets are held in online advertiser aQuantive, which Microsoft has snapped up for an 85% premium. Energy funds also did well, due to rising oil costs, while real estate lagged, with office and apartment-oriented real estate investment trusts suffering, perhaps due to investors’ reaction to the unrelated sub-prime scares. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

The opening salvoes of the Morningstar conference resounded with discussions of oil prices and offshore investing, according to U.S. News & World Report. As for oil, Dan Rice of BlackRock expects crude prices to hover at least around $60 to $60 per barrel, although most stock prices assume the cap is about $53. Meanwhile, Fidelity Select Energy and Select Energy Service Fund manager John Dowd said demand from China could push it about $70 per barrel, especially with the steep cost of exploration and tight demand for antiquated refineries slowing the time to market. China will also drive up the price of coal, according to Rice. This year, China became a net importer of coal, as domestic energy demand increased. “That will spread to the rest of the world,” Rice said. David Herro, manager the Oakmark International and Oakmark International Small Cap funds, and who is held in high esteem by Morningstar analysts, said he shies away from Japanese stocks. Toyota, for example, aims for a return on equity of 10% per year, compared to 16% or better among its American counterparts. The reason? Toyota’s higher ups are worried shareholders might profit too much. “It’s a great car company. It’s a great manufacturer, but do they really care about their owners?” he asked. Herro also said the major drivers that have pushed European returns are waning. Latin America, he said, is not for the faint of heart. “It’s kind of hard to even find names, unless you like risk,” he said. Even when it comes to emerging markets, Herro was subdued. He warned against jumping into economies that have delivered 20% or better returns, and said the best bets are those that are out of favor. Still, the risk cannot be ignored, he said. “What people fail to adequately price is the shallow and opaque corporate governance” in emerging markets, Herro said. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

Lake Shore Asset Management, a Chicago-based hedge fund, had $288 million of its assets frozen by a federal court last week, after regulators stated it overstated its holdings, according to Bloomberg News. Lake Shore is run by Laurence Rosenberg, former chairman of the Chicago Mercantile Exchange, and manages $1 billion for investors and trades U.S. commodity futures contracts, according to Commodity Futures Trading Commission. A review of the fund showed that it had $466 million. The fund banned regulators from inspecting its accounts on June 14, which is a violation of the Commodity Exchange Act, according to the commission’s complaint. Lake Shore is a commodity pool operator, an investment group that seeks to aggregate money to trade futures and options on commodities and other financial instruments. The commission’s complaint contends that Rosenberg and other employees at the fund gave inconsistent statements to regulators regarding the fund’s activity and that it has refused to make documents available to the agency. On June 14, Rosenberg allowed the National Futures Association to review Lake Shore’s protected website, where it found that the fund had $466 million in managed accounts, “dramatically less then Rosenberg’s estimate that it had approximately $1 billion under management,” the commission said. A hearing is scheduled for July 11, the commission said. Judge Blanhce Manning of the Federal District Court in Northern, Ill., granted the commission’s request to freeze the funds assets and to prevent it from destroying documents related to the inquiry, according to a court filing dated June 27, 2007. Lake Shore “has engaged, is engaging in and is about to engage in violations of the Commodities Exchange Act, Judge Manning ruled. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.

John Hancock has settled with the Securities and Exchange Commission on charges that it failed to disclose $14.8 million in revenue-sharing agreements with 55 brokerages between 2001 and 2004. In exchange for the payments, the brokerages promoted Hancock mutual funds and variable annuities and gave the investment management firm's marketing and sales staff access to their representatives at conferences and meetings.

Increased international competition, proxy votes and Sarbanes-Oxley were a few of the issues discussed during the House Financial Services Committee's review last week of the Securities and Exchange Commission's effectiveness in investor protection and market oversight.

NEW YORK-Despite the near dizzying deluge of exchange-traded fund listings, investment advisers say they still want more. Yet while their appetite for more tactical, more specialized splices of indexes seems insatiable, experts warn that sponsors may have had their fill.

Looking at the cultural chasm between independent and wirehouse broker/dealers, the fast-growing fee-based separately managed account business seems, to date, to have stayed on the wirehouse side of the divide.

Although there have been a smattering of articles about a reformation at Janus Capital appearing over the past few months, none has been as colorful or as compelling as one last week in Kiplinger's Personal Finance.

Former Fidelity Lawyer Sues Firm Over Policies

Fidelity Investments Adds 10 Staffers to RIA Group

Offshoring functions save companies millions of dollars a year, and as the practice matures, financial institutions are moving to the next stage of optimizing their offshoring operations, according to Deloitte & Touche's fourth "Global Financial Services Offshoring" report, based on interviews with 36 financial institutions in eight countries.

An intended class-action lawsuit filed in Illinois in mid-May has the potential to challenge how all state Treasury offices apply tax deductions for contributions to in-state, versus out-of-state, 529 college savings plans.

Reuters has signed an agreement to acquire Feri Fund Market Information, a London-based mutual fund data, analysis and research firm.

Financial advisers will now be able to get information about Fidelity mutual fund accounts online. The Boston-based behemoth has joined the DST Vision platform, which aggregates mutual fund and variable annuity account information from intermediaries.

Rydex Investments has agreed to be acquired by Security Benefit for an undisclosed amount, bringing the combined organization to around $35 billion in assets under management and $52 billion of assets under administration

UBS has been accused of “dishonest and unethical business activities” by Massachusetts Secretary of the Commonwealth William F. Galvin for giving hedge fund managers perks in order to get their lucrative trading business, according to The Boston Globe.

The NASD has settled with four brokerages over improper mutual fund sales. Combined, they are paying fines of $1.2 million.

A survey of high-net-worth and ultra-high-net-worth investors by Advisor Perspectives found that left to their own devices, about a third will park their money in index funds, the Financial Times reports. But working with an adviser, they feel more comfortable investing in an actively managed mutual fund or separately managed account; if they are working with an adviser, only 3.8% of wealthy investors’ money is in index funds.