Special Program Root Tag

Japan issued disciplinary action against Mitsubishi UFJ Monday, ordering the firm to improve mutual fund sales compliance and money laundering controls, the Associated Press reports. The Japan Financial Services Agency also ordered the firm to submit an operations improvement plan by July 11.

It is an honor for Money Management Executive to sponsor SourceMedia's 2007 Fund Operations Awards, our fifth annual, and we would like to thank all those who entered their thoughtful submissions, as well as this year's panel of judges, who gave so generously of their time to assess the impressive entries: T. Neil Bathon, managing director, PMR Associates, Peter Delano, senior analyst, investment management, TowerGroup, Bob Goldberg, president emeritus, The National Investment Company Service Association, Burton J. Greenwald, president, B.J. Greenwald Associates, Vincent Walsh, managing director, advisory services practice, KPMG and Kathleen Whalen, managing director, Dalbar.

Growth stocks are back in vogue this year, according to Dow Jones. The past few years, value stocks have been all the rage. “We’re making a bet that growth is going to outperform going forward,” said James Diedrich, who oversees First American’s Mid-Cap Growth Opportunities Fund. The portfolio is now weighted toward stocks whose earnings are expected to grow faster than the overall economy. However, managers of the fund are very particular about what stocks qualify for the portfolio. “Durable growth is just worth much more,” said co-portfolio manager Hal Goldstein. “We’d rather have something that grows less quickly if we believe it can grow at that pace for a number of years.” Managers of the fund put the stocks through a vigorous screening process. They search for companies with market capitalizations of between $1 billion and $15 billion that fit earrings, liquidity, return on invested capital and free-cash-flow growth parameters and hold a sustainable competitive business advantage. Rather than trying to fulfill a sector quota, they concentrate on picking individual stocks and let those choices largely determine sector weighting. The portfolio is underweight on consumer discretionary issues. Diedrich said, “We just can’t find many names we like.” The fund is also light on utilities and materials. The fund’s biggest holding as of March 31 was Thermo Fisher Scientific, a blend of Thermo Electron and Fisher Scientific, two companies whose shares the fund had owned prior to their merger. “We like it because it’s got a leadership position,” said Goldstein. “It’s not a super-fast grower,” he added, but predicted mid-single-digit or better top-line increases as it generates significant free-cash flow. Recently, among the fund’s biggest disappointments were Harrah’s Entertainment and Station Casinos. Year-to-date from last week, the fund returned 13.07%, compared with the benchmark Russell Midcap, which is up 12.01%, according to Lipper. 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 more low-income families store away money for retirement, the more they might be paying higher taxes, according to the Los Angeles Times. Low-income households face “astronomical” penalties for saving, according to a report by the National Center for Policy Analysis. For every saved $1, a single parent who earns $15,000 pays $2.60 in higher taxes and lost government benefits. “We’re constantly told that we need to save early and often to prepare for retirement,” said Laurence Kotlikoff, a professor at Boston University and author of the study. “Yet government policies tell low-income families, ‘If you save for the future, you won’t get our help today.’” The government has sharply increased amounts that Americans can set aside on a tax-favored basis for retirement, created a tax credit for low-income people who fund retirement accounts and launched a number of public campaigns urging people to save money over the past decade. Those efforts are hindered by incentives created by the government, Kotlikoff said. The tax credit for saving for retirement goes away when the taxpayer also qualifies for the earned income tax credit. Also, saving for retirement disqualifies families for food stamps, healthcare benefits and assistance given to poor families with children. For example, in Massachusetts anyone with assets over $2,500 is disqualified from receiving federal assistance to families with dependent children. The only way to fix the problems described in the report would be a massive overhaul of the U.S. tax code and the way benefit programs are administered, Kotlikoff 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.

Creeping interest rates may finally test the much-discussed recent run on mergers and acquisitions, according to The Wall Street Journal. That could be good news for some mutual fund investors. For one thing, rising rates will increase the cost of borrowing. Standard & Poor’s leveraged commentary and data and Lehman Brothers data suggest that buyout companies are looking to sell as much as $250 billion in junk bonds in upcoming months to fund deals, while slumping stocks make sell-offs less attractive. To make matters worse, pension plans, which had been investing in lock-step with private equity, seem to have pulled back, while shareholders at target companies have gotten more aggressive, increasing the premiums they demand. Among those shareholders are mutual funds including Fidelity. In May, Fidelity forced equity firms Thomas H. Lee Partners and Bain Capital LLC to increase their bid for Clear Channel Communications. Highfield Capital Management, a hedge fund based in Boston, joined Fidelity in the fight. Biomet, a company in Indiana which manufactures artificial hips, knees and shoulders, was offered a $10.9 billion buy-out from Blackstone Partners, Goldman Sachs Capital Partners , Kohlberg Kravis Roberts and Co. and TPG. After Institutional Shareholder Services led a challenge to the offer, the group of investors upped the ante by $500 million. “Investors right now can’t imagine how the [leveraged buyout] boom would end,” said Richard Bernstein, a stock strategist with Merrill Lynch. But in a note to clients, he wrote that the confluence of rising interest rates and slowing stock markets “could do the trick.” 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.

BNY Convergex Group last week introduced its Commission Management Utility, a product for which the company is seeking a patent. The open-architecture system allows for recording various currencies, brokers and client accounts, and is meant to complement BNY’s InterComm data management system. The launch comes at a time when Securities and Exchange Commission Chief Christopher Cox has suggested eliminating the safe harbors that allow soft dollars, and vowed to keep spending in check. “In a marketplace characterized by constant change and volatility, the need for dynamic, cutting-edge technologies that provide flexibility has never been greater,” said John D. Meserve, director of BNY ConverEx Group.

The Securities and Exchange Commission will hold a roundtable discussion to address whether all mutual funds are treated equally, despite geography, investor class and company size. The event, which will be broadcast from the SEC’s website, begins at 9 a.m. Eastern on Tuesday, June 12. Materials will be posted at www.sec.gov/spotlight/mutualrecognition.htm. In an era of increasing cross-border investing, the panelists will discuss whether retail and institutional investors, global and regional broker/dealers, and funds on U.S. or non-U.S. exchanges are treated equally. The first panel will address the increase in participation of American investors in markets overseas, and will include representatives from The Vanguard Group, NASDAQ, the New York Stock Exchange, the London Stock Exchange, The Philadelphia Stock Exchange and Brooklyn Law School. The second panel will focus on how non-U.S. broker/dealer access to U.S. investors affects domestic markets, and will include speakers from global companies such as Citigroup, UBS Investment Bank, and Auerbach Grayson, domestic companies such as E*Trade , Evensky Katz and Hilliard Lyons. The final panel will include representatives from the legal community discussing how to compare and measure the equitable treatment meted out by regulators in various markets.

Fund companies have been excited at the prospect of launching actively exchange-traded funds, but two recently regulatory filings from AER Advisors and XShares Advisors hint that the first active ETF would look a lot more like existing index ETFs, according to Dow Jones. ETF fund companies have tried to think of a design for actively managed ETFs for years that would be accepted by the Securities and Exchange Commission, but thus far no plan has been approved, and a real solution could still be years away. Recently launched ETFs have tried to capture some of the interest of active funds without actually being actively managed. The funds are known as “semi-active” or “enhanced” index funds and follow indexes, but their benchmarks are known as proprietary. There are a number of proposals for actively managed ETFs filed with the SEC, including bond funds. The two latest filings from AER and XShares emphasize their easy-does-it approach. They vary slightly from funds already on the market and they might be to the liking of the SEC. The most important aspect when structuring an active ETF is whether or not to reveal what stocks the fund holds. Managers typically do not like to broadcast their strategies to competitors and only disclose their stocks when required to do so once. 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 American Federation of State, County and Municipal Employees released a report Tuesday calling AllianceBernstein, Barclays Global Investors and AIM "pay enablers."

Despite the hurly-burly set off by Securities and Exchange Commission Chairman Christopher Cox's request that Congress eliminate soft-dollar safe harbors, industry insiders argue that such a change will result in nothing but toil and trouble for retail investors.

An innovative new website is bringing fund managers and their research teams to the table-the operating table.

Columbia Funds, T. Rowe Price and The Depository Trust & Clearing Corp. take top honors in SourceMedia's 2007 Fund Operations Awards. Now in its fifth year, the awards program is sponsored by Money Management Executive and judged by a panel of leading industry consultants. The awards honor industry leaders in three categories: Leadership, Innovation and Efficiencies/Streamlining.

It is an honor for Money Management Executive to sponsor SourceMedia's 2007 Fund Operations Awards, our fifth annual, and we would like to thank all those who entered their thoughtful submissions, as well as this year's panel of judges, who gave so generously of their time to assess the impressive entries: T. Neil Bathon, managing director, PMR Associates, Peter Delano, senior analyst, investment management, TowerGroup, Bob Goldberg, president emeritus, The National Investment Company Service Association, Burton J. Greenwald, president, B.J. Greenwald Associates, Vincent Walsh, managing director, advisory services practice, KPMG and Kathleen Whalen, managing director, Dalbar.

Two Former Putnam Execs Avoid Draconian' Charges

Smith Becomes Senior Advisor to Donohue at SEC

Scamming U.S. Military: Garbage In, Garbage Out

Retirement confidence remains high among minorities, despite the fact that they are saving less than they were three years ago.

Relying on the brand recognition of the Lipper name, the cache of exchange-traded funds, and the buzz around target-risk investing, Parsippany, N.J.-based Hennion & Walsh Asset Management is hoping to attract attention, flows and perhaps some space on 401(k) platforms.

With Chinese continuing to open brokerage accounts at the rate of 300,000 a day and some believing that it’s easier make a living in the stock market than working, the market is inevitably heading for a crash, Forbes.com reports.

Barry Fink, a managing director at Morgan Stanley, will be joining American Century Investments on July 2 as executive vice president and chief operating officer, as well as a trust on the funds’ board.