Special Program Root Tag

NASD announced Tuesday that it has fined two Fidelity Investments broker/dealers—Fidelity Investments Institutional Services Co. and Fidelity Distributors Corp.—$400,000 for distributing misleading sales performance information about investment plans sold primarily to military personnel. The money will go to the NASD investor education program for the benefit of the military community.

Wilmington Trust is acquiring Bingham Legg Advisors, a wealth advisory firm based in Boston that specializes in tax-sensitive investment strategies.

After eager investors rushed in to Brazil, Russia, India, China funds (BRIC), many pulled back, particularly disappointed by performance in China and Russia.

A nursing shortage in the U.S. is causing many nurses to double up on shifts and make more money, and in return they are saving more for retirement than other working employees, research from Fidelity Investments found.

Goldman Sachs is expanding its presence in the South Korean retail fund business with the recent agreement to acquire a South Korean asset management firm from majority owned Australia-based Macquarie Bank, according to Reuters.

Investors showed continued interest in bond and large-cap funds in the first quarter, while interest mid-cap and growth funds shrank, according to The Wall Street Journal.

Zurich Capital has settled with the Securities and Exchange Commission for having provided financing to four of its hedge fund clients for the purpose of market timing mutual funds. The firm is paying a $16.8 million fine, consisting of $12.8 million in disgorgement and a $4 million penalty, all of which will be distributed to the mutual funds that were harmed as a result of the market timing.

Whether it's protection of their own investments or a sense of responsibility to the world, there is an intriguing, if not unexpected, movement developing among mutual fund investors.

Some mutual funds, looking to boost returns or hedge their market exposure, have been turning to derivatives, particularly bond and commodity mutual funds, The Wall Street Journal reports. And this has been causing problems for the people wearing the green shades in the back office.

Typically delivering high double-digit returns, hedge funds have had no trouble charging investors, typically, 2-and-20: 2% of assets and 20% of gains. But with performance disappointing of late, some investors are pressuring hedge funds to lower their fees, BusinessWeek reports. And wealthy investors’ interest in hedge funds is on the decline; 27% of households worth more than $25 million own hedge funds, down from 38% two years ago, according to Spectrem Group. Last year, the average hedge fund returned 12.9%, whereas the S&P 500 rose 15.1%. “We have no problem paying high performance fees for a manager’s selection, but we find taking on average market risk inherently unsatisfying,” said Russell Read, chief investment officer of CalPERS. Robert Discolo, head of hedge fund securities at AIG Global Investment Group, agreed: “In most cases, [managers] don’t deliver enough to justify their fees. Most funds are doing things that can be replicated much cheaper.” As a result, institutional investors with large stakes in hedge funds are pressuring the managers to lower fees. At the same time, some hedge funds are voluntarily rewarding investors who agree to lock up their money for three years, rather than the standard one year, with a 1.5-and-15 rate, that is, 1.5% of assets and 15% of profits. 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.

A wave of executives leaving Wall Street to work for hedge funds has been occurring the past few years, but now some of those employees might be coming back, according to the Financial Times. The hunt for long-term capital, wanting to build more than a short-term moneymaking machine, and the need for resources are fueling the desire to come back to the Street. Also, investment banks and other financial institutions are starting to invest directly in hedge funds or hire executives from them, further fueling the trend. “If Wall Street wants to attract these people in a way that is acceptable to shareholders and boards, they are not going to do it by paying hedge fund-like salaries, so they are resorting to acquisitions,” said one New York-based hedge fund banker. The large players offer employees the backing of a large organization and, in some instances, senior roles at group level to make sure they don’t leave. This is the case for Gil Caffray, vice-chairman of FrontPoint Partners, a hedge fund conglomerate, who is now also the vice-chairman of Morgan Stanley’s fund management unit after the investment bank bought his company late last year. Caffray said that Morgan Stanley convinced FrontPoint’s management of its commitment to building a world-class alternative investment franchise, with Front-Point as a cornerstone of that effort. “It does give us the ability to attract and to retain very high quality investment teams,” Caffray said. FrontPoint’s investment expertise and distinct set of strategies provide Morgan Stanley’s existing clients with a broader range of alternative investments than they had access to before, said Stu Bohart, head of alternative investments at Morgan Stanley Investment Management. Besides Caffray, other employees of FrontPoint’s management team have also assumed leadership roles with Morgan Stanley. The move of hedge fund executives back to the Street also comes at a time when hedge funds and investment banks are converging on common territory. More and more hedge funds are being viewed by bankers as partners in the capital markets, especially in buy-out deals. Investment banks are starting to become similar to hedge funds in certain areas. “You are certainly seeing more convergence between hedge funds and Wall Street, be that through acquisitions of hedge funds by Wall Street firms, staff moving from one to the other, or the two working in concert on restructuring and turnarounds,” said one fund of hedge fund managers. 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.

Companies thinking about launching actively managed exchange-traded funds in the U.S. might want to see first what kind of splash they make across the pond. In March Bear Stearns Asset Management filed papers with the Securities and Exchange Commission to launch an actively managed ETF. The proposed YYY Trust would invest in both money market and short-term fixed income tools. But the process has not been a quick one. The company, which has been negotiating with regulators, does not plan to introduce the product to the public for between three and six months. When it does, the industry will watch with interest at how investors respond to what might become the biggest investment innovation in years, according to Investment News. Experts suggest that because European regulations surrounding the development and release of new products are less rigid, introducing unconventional tools there e before rolling them out in the U.S. may make better business sense. If the Bear Stearns product is successfully received, not everyone may be willing to wait for the U.S. regulatory rigmarole before coming to market. “Europe is catching up rapidly and in some ways passing the U.S.,” said Greg Ehret, senior managing director and head of sales and distribution in Europe for Boston-based State Street Global Advisors. 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.

After missing the mark on projected profits, UBS last week announced plans to move its hedge fund operations under the aegis of the investment banking division, according to Business Week. That’s because the 7% slump in year-to-date profits for the quarter ending March 31 is due, in large part, to big losses at the company’s hedge fund division, run by Dillon Read Capital Management. The unit was heavily invested in mortgage products. “Operating a proprietary trading platform outside the investment bank and managing client money alongside it became too complex and expensive,” said John Fraser, chief executive of UBS Global Asset Management. As a result, the operations will be pulled into the global asset management group. Dillon Read will continue operating the fund until the transition is complete, which is expected to be in the third quarter this year. UBS stock rose 3.4% to $63.20 per share on news of the reorganization. Analysts noted that other units within the bank were performing well, and expected the company to recover from its profit setback quickly. “While the [Dillon Read Capital Management] u-turn is clearly an embarrassment, we believe the u-turn is to be welcomed while the solid results elsewhere are a relief, given the cost concerns,” said Matthew Clark, an analyst with Keefe, Bruyette & Woods in a note. 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 FBI is warning that tens of millions of dollars have been robbed from online brokerage accounts by scammers who target hotel guests and Internet café patrons, according to Bloomberg. E*Trade Financial Corp. paid $18 million in last year’s third quarter to reimburse customers whose accounts were scammed. TD Ameritrade Holding Corp. paid $4 million. In March, the Justice Department opened its first criminal charges in such cases. Since December, the Securities and Exchange Commission has brought five civil complaints against such scammers. Several more cases are in the pipeline, said an SEC official. In the recent wave of fraud scams, brokerages have reimbursed their customers for their losses, although not all brokerages have policies requiring that they do so. The latest fraud combines identify theft with a pump-and-dump scheme. In the first part of the machination, the scammers install keystroke-logging programs on computers in hotel business centers and Internet cafes to steal investors’ usernames and passwords. They then deplete the investors’ accounts and use the money for the second part of their scheme, in which they buy up shares of thinly traded stocks that they already own, boosting the price and then selling out of it. 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.

A bill on The Hill aims to help part-time employees prepare for retirement, Pensions & Investments reports. The Women’s’ Retirement Security Act of 2007 would require employers to open their 401(k) or deferred compensation retirement accounts to the ranks of part-time workers. Companies that do not sponsor such plans would be required to allow employees to earmark a portion of their pay to an Individual Retirement Account (IRA). Although the bill would apply to all employees, the motivation behind it is to help women, who often have less linear career paths than men, according to a statement from one of the bill’s co-sponsors, Sen. Gordon Smith (R-Ore.). “Unfortunately, due to unique circumstances women face in their lifetime, the current pension structure makes it more difficult to prepare for retirement,” said Smith in a release. “It is important that we remove barriers,” he said. Other sponsors include Sens. John Kerry (D-Mass.), Kent Conrad (D-N.D.), Jeff Bingaman, (D-N.M.) and Olympia Snowe (R-Maine). 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.

Citigroup announced last Wednesday that it will acquire BISYS Group for $1.45 billion in cash and divest its retirement and insurance services units to J.C. Flowers, a private equity firm, for $650 million. Citigroup will keep BISYS' fund and alternative investment units so that it can expand its services to hedge funds, mutual funds and private equity firms.

How many regulators does it take to develop a clear, easy-to-read privacy notice?

The hedge fund industry will consolidate through mergers and acquisitions, as the funds continue to proliferate and gain popularity among institutional investors, experts predict.

With the Dow Jones Industrial Average hitting a record level of 13,000 in recent weeks, and three of the Russell U.S. equity Indexes, the Russell 1000, 2000 and 3000, also blasting through their previous ceilings in April, are investors worried the U.S. stock market has no place to go but down?

Whether it's protection of their own investments or a sense of responsibility to the world, there is an intriguing, if not unexpected, movement developing among mutual fund investors.