Special Program Root Tag

With the government looking into improving disclosure of fees in 401(k) plans and expected to issue new guidelines before the end of the year, Mercer Human Resource Consulting is recommending that plan sponsors address the issue early on.

Although fund companies continue to bring exchange-traded funds to market, most of the new offerings fail to gather significant assets, the Associated Press reports.

Morgan Stanley Investment Management has acquired all the assets of Affinity Investment Advisors, an independent investment advisor that specializes in disciplined large-cap equity investing, and hired its investment team yesterday, according to an internal memo from Morgan Stanley.

New default options that 401(k) providers can use when investors fail to select investments on their own will “significantly” improve investors’ returns, according to Dallas Salisbury, president and chief executive officer of the Employee Benefit Research Institute.

A labor activist group called CtW Investment Group, the investment arm of the Change to Win federation of labor unions, is pressuring mutual fund companies to vote their proxies to rein in excessive executive compensation, Investment News reports.

Fidelity Investments has opened a back-office operation in China, in a port city in the northeast by the name of Dalian, becoming the first foreign fund company to do so, Financial Times reports.

Vanguard is planning to launch an exchange-traded share class of an existing bond fund, the Vanguard Inflation-Protected Securities Fund, The Wall Street Journal reports. The share class is awaiting approval by the Securities and Exchange Commission.

In their zeal to cash in on the latest investment craze, fund companies all too often have displayed a lack of originality and bad timing when launching new funds. Since exchange-traded funds have taken all of the major indexes, those that have come late to the ETF rage have come out with incredibly narrow niche and enhanced index funds that defy logic.

Fidelity is aiming to hit the bullseye in the British retirement market with target-date funds, according to London’s CityWire. Fidelity’s funds will be a first-of-their kind for U.K. investors, who are adjusting to retirement savings, as the pension crisis in that country deepens. Richard Skelt will manage the seven funds, which have target dates in five-year intervals running between 2015 and 2040. Like their U.S. counterparts, the further away the date of maturity, the more equity-heavy the funds will be. At maturity, funds are then rolled into the Fidelity Retirement Income Fund, which is 70% fixed income. Although the philosophy and structure of these funds is essentially the same as in the U.S., the fee system is a graduated rate. Fidelity will sell the funds through individual financial advisers. Investors pay 3.5% for their initial investment, and then annual fees of 1.5%. Financial advisers get 3%. Five years prior to retirement, the annual fee drops by another 25 basis points. 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.

In an overcrowded commodity market, hedge funds are exploring new markets and unusual metals such as cobalt, vanadium and molybdenum, Reuters reports. “There are a lot more people in the metals business, and people are looking for unexplored, unsaturated markets,” said Daniel McConvey of Rossport Investments, a New York-based commodity trading adviser, which invests in the metals. The bulk of money in metal investments has gone to copper, nickel and other key industrial commodities this decade. However, the amount of money poured into these metals has made it harder for fund managers to make a return, so they are looking at other materials, said Keith Dunleavy, a trader a London-based Stratton Metals. Dunleavy has sold cobalt, which is similar to nickel, to hedge funds, and he anticipates prices to rise well past their current 11-year high of $30 per pound. “They started getting into cobalt at $22 and $24. We started badgering them to take profit at $28, but they are not interested,” he said. The metal could grow to $40 per pound, according to Credit Suisse. Cobalt is not traded on an exchange, and, therefore, the market can be opaque and accurate pricing data difficult to find. Another option instead of buying the metal itself is to buy stock in a company that products cobalt, said Marcus Edwards-Jones, managing director at Lloyd Edwards Jones. The rising price of metals is due to the use in products such as flat screen televisions, aircraft parts and car exhaust catalysts. “Lots of these metals are hi-tech, and with the explosion in hi-tech, minor metals are going to feel some sort of that explosions,” said McConvey. However, one complicated aspect is investors trying to close down their position without freeing a large amount of metal onto the market, which would cause prices to fall. 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.

Ontario Securities Commission, one of Canada’s regulatory watchdogs, is looking into launching new initiatives this summer to protect investors, according to the Financial Post. “The investor has to know that someone is working to keep the playing field level,” said David Wilson, OSC chairman, at a conference this week. “That someone has to be the regulator.” In the past, investors have criticized Canada’s regulators for not being vigilant enough. OSC’s new efforts include a two-page point-of-sale disclosure document to help simplify investment options for mutual and segregated funds. “Achieving full and appropriate disclosure is seriously, perhaps fatally, compromised if the disclosure is so cumbersome and so complex that investors don’t read it, or if they do read it, they don’t understand it,” Wilson said. Also, a new “anti-scam unit” will launch in June or July, Wilson noted, with a mandate to fight fraud illegal distributions, including boiler rooms. “With globalization comes the proliferation of even more sophisticated cross-border frauds,” he said. “Scam artists have taken the old cons and juiced them up using new technology.” “I believe that people behave differently when they know that someone is checking their conduct,” he added. 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.

While companies around the world look to outsource business functions to India, at least one Indian bank is looking to do the reverse, Forbes reports. With India’s stock market expected to continue to deliver double-digit returns over the next several years, Kotak Mahindra is looking to investors around the world to raise assets. The bank has listed the close-end India Equities Fund on the Australian Stock Exchange after an initial public offering that raised $75 million from 3,000 investors, and there are plans to offer similar funds in the U.S., Europe and Japan. Currently, the bank is setting up a fund in Dubai. C. Jayaram, executive director at Kotak Mahindra, said he expects other banks to offer funds abroad as well, due to increasing interest among investors around the globe in India’s booming economy. “On a three-year horizon, we’re expecting year-on-year returns of at least 15% from the Indian markets,” Jayaram said. “How the fund fares will be a reflection of how the markets fare.” 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.

Senior Securities and Exchange Commissioners seem to be flocking a new not-for-profit on the scene, according to Dow Jones. Cynthia Fornelli, former deputy director of the SEC’s Investment Management Division led the way to the American Institute of Certified Public Accountants’ new Center for Audit Quality, now serving as the group’s executive director. Then came Jane Cobb, former SEC director of legislative affairs, who is the center’s operations director. Next is SEC’s former acting director of investor education, Lori Schock, who left the SEC Friday and will head up outreach at the Center for Audit Quality. SEC Chief Counsel in the Office of the Chief Accountant Robert Burns, will retire from his government post to become the center’s director of research. With Schock gone, it is unclear who will head the Investor Education Office at the SEC, which has a staff of 66 and which last year handled more than 77,000 calls, letters and e-mails. The last permanent leader of the division was Susan Wyderco who left to head the Mutual Fund Director’s Forum in June, 2006. 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.

If the Securities and Exchange Commission decides to eliminate 12b-1 fees, that would mean both good news and bad news for investors, Seattle Times reports. The good news is that the industry wouldn’t be able to misuse an antiquated fee to pay financial advisers with shareholders assets instead of increasing assets in the fund. The bad news is that fund companies would probably increase other fees to compensate. “The elimination of 12b-1 fees will drive up management fees, unquestionably,” said Mercer Bullard, founder of FundDemocracy.com. According to Morningstar, the majority of mutual funds charge 12b-1 fees, earning the industry $10 billion last year. SEC Chairman Christopher Cox has likened 12b-1 fees to charging cable TV viewers and also running advertisements. “There doesn’t appear to be a whole lot of evidence that 12b-1 fees are anything but a net drain on shareholder wealth,” said Edward O’Neal, an assistant professor of finance at Wake Forest University. 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 Bush administration pledged last week to improve fee disclosure in 401(k)s. The Department of Labor's Employee Benefits Security Administration is now accepting ideas on how to do so from the public and the investment management industry. The deadline for comments is July 24.

NEW YORK-When Alan Greenspan speaks, markets move and people listen. Usually.

CAMBRIDGE, Mass.-Target-date funds will continue to increase in popularity due to their simplicity, automatic rebalancing and diversification, according to panelists at Financial Research Associates' "Target Date Lifecycle Funds" conference here last week.

A Kentucky lawsuit decided in early 2006, and a similar tax case now being tried in North Carolina, could spell the demise of single-state municipal bond funds as we know them.

In their zeal to cash in on the latest investment craze, fund companies all too often have displayed a lack of originality and bad timing when launching new funds. Since exchange-traded funds have taken all of the major indexes, those that have come late to the ETF rage have come out with incredibly narrow niche and enhanced index funds that defy logic.

Fidelity's New Campaign Focuses on Regular People