Special Program Root Tag

Sales of American Funds have outpaced competitors for the past five years. In each of the years 2005 and 2006, the fund shop took in more than $73 billion. But that’s likely to stop in 2007, the firm predicts, Investment News reports.

With the stock markets doing so well in China and competition heating up, it didn’t take long for fund companies there to realize they might pump up the volume by promising trading commissions to those brokers who sell large volumes of their funds.

While the Securities and Exchange Commission wavers on the nearly three-year contested issue of independent board chairman—seemingly in favor of allowing a lead independent director—Morningstar has just shot off a letter to the SEC urging it to make independent chairmen a requirement.

A follow-up proxy that Reserve Management, the investment advisor to the Reserve Funds and Hallmark Funds, filed with the Securities and Exchange Commission reveals the true cost of the company's error, discovered two years ago.

As technology continues to morph from a businesses support tool to a business development driver, it is also a bigger piece of investment companies' budgets.

The fact that fund companies are increasingly voting their proxies in favor of management proposals may be disappointing to shareholder advocates but it comes as no surprise to them.

The competition to win over financial advisers and their clients is heating up. Two investment management firms, Ameriprise Financial of Minneapolis, and Old Mutual Capital of London and Boston, recently launched multimedia ad campaigns specifically aimed at investment advisers and reps at regional broker/dealers and independent dealers.

American Stock Exchange Promotes Weber, Ebner To EVP, SVP in ETF Unit

Many industry insiders predicted that a Democratic-controlled Congress would turn its attention to 401(k) fees, and, sure enough, the first hearings on the topic took place last week. More than likely, however, the fund industry will fight legislation mandating better disclosure because if that should pressure it to lower 401(k) fees, it would put billions of dollars in annual revenue at stake.

The man who calls himself "The Bishop" and who has sent six threatening letters and two dud pipe bombs over the past 18 months is expected to strike again, the Associated Press reports. One of the pipe bombs was sent to American Century on Jan. 31. Then, on Feb. 1, a similar explosive was found in a Chicago office building.

Advisers this year remain enthusiastic about exchange-traded funds, but reticent when it comes to real estate investment trusts (REITs), according to a survey of independent investment advisers surveyed by Charles Schwab Institutional of San Francisco.

Exchange-traded funds may still be relatively unchartered territory to many retail investors, but they are predicted to infiltrate the mass market from the imminent actively managed ETF to the 401(k) marketplace in the coming years.

Although the real estate market and retail sales are in a slump, the net worth of the average American household grew in the fourth quarter of 2006, largely due to the strength of the financial markets, Business Week reports. Net worth grew 2.5% from the previous quarter and 7.4% from the year before, according to data from the Federal Reserve.

Last month’s sell-off signaled a shift in investors’ willingness to hold volatile investments, including U.S. junk bond funs, according to a Reuters report. Junk bond funds lost $11 million in the week ending March 7, after bleeding $23 million the week prior, according to data from AMG Data Services. Many blame the Feb. 27 drop in Chinese markets for triggering a global sell-off. While the true cause cannot be identified for certain, experts have suggested that the episode reminded investors of the perils of the markets, most importantly of downside of higher risk. Despite the sell-off junk bond fund returns are positive, with 0.17% gains for March to date and 2.657% for a year. According to data from Merrill Lynch, this makes them the top-performing bond group. 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 lawmakers focus on the transparency of 401(k) fees, Dow Jones Columnist Robert Powell suggests they pay more attention to the default investments allowed by last year’s Pension Protection Act. Powell notes that the usual suspects: target date, by which investors choose portfolios that morph slowly as they approach retirement, and target risk, though which investors decide what level of risk they are willing to take, but does not significantly change. “The two types of mutual funds that will soon become the default investment options for millions of Americans come with some drawbacks,” Powell wrote. Citing a study by Boston University School of Management Professor Zvi Bodie, Powell notes that target date funds fail to factor in any risk tolerance, therefore forcing investors to choose asset allocation based on only one of three portfolio factors: time horizon, while ignoring investment objective and risk tolerance. Likewise, Bodie’s study notes that target risk funds fail to factor in time horizon. That is not to suggest that either type of fund is a poor choice for retirees, Bodie wrote. “Empirical evidence suggests that a simple [target date fund] would be an improvement over the choices currently made by many uninformed plan participants,” the paper says. Still, they are not perfect. Target date funds work best for middle-aged employees, he said, who can tolerate some risk. But for those who are highly risk averse, or early in their careers and prone to change jobs or industries frequently, target date funds might not pay off. Bodie suggests a “safe target-date” option, perhaps included Treasury Inflation Protected Securities (TIPS). Because TIPS mature in a certain year, and pay interest based on inflation, they are more certain than money-market funds, and always beat inflation. Powell urges lawmaker to consider Bodie’s case for TIPS, and takes to look seriously at asset allocation for automatic enrollment. 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 consortium of think-tank analysts believe it has the answer to addressing the retirement crisis facing the 75 million Americans whose companies for not offer 401(k) type plans: the automatic IRA. Analysts from The Brookings Institution and The Heritage Foundation have encouraged the bill, which is expected to be introduced in Congress within the next few weeks, but would like to delay its introduction in order to help build support among small business owners, according to The Chicago Tribune. Roughly half of American employees have no 401(k) option. That’s because, for small businesses especially, the plans can be expensive to administer. The IRA, conversely, would allow approved employers with at least 10 employees to deduct from employee’s paychecks, and even select the investment options for employees. Employees could then choose different funds or withdraw. Employers would not be burdened with the costs of administration, or matching programs. Employees’ relationships would be directly with the banks managing the IRA. “It’s like letting your employees set up direct-deposit with their paychecks,” said J. Mark Iwry, a Brookings fellow. For employees, IRAs allow fewer saving. The maximum contribution for those under 50 is $4,000 per year, compared to $15,500 for 401(k)s. Still, experts agree something is better than nothing, and nothing is what most small business workers have put aside for retirement so far. According to the Congressional Research Service, only 24% of people without 401(k) or other employer-sponsored retirement plans have IRAs. 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 trading volume of some small-cap exchange-traded funds is so large that it is having an outsize effect on the value of some small company shares, The Wall Street Journal reports. In fact, three ETFs are having a tremendous impact on some of the stocks in the Russell 2000. “To the extend that the ETF is a larger presence in small-cap stocks, there’s at least a chance that they’re going to be able to move stock prices one way or the other,” explains Curtis Jenson, manager of the Third Avenue Small-Cap Value Fund.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.

Just as it took four years following the stock market crash of 1929 for the government to pass the Securities Act of 1933, regulators and the courts are dragging their heels on hedge fund oversight, MarketWatch writes in a column. Opponents to securities regulation in the 1920s argued that anti-fraud laws were adequate to regulate the stock markets and that no specific oversight was needed. Today, those who oppose regulation of hedge funds—which MarketWatch calls modern-day “Robber Barons—make the similar argument that the industry is doing fine on its own. “Decades from now, people will be looking back on us, as we do on the Roaring ’20s, scratching their heads and wondering why rules weren’t in place to protect investors,” MarketWatch opines. In fact, some believe a serious hedge fund blowup that will have global ramifications is in the offing. But at least one Senator, Charles Grassley (R-Iowa), has harkened back to the issue of hedge fund registration with the Securities and Exchange Commission, proposing such an amendment last week. “My amendment gives Congress a good opportunity to say there should be greater transparency with hedge funds,” Grassley argues. “Today, the Average Joe has a stake, as pension funds are invested in hedge 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.

AIM Investments, a wealth management unit of Amvescap, has launched a series of six target-date maturity funds.

EE Fund Management, an investment firm that specializes in the video game industry, has launched a corresponding index. Called EEndex (for electronic entertainment), the index is comprised of 45 stocks that trade in nine countries for a market capitalization equivalent to $126 billion.