Special Program Root Tag

A look at the proxy voting patterns of mutual fund companies in 2006 by The Corporate Library shows that they continue to vote overwhelmingly in favor of management proposals and typically shun shareholders’ ideas, The Wall Street Journal reports. Most tellingly, a majority of funds, 65%, have opposed shareholder proposals this year to limit executive pay.

Wachovia wired a $3.8 million payment to scandal-tainted Frederick J. O’Meally, a move the former broker claims will untangle his name form accusations of market-timing abuses, according to The New York Times. The payment, a result of NASD arbitration, represents the value of a bonus promised to O’Meally when he was a broker for Prudential Securities, which has since been folded into a joint venture with Wachovia. O’Meally’s bonus was withheld because of questions surrounding his market-timing practices. His system, O’Meally boasted, allowed him to execute “a few hundred trades a minute.” Once funds caught on, they began trying to block his trades. “No one told me to change anything, and no one said I was doing anything wrong,” he said, describing an internal review process he likened to an audit. The process worked for him, too, since he took home about 40% of his $5 million annual production. O’Meally, 48, says that the fact he has been paid by his old firm proves his market-timing practices breached no rules. O’Meally has not received compensation for slander, wrongful termination, or attorney fees, all of which he asked the NASD panel to consider. The case is not closed. In August, Prudentialagreed to pay the Securities and Exchange Commission $600 million as part of a market-timing settlement. The same day, the SEC announced a civil action suit against O’Meally and three other Prudential colleagues, claiming the four’s market timing cost 25 mutual funds a total of $2.5 billion. That investigation is pending, according to David Bergers, who leads the SEC’s Boston Office. “The SEC hasn’t heard my full testimony. Once someone hears the story, we feel confident that they’ll think everything I did was appropriate,” he said. After he was fired, O’Meally told the Times he became depressed, drank, and sought medical attention. He sold off assets to pay legal bills, he said, but retained his home and still managed to have $2 million with which he launched a hedge fund, Kismet Capital Advisors. The Bay Shore, N.Y.-based fund now has $12 million in assets under management. “I like what I’m doing better—owning my own hedge fund instead of being a broker,” he 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.

Morgan Stanley expects the benefits of its recent acquisitions will take time and that margins in its asset management division will be slim for several more quarters, The Wall Street Journal reports. And if the firm sticks to its intention of making additional acquisitions, those could continue to lower earnings.

Nationwide Financial Services has started a new retirement plan offering, Retirement Innovator, designed for smaller business with fewer than $10 million in assets to begin defined contribution plans for employees. Retirement Innovator is a comprehensive plan that provides plan sponsors with tools and services typically reserved for larger plans, such as resource-filled websites and comprehensive educational materials. Also, plan sponsors have the option to receive personalized and interactive service from a local investment professional. The program is tailored to individual needs of participants. It also offers access to more than 300 mutual funds from multiple fund companies, asset-allocation funds, managed accounts, self-directed brokerage and several fixed account options. Eighty-seven percent of companies with five to 500 employees don’t offer a retirement plan, and each year around 45,000 small plans look for a different provider that can better meet their needs.

U.S. mutual fund managers are feeling more optimistic. A Merrill Lynch survey of fund managers found a significant change in tone by pros investing domestically, MarketWatch reports. Fifty-five percent of those queried said it was very unlikely that the economy will experience two straight quarters of negative gross domestic product growth in the next 12 months. A month earlier, only 12% felt that way. “The economy is in pretty good shape in our view,” said John Kornitzer, a portfolio manager and president of Kornitzer Capital Management. “Takeover activity is still going on, so you know someone is still finding value in stocks.” More than half of the managers surveyed now believe economic fortunes in the U.S. will get stronger. That compares to slightly less than a third a month ago. This month, 40% said they think it’s likely that corporate earnings will rise 10% or more in the next 12 months. It was at 12% in October. The sentiments come as the market keeps moving into positive territory. The typical large-cap core stock fund is up more than 11% in 2006, according to Morningstar Inc. In the past three months, it has returned 13%-plus and in the past month better than 1.5%. “The macro views we’re seeing are definitely working more in our favor these days,” said James Breen, co-manager at Symphony Wealth Management Ovation Fund. The new balanced fund entering November had 68% of its assets in stocks with another 30% in short-term bonds. The rest was in cash. 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.

Kansas State Treasurer Lynn Jenkins announced Thursday that after reviewing a number of proposals from investment management firms, the state has re-hired American Century Investments to run its 529 college savings plan, Learning Quest. American Century has been running the plan since it was launched six years ago. “It was a long and difficult process, but after all the proposals were reviewed on their own merits and evaluated against each other, it was determined that American Century would continue to best meet the needs of Learning Quest's more than 93,000 account owners and combined assets of nearly $1.5 billion,” Jenkins said. American Century is expanding the investment options and lowering fees, with the program management fee dropping from 39 basis points to 20 basis points. New offerings are from The Hartford Mutual Funds, OppenheimerFunds, Principal Financial Group and Riversource Investments.

Vanguard on Thursday announced its new High Dividend Yield Index Fund, available to individual investors, institutions and financial advisers in both traditional and ETF shares.The fund will track the FTSE High Dividend Yield Index, a new index of U.S. stocks with higher-than-average yields taken from the FTSE Global Equity Index that FTSE Group created exclusively for Vanguard.

Ameriprise Financial will begin selling its RiverSource funds outside of its financial adviser network through banks and broker/dealers, the Pioneer Press reports. Although Ameriprise has historically sold its funds through its captive sales force, it formed a distribution agreement with Securities America, a related firm, earlier this year. The company has not yet named its bank and B/D partners. “There is a limit to what we can [get] out of our adviser network. That third-party distribution becomes a very necessary thing,” said Ted Truscott, chief investment officer at Ameriprise. Truscott said that selling off of different platforms might also help retain and attract strong portfolio managers. But because the funds’ performance hasn’t been strong in the past, the firm will have stiff competition, noted Ryan Shannon, an investment adviser with Webb Financial Group. That has changed this year, however, with 73% of the RiverSource funds above the median of their respective peer groups year-to-date through Sept. 30, according to Lipper data. In addition, outflows have slowed. In the third quarter of this year, Ameriprise saw $800 million walk out the door, compared to $2.7 billion in the third quarter of 2005. 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 the media has been making a fuss over the fact that it looks like Bill Miller’s Legg Mason Value Trust Fund won’t beat the S&P 500 this year—meaning his 15-year winning streak will end—the firm’s chairman says the celebrated portfolio manager will, once again, deliver stellar returns, Reuters reports. “I know everyone is beating on Bill Miller now, but I don’t know how many of you have beaten the market 15 years,” Legg Mason Chairman and CEO Raymond Mason told a banking conference. “He will be back. His numbers are coming back now.” So far this year, Miller is up 4.12%, after his fund was in the negative 10% territory for some time. 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.

European hedge funds don’t need any more regulation, the European Commission said Thursday. The transparency of their holdings is also adequate, and any additional regulation could stifle their growth and their innovation, the Commission added.

The European Commission unveiled plans in a white paper on Thursday to overhaul mutual fund rules to make it easier for both money managers and investors to do cross-border business. Among other changes, the new rules would allow asset managers to run funds in other countries. The Commission also wants to ensure that fees and performance are presented in a uniform way, and that regulators cooperate more frequently. The net result, the group hopes, will be lower costs for investors since investment managers won’t have to comply with so many different rules. The Commission plans to study these changes over the next several months and propose new rules in the fall of 2007.

New York Attorney General Eliot Spitzer filed a lawsuit against two hedge funds and their principals Thursday for fraudulently timing mutual funds through Security Trust Co. Named in the suit are Samaritan Asset Management, Johnson Capital Management, and their principals, Edward T. Owens and Michael A. Johnson. Spitzer’s office said the hedge funds disguised timing to “fly below the radar” by piggybacking them to the investment accounts of retirement plans and by varying the amounts of the buy and sell trades. “When trading the piggyback accounts, try to adjust the buy and sell amounts,” an employee of Security Trust advised Johnson in an e-mail, “meaning, do not complete the sell trades for the same amount as the buy trade from the previous day. Same with [exchanges]. Do not use the same amount—vary each in and out trade. This will assist us in trying not to bring attention to the trading.” The suit, filed in New York Supreme Court, seeks to prevent the defendants from market timing funds and restitution of their ill-gotten financial gains. The case came as a result of a previous lawsuit Spitzer brought against Grant Seeger, the CEO of Security Trust, and William Kenyon, the firm’s president. Seeger pled guilty in 2005 in New York Supreme Court to second-degree grand larceny and a violation of the Martin Act, while Kenyon pled guilty to violation of the Martin Act. 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 PIMCO All Asset Fund, a fund-of-fund with $13 billion in assets, has quadrupled its commodity exposure to 12%, Bloomberg reports. Likewise, a Japan version of the All Asset Fund has also quadrupled its commodity holdings from 5% to 20%.

The Investment Company Institute and its related body, the Independent Directors Council, named new appointments on Wednesday.

The Securities and Exchange Commission is examining whether Allegiant Asset Management accepted kickback payments from its fund administrator to pay for marketing, the investment management firm’s parent company, National City, indicated in an SEC filing.

Before he leaves his position as New York attorney general to become governor of the state, Eliot Spitzer may unleash one, perhaps two, more whopper enforcement actions against major Wall Street firms, David Brown, the A.G.’s investment protection chief indicated at a Reuters Investment Banking Summit in New York.

WisdomTree Investments has registered 31 exchange-traded funds with the Securities and Exchange Commission. The filing includes sector funds focusing on communications, financial services, real estate investment trusts and utilities. It also includes funds focusing on Latin America, Australia, Canada, China, France, Germany, Hong Kong, India, Malaysia, Singapore, South Africa, Asia, South Korea, Taiwan, and the United Kingdom. WisdomTree has 30 fundamentally weighted exchange-traded funds listed on the New York Stock Exchange, including the first 10 pure international sector ETFs.

Hedge funds posted gains last month for the third month in a row, but their gains trailed the average U.S. stock mutual fund and the broader equities market.

After a four-year slump that halved the Shanghai index, it is up a whopping 60% so far this year, inspiring Chinese investors to once again return to mutual funds and stocks, Reuters reports.

The 401(k) turned 25 this month, and with that milestone, experts hope that it will continue to become more streamlined in the years ahead so that investors are prepared for retirement, The Wall Street Journal reports.