Special Program Root Tag

The hedge fund industry is reaching new heights, as assets shot to a record level of $665 billion, driven primarily by broad-based performance, according to Hedge Fund Research, Inc.

Fee-Only Planners, Reps Stick With Mutual Funds

Courtside seats and free bottles of vino may be a thing of the past once regulators are through retooling broker compensation.

Standard & Poor's recent research calling into question the levying of 12b-1 fees by funds closed to new investors has many in the mutual fund industry scratching their heads and poking holes in S&P's assessment.

Fund companies have jumped on the 529 bandwagon as a way to boost assets, but Ric Edelman, chairman of Edelman Financial Services, believes these college savings vehicles are a way to cement relationships and cross-sell a variety of investment vehicles. Edelman should know. The Fairfax, Va., financial planner was one of the first to offer college savings plans to his clients - and he has parlayed his original fledging college savings practice into a $2 billion business.

The National Association of Securities Dealers last week suspended four brokers for inappropriate sales of B shares of mutual funds. A fifth broker is contesting the charges. The brokers will be suspended for up to nine months and pay a combined total of nearly $120,000 in fines. The brokers' clients would have had reduced up-front sales charges through eligible breakpoints on A shares, NASD said.

Massachusetts regulators last Monday filed administrative proceedings against Morgan Stanley for providing its brokers with higher commissions and bonuses to sell in-house funds and funds of partner firms (see related story, page 1). The state believes these sales tactics earned Morgan $5 million to $8 million in commissions since January alone. In a statement, Secretary of the Commonwealth William Galvin compared Morgan Stanley's sales practices to those of used-car salesmen.

While the SEC and Congress consider regulating the hedge fund industry, the Managed Funds Association has issued guidelines for its member hedge fund managers. The guidelines suggest best practices for monitoring various types of risk; fair, consistent and verifiable valuation policies; compliance with regulation; and disaster recovery and business continuity practices.

Sixty percent of the leaders of U.S. multinational corporations are optimistic about the prospects for the economy over the next 12 months, PricewaterhouseCoopers' Management Barometer survey found. Another 42% said they are confident about the world economy. That was up markedly from the first quarter, when only 34% said they were upbeat on the U.S. economy and only 28% were optimistic about international prospects. Revenue growth, new investments and new hiring, however, concern them.

Erich Gerth has joined Janus Capital as national sales director, a new position at the firm in which he will oversee distribution through broker/dealers, financial advisers and institutions. Gerth was previously national sales director of third-party broker/dealers at Goldman Sachs Asset Management. He reports to Richard Garland, CEO of Janus International.

GoldK, a retirement outsourcing firm, has named Paul K. Zurlo chief financial officer, in charge of financial activities and corporate affairs. Zurlo joins GoldK from MCK Communications, where he was a senior vice president and chief financial officer. Previously, he had been a vice president for Summit Partners and a global strategy consultant at Bain & Co.

Bank of New York's asset management division has named Patrick Crowe director of research, reporting to Kevin J. Bannon, executive vice president of the Bank and CIO of BNY Asset Management.

William R. Hutchinson has joined the board of five Salomon Brothers closed-end funds: the Emerging Markets Floating Rate Fund, High Income Fund, Municipal Partners Fund, Worldwide Dollar Government Term Trust and Worldwide Income Fund. Hutchinson already serves on the board of a number of other Salomon funds.

Steve Wiggs is heading up BB&T Corp.'s new wealth management division. Formerly president of BB&T's Piedmont Region and a veteran of the firm since 1979, Wiggs assumes control of a division solely dedicated to affluent clients. He reports to Chief Operating Officer Henry Williamson. The new wealth management division is a combination of BB&T's existing personal trust and private financial service departments.

Latin American funds have been outstanding performers this year, but let's not break out the piatas just yet.

James T. Colby III has joined John Hancock Advisers as head of the municipal bond group, which has nearly $1 billion in assets in privately managed accounts and five funds.

While mutual fund firms asked investors to look the other way when it came to performance during the bear market, some fund companies are now treading in dangerous territory following the market's recent rally, by promoting their year-to-date performance.

RBC Asset Management Inc. has expanded its RBC Funds to include load versions of 10 existing portfolios.

Forward Management said it is trying to make its relationship with Uniplan Real Estate Advisors a bit closer.

Eric R. Dinallo, chief of the investment protection bureau in the office of the New York State Attorney General Elliot Spitzer, has joined Morgan Stanley as managing director and head of regulatory affairs. In this role, Dinallo will work federal and state regulators, as well as industry self-regulatory organizations. He will start Sept. 8, reporting to Chief Legal Officer Donald Kempf.