Fund performance

The majority of financial services firms don’t expect an economic recovery to take place until 2010 or later, with 34% saying they expect a rebound sometime in the first six months of next year and 32% pointing to a future date, a survey of 125 companies by Ernst & Young found.

Returns on target-date funds continue to disappoint, with the five largest 2010 funds trailing the S&P 500 by 11 percentage points since the market’s March 9 low. They are up an average of 25% since that date, well below the benchmark index’s 36% rise, The Wall Street Journal reports.

As the economic slump curbs retirement savings and the government considers imposing curbs on target-date funds, Great-West Retirement Services is trying out what its president is calling "the next generation" of target-date funds.

It won't be easy in the aftermath of a global recession, but with the right mixture of transparency and expertise, wealth managers will be able to regain their status as trusted advisers.

In the wake of Bernie Madoff's monumental, $60 billion Ponzi scheme, regulators are proposing to increase accounting safeguards by requiring mandatory surprise audit inspections of every investment adviser with custody of client assets.

Bill Miller, manager of the Legg Mason Opportunity Trust Fund, is showing that he’s still got game. With the fund returning a stunning 48% in the second quarter, it is the No. 1 performing U.S. stock fund for the period.

Get ready for subdued economic growth in the years ahead, as fear and frugality will dominate the mindset of U.S. consumers for at least a generation, Pimco’s co-CIO Bill Gross says in his July investment outlook, posted on the firm’s website. He projects annual GDP growth rates in the U.S. of 2% a year, down from the historical 3.5%.“Greed will come again. But for now, the trend is the other say, and it promises to persist for a generation at a minimum,” Gross said.While American consumers have been known to have short memories, the fact is, $15 trillion of wealth has been eliminated since early 2007 and the unemployment rate is near 10%, Gross pointed out.He writes: “Our economy’s lights, if not switched off in a rehash of the 1930s Depression, have certainly been dimmed in a 21st century version likely to be labeled the Great Recession. U.S. and many global consumers gorged themselves on Big Macs of all varieties: burgers to be sure, but also McHouses, McHummers, and McFlatscreens, all financed with excessive amounts of McCredit. What a colossal McStake.”

Standard & Poor's, economy

Adviser confidence in the economy and the stock market grew in June, according to Rydex SGI AdvisorBenchmarking.

Hedge funds appear to be on track to deliver returns of 6% or better in the second quarter, their best quarterly performance since 2000, Merrill Lynch analysts project.

Replacing a team portfolio structure with a single top manager and doing away with quantitative strategies has created a new era of accountability at Putnam Investments that appears to be having a striking effect on performance.

Assets under management are down for nearly all firms due to market depreciation. And making matters worse, most funds have also been hit with steep outflows. According to Strategic Insight, only about 22% of equity mutual funds had inflows for at least four of the last five months of 2008. But a few firms have actually seen positive flows over the past year.

DST Systems Inc. this year celebrates 40 years of providing market-leading solutions to the mutual fund industry. In recognition of this milestone, Money Management Executive asked DST's senior leadership to identify ways in which investment management companies can maximize the value they deliver to their stakeholders by leveraging the strengths and resources of their service provider.

Regulatory leaders are questioning whether changes need to be made to target-date funds after several 2010 funds reported huge losses last year, but mutual fund industry leaders say these concerns are overblown.

Banking companies will be hard-pressed to repeat a banner 2008 in terms of sales of fixed annuities. Fixed annuities were popular late last year and early this year, but with interest rates falling and the markets in a fingers-crossed recovery, executives and analysts expect demand for these products to start tapering off.

Regulators are searching for ways to make money market funds stronger without inadvertently crippling the $3.7 trillion industry, but reaching that delicate balance will require compromises from both sides.

Financial advisers were able to save their millionaire clients big money last year, helping to fortify the need and demand for good advice among the wealthy, Fidelity Investments found.

The economy will not bound back with élan but at least will provide a “normal recovery,” Vanguard founder John Bogle tells Bloomberg.

More than 25% of high-net-worth individuals either withdrew assets or closed their accounts with their wealth managers in 2008, according to the World Wealth Report, a survey of the 15 largest firms issued by Merrill Lynch Global Wealth Management and Capgemini. Instead, 30% of wealthy investors said they are likely to move their money to local and regional banks.The 15 asset managers surveyed lost an average of nearly 25% of their assets in 2008 after a 17% growth in 2007.“The good news is that it’s still a profitable business—just less profitable than before,” commented Bertrand Lavayssierre, managing director of global financial services at Capgemini.Wealthy clients moved 50% of their assets into cash or cash-equivalent assets, up from 44% in 2007 and 35% in 2006.

Due to a greater ease of getting in and out of markets, smaller hedge funds are handily outperforming large counterparts, according to Eurekahedge.Hedge funds with $100 million of assets under management or less are up 9.7% year-to-date through the end of May, compared with average returns of 5.2% for hedge funds with $500 million or more under management. Those with between $100 million and $500 million are up 9.4%.Bill Maldonado, head of Halbis, a division of HSBC Global Asset Management, told The Wall Street Journal that markets have been moving very swiftly this year, making it difficult for large funds to switch course. “There was an inference that they would be able to turn exposure around very quickly and go short, but, in fact, that didn’t happen,” he said.According to PerTrac Financial Solutions, smaller hedge funds have been beating larger hedge funds since 1996. The firm’s database of performance between 1996 and 2008 shows funds with less than $100 million delivering 13% a year, compared with 10% for funds with $500 million or more.