Fund performance

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.

The number of millionaires in the world plunged 14.9% last year as the markets faced extreme losses and volatility, according to the Merrill Lynch/Capgemini 2009 World Wealth Report. This means there are fewer millionaires in the world today than in 2005. The number of ultra-high-net-worth individuals (those worth net assets of at least $30 million, not including their primary residence) also dropped 24.6%.

In today’s unpredictable market, even the “safest” investments such as stable-value funds carry considerable risks that plan sponsors and participants might not be aware of, cautions Watson Wyatt. Thus, the consultant urges plan sponsors and investors to review their holdings.

Financial planners’ high-net-worth clients are asking for guidance on investing and spending, as they reassess their holdings following the devastation of 2008, the American Institute of Certified Public Accountants found in a survey.

While the financial services industry largely embraced most of the Obama administration's financial services overhaul, the idea of removing money funds' $1 net asset value is causing widespread concern in the mutual fund industry.

The Financial Industry Regulatory Authority has fined seven firms a total of $184,500, including $80,000 for Tulsa-based BOSC Inc., for failing to timely or accurately report municipal securities, unfairly pricing bonds, as well as other muni and non-muni rule violations.

At the hearing on target-date funds that the Department of Labor and the Securities and Exchange Commission held in Washington last Thursday, the focus was on better disclosure of holdings.

After active managers fell in lockstep with their benchmarks and all of the major indexes in 2008, many institutional investors are paring back their investments with active managers in favor of low-cost passive alternatives, The Wall Street Journal reports.

As fund companies continue to look to streamline their operations to cut costs, even with the market recently rising, they will most likely merge additional funds, experts say. Some, particularly asset managers held by banks, will look to be sold.

The recession is over, Loomis Sayles’ Dan Fuss told Reuters.

At the hearing on target-date funds Thursday, target-date fund managers, along with the Investment Company Institute, asked the Securities and Exchange Commission to butt out of asset management.ICI General Counsel Karrie McMillan said interfering in the mix of assets would be unprecedented: “In the 70-year history of mutual fund regulation, the government has never regulated the investment choices of mutual funds. Nor should it start now.”“We strongly oppose any efforts to regulate the glide paths or other aspects of the investment design or construction of target-date funds,” concurred John Ameriks, a Vanguard principal.Fund executives also said they were opposed to labeling target-date funds conservative, moderate or aggressive, based on the mandate of their glide path and current holdings.But SEC Chairman Mary Schapiro countered that target-date fund losses last year ranged from minus 3.6% to minus 41%, with an average loss of 25%. “These varying results should cause all of us to pause and consider whether regulatory changes, industry reforms or other revisions are needed with respect to target date funds.”Financial planners who testified Thursday tended to agree with the SEC that a target-date fund’s name should give some indication of its level of equity and other risk exposure. “The name of each fund must bear some relationship to the way the fund is managed, that is, its glide path,” said Joseph Nagengast of Target Date Analytics, which provides benchmarks for target-date funds. “If a fund labeled 2010 is really targeted to land at 2040, it should be relabeled as a 2040 fund.”