Fund performance

The phone lines were jammed at financial advisers’ offices throughout the week as average investors called to find out just what the heck was happening on Wall Street.

The U.S. Treasury Department announced early Friday it has set aside $50 billion from The Exchange Stabilization Fund to insure that no fund in the $3.4 trillion money market fund industry “breaks the buck” for the next year.

Putnam Investments announced Thursday that it was liquidating the institutional Putnam Prime Money Market Fund and distributing the fund’s $15 billion in assets due to marketwide liquidity issues and high redemptions on Wednesday, rather than to exposure to uncreditworthy investments in AIG, Lehman Brothers or Washington Mutual.

Shareholders filed a lawsuit in U.S. District Court in Manhattan Thursday against Reserve Funds’ Primary Fund for halting redemption of holdings of $10,000 or more on Tuesday due to the fund falling to 97 cents on the dollar.

Jeffrey Gundlach, chief investment officer of TCW Group, ticked off a host of cataclysmic forecasts for the financial services industry in a client conference call Wednesday that he titled “No Market for Old Men,” MarketWatch reports.

The Reserve announced Tuesday that its Primary Fund broke the buck, with shares worth only 97 cents on the dollar, due to $785 million worth of Lehman Brothers blue-chip commercial paper and medium-term notes that had fallen to zero value as of 4 p.m.

With Lehman Brothers’ in Chapter 11, Bank of America acquiring Merrill Lynch, Fannie Mae and Freddie Mac bailed out by the government, Bear Stearns acquired by JPMorgan and the future of AIG and Washington Mutual now hanging in the balance—mutual fund investors are calling to find out about potentially treacherous exposure. But so far, The Wall Street Journal reports, they are holding steady and not seeking mass redemptions.

A number of leading mutual and pension funds are invested in Lehman, Merrill Lynch and AIG and could suffer as a result, the Toledo Blade reports. How badly the shock to investors’ retirement savings will be, has yet to be sorted out, however.

As the shock of the turmoil in the financial services industry continues its ripple effect, businesses and governments outside New York and Boston are bracing for lower tax rolls as a direct result of tax cuts.

Identity theft, data loss and other privacy violations are among the leading threats faced by financial institutions. Depending on their nature, they can inflict reputational and brand damage, cause revenue losses and prompt civil liability suits by customers. What's more, regulators are taking an increasingly hard line in these matters. Two new regulatory measures to safeguard investor privacy have far-reaching implications for investment companies, and executives need to take steps to comply.

Target-date funds, also known as lifecycle funds, are rapidly rising in 401(k) plans as the favorite qualified default investment alternative because they're much more appropriate than the traditional money market fund for hands-off investors.

Americans have changing needs for retirement products as they grow older, and mutual fund companies that recognize and respect the differences between the age groups can be much more effective.

Fidelity will buy back $300 million worth of auction-rate securities from its brokerage customers, according to the Associated Press, citing an individual close to the talks. In so doing, it will settle an investigation by New York Attorney General Andrew Cuomo, and the announcement could possibly be made this afternoon.

Janus Twenty Fund manager Ron Sachs must be ruing purchasing nearly 10 million shares in Lehman Brothers, now that the company is either on the brink of collapse or a fire sale, the Rocky Mountain News reports. The stock is down nearly 80% since the beginning of June.

Financial services, insurance, and real estate businesses’ hiring plans for the fourth quarter are the weakest they have been in 16 years, as a result of a contracting banking sector and the slumping housing market, a survey by Manpower found.

Although unemployment and inflation have been higher in the past 30 years, a majority of people age 60 or older have a very pessimistic outlook, according to a poll by the MetLife Mature Market Institute.

While American Funds and Vanguard raked in $74 billion apiece in 2007, Fidelity Investments netted $2 billion, according to Strategic Insight data. It was the first time in 20 years Fidelity didn’t rank in the top 25 fund houses in terms of net sales.

Among the largest hedge funds, 35% are in the red so far this year, Hedge Fund Research data shows, as reported by The Wall Street Journal. As a group, their assets are down 4.3%, and among all of the listings in Hedge Fund Research’s Fund Weighted Composite Index benchmark, they are down 0.75%. This is the first half-yearly decline in the index since the group started it in 1990.

Bill Miller, manager of the Legg Mason Value Trust, may have made a poor gamble last summer, when he expanded his holdings of Freddie Mac, 14.6 million shares of which he first bought in the fourth quarter of last year, by an additional 30 million shares, The Baltimore Sun reports.

The boomerang effect of the financial crisis and eye-popping oil prices are proving more difficult than even the most skilled mutual fund managers can handle, the Chicago Tribune reports.