Investment funds

WASHINGTON—Rather than looking toward a recovery, Richard Davis, chairman, president and CEO of U.S. Bancorp, is “looking for a new direction.”

WASHINGTON—At a separate summit on 401(k) reform during last weeks General Membership Meeting of the Investment Company Institute, Putnam Investments CEO Robert L. Reynolds called for sweeping retirement reform, beginning with mandatory automatic enrollment in qualified default options, savings escalation, the inclusion of retirement income options and full advice on asset allocation and retirement planning.

Asking investors to properly maneuver their 401(k) plans in a market like this is akin to an airline pilot stepping aside and telling passengers to take the controls mid-flight. Workers never asked for so much responsibility in controlling their own retirement future, and most have no idea what to do now that the plane is losing altitude. In fact, most investors seem to be in shock and are doing nothing at all. A persistent problem with the mutual fund industry is the lack of education among its customers about how to manage their own retirement savings. Ignorance was bliss when equities were historically delivering 10% average returns, but the tide has turned. The first wave of Baby Boomers realized they did not have enough savings and decided to bet on risky equities to make up for the shortfall. That gamble backfired when equities in nearly every asset class plummeted last year. Now vastly underfunded as they approach retirement, most Boomers are skeptical they will ever get it back. Financial information is very confusing to the uninitiated. The vocabulary is difficult, the products are complicated, and the professional advice isn't always right. If the fund industry can encourage its customers to become more financially savvy, without stepping on any conflict-of-interest tripwires, its investors will be able to shop for the best products at the lowest cost and keep more assets under management. Younger workers-particularly those in my generation-are getting an early and valuable lesson about market volatility. Buy-and-hold investing is obsolete in an era where one bad year can wipe out 20 years of gains. Younger workers still have plenty of time to more than make up for losses, but will be wary going forward of future bear markets. These investors are plugged in to a myriad of information available instantly at their fingertips. As technology continues to advance, this will lead free-thinking investors who will be able to take responsibility for learning how to navigate their savings. Funds would be wise to become the source and the inspiration for that learning. (c) 2009 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com/

WASHINGTON --Mutual funds remain a sound investment choice, and will, once again, grow through the perseverance of American ingenuity. Investment firms must stress this to investors to restore their faith.

The Securities and Exchange Commission has filed fraud charges against the Reserve Primary Fund and its officers for failing to disclose the fund’s vulnerability to Lehman Brothers, as it filed for bankruptcy, instead falsely assuring investors that it would support the fund’s $1 net asset value.

Market turmoil has spurred investors’ appetite for advice, and nowhere can this be seen more clearly than in mutual funds sold through brokerages or financial planners, according to Strategic Insight.

The current regulation that allows hedge funds and other advisers with fewer than 15 clients not to register with the Securities and Exchange Commission is a “gap [that] doesn’t make sense,” said Andrew Donohue, director of the division of investment management, speaking before the Mutual Fund Directors Forum.

As investors have grown more conservative, fund companies are rethinking their entire product lineups, Dow Jones reports.

The Securities and Exchange Commission is considering better disclosures for target-date funds, particularly their glide paths and asset allocations, SEC Chairman Mary Schapiro told the Mutual Fund Directors Forum.

Legg Mason lost $325.1 million in the fiscal fourth quarter ended March 31, or $2.29 per diluted share, compared to a loss of $255.5 million, or $181per diluted share, in the fourth quarter of fiscal 2008.

Despite their growing popularity in recent years, target-date funds are grossly misunderstood, according to a survey by Envestnet Asset Management.

Investors who have been laid off or who have switched jobs may be in for a rude awakening when it comes to their 401(k). Not only has its value declined steeply, but the investment advisor may not honor redemptions in funds whose assets are tied up in any type of risky, illiquid investment, The Wall Street Journal reports.

With so many Wall Street investment banking powerhouses and hedge funds closing, and regulators pressuring them to rein in risk, many of these executives are returning to the game, setting up, you guessed it, hedge funds, Reuters reports.

Fidelity Investments has added the IQ Alpha Hedge Strategy Fund to its mutual fund platform, making it available to registered investment advisors and retail investors.

Growth funds are beating value funds handily so far this year, leading some fund managers to believe the market may be back on track, The Wall Street Journal reports.

Execs Predict 'New World Order' For Financial Services

Fidelity Promotes Hogan To Fill Donovan's Spot

With more than nine in 10 shareholders reporting Internet access, the SEC's summary prospectus rule represents more than just an opportunity to provide an easier-to-understand document. The new rule provides a unique chance to refine the overall shareholder communication model.

Last year was a brutal one for mutual fund performance, but that has not prompted bankers to revamp their lineups of preferred funds and fund families-possibly because they wisely erred on the side of caution and prudence in the first place.

Robert L. Reynolds loves a challenge. Without question, he certainly faces one. Trying to restore Putnam Investments' stature among America's top mutual fund companies after the firm's involvement in the trading scandal of 2003 and depletion of assets, now at $99 billion, a mere quarter of what they were in 2000-is a formidable task.