Law and regulation

Mistakes, bad luck and unexpected events can happen to any firm during good times and bad, but tackling misfortune in a forthright, brutally honest manner rather than trying to sidestep unpleasant truths can mean the difference between a small crisis and a full-blown public relations nightmare.

Fair value reporting seemed anything but fair last October when prices fell off a cliff.

Hedge fund Duff Capital Advisors has laid off approximately 80% of its staff, mostly form its investment teams, Dow Jones reports.

Investment research analyst Ian Jacobs, who has worked at Warren Buffett's Berkshire Hathaway Inc. since 2003, is reportedly planning to launch his own fund on March 1.

Reflecting current financial turmoil, most investors are more attuned to whether a company is viable than to its performance, according to the 2009 Investor Brandscape report from Cogent Research.

The events that occurred in the financial services industry over the past year were once thought inconceivable. At this point, regulators are chomping at the bit to reverse how Wall Street does business, and investors are downright spooked. The editors of SourceMedia's business publications offer their views on how these dramatic shifts on Wall Street and in corporate America will impact businesses and investors this year.

NEW YORK - The whole world will be in a recession throughout 2009, economists say, but it will be the U.S. and its strong dollar that lead the world to recovery sometime in 2010.

Millionaires and affluent investors suffered steep losses in 2008, and most, particularly Baby Boomers, are rolling their remaining assets into cash and stable-value investments for the foreseeable future.

Variable annuity sales sank in 2008 as the stock market's swoon scared investors off.

NEW YORK - Millions of aging Baby Boomers heeded the reassuring words of their financial advisers and remained heavily invested in equities throughout 2008, only to watch in shocked disbelief as 40% of their life savings disappeared.

Risk management will take on an increasingly important role this year as financial firms struggle to survive the fallout from last year's market mess.

The Federal Reserve has allowed more companies to take part in its program to add more liquidity to money market mutual funds.

Renaissance Institutional Futures, a $3 billion hedge fund run by James Simons, is foregoing management fees for 2009 as a response to poor performance in 2008.

Long-term U.S. government funds yielded 22.5% in the fourth quarter of 2008, for a three-month performance of 27.1% year to date, according to data from Morningstar Inc., as investors flocked to safety.

Among my predictions for 2008 was the subpoenaing of Eliot Spitzer's e-mails to prove his smear campaign against New York State Republican Majority Leader Joseph Bruno. And we all know what happened to the disgraced former governor of New York.

While the news about the economy and the markets continues to be bad, some in the business are taking heart.

Most executives wouldn't consider themselves "fortunate" if they took over one of the largest fund companies weeks before an historic market collapse.

Three months ago, financial experts were concerned that the Securities and Exchange Commission was on the verge of eliminating or making major revisions to 12b-1 fees for marketing and distributing mutual funds. A lot has happened since then.

Mutual fund managers Tom Forester and David Ellison stood out from the crowd last year with the two best-performing funds, even though they both lost money in 2008.The Forester Value Fund was down 0.82% for the year, thanks to investments in stocks that typically do well during recessions, such as Kraft Foods Inc., Johnson & Johnson and H.J. Heinz Co. The average decline for the year in the value fund category was 38%, according to Morningstar Inc.Ellison's FBR Small Cap Financial Fund was second among financial sector funds, losing just 10% of its value, compared to an average decline of 45% in its category.While Forester and Ellison may want to adjust their portfolios as market conditions improve, they are continuing to attract new clients and new assets for now. Forester said his fund's assets have grown fivefold in 2008 to $55 million."I'll probably be in some of the same stocks for the first six months or so of 2009," Forester told the Associated Press. "And then as I see things getting better, I'm going to shift out of the real defensive things, and get more constructive on the more cyclical stocks that can grow quite well as we come out of this period."Ellison's fund is invested primarily in low-risk small banks and in cash. He said he plans to keep it there until the economy starts to show broader signs of recovery."I think unaffordable mortgages are still going to chew on the economy for a while," he said.

A 38% drop in the Standard & Poor's 500 index last year seems almost rosy compared to the abysmal performance of three big mutual funds that all lost more than 60%.Legg Mason heavyweight manager Bill Miller - who once beat the S&P 15 years in a row - has gone from best to worst, with his Legg Mason Opportunity Trust fund down a staggering 65% for the year.According to Morningstar Inc., the second-worst performer was the Winslow Green Growth Fund, down 61%, followed by the Legg Mason Growth Trust fund, down 60%."[Miller] continued to try to position the fund for a recovery," Morningstar fund analyst Greg Carlson told The Wall Street Journal, adding that Miller kept holding on to stock in Amazon (down 45%), Expedia (down 74%) and Yahoo (down 48%) as well as Freddie Mac and American International Group Inc.Winslow manager Jack Robinson said the fund's losses were due to its concentrated portfolio and focus on green energy companies."We also made a couple of mistakes," Robinson said. "We stayed with some companies that had sound fundamentals but which had debt. We're going to be sticking with our investment philosophy for the long term."Morningstar's analysts are optimistic that Legg Mason's Growth fund, managed by Robert Hagstrom, is well positioned for an upswing in the markets, whenever that happens."Legg Mason Growth will soar again," Morningstar senior fund analyst Bridget Hughes. "We're confident that the fund will perform well in an upswing. In fact, since mid-November, it has gained more than 7.5%, putting it near the category's top."The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.