Mutual funds

Baring Asset Management has launched an international small-cap fund for institutional investors that will seek long-term capital growth by investing in Europe, Japan and the Far East, with the Morgan Stanley Capital International Europe Australasia Far East Small Cap Index as its benchmark.

Although the Securities and Exchange Commission is not requiring fund companies to begin producing summary prospectuses until Jan. 1, some fund companies, including the Guinness Atkinson Funds, have already started to equip investors with the plain English, four-page documents.

The mutual fund industry may be waiting in vain for inflows to return once the stock market shows steady signs of life, Dave Swanson, founder and managing principal of SwanDog Strategic Marketing, warns in a new whitepaper, “How to Save the Mutual Fund Before It’s Too Late.”As he rationalizes it, “In terms of rebuilding lost trust, here we come again, asking fund investors and sellers for another chance for the second time in the last seven years.”At age 85, the mutual fund value proposition needs revisiting. Otherwise, it will continue to lose market share to exchange-traded funds and other index and passively managed products, along with quantitative models and guaranteed investments “where investors and advisers have more control over the outcome.”The most important thing that fund companies can do, Swanson says, is give back portfolio managers their stock picking powers, so that they are not constrained by strict and narrow investment mandates that tie them to style and capitalization constraints.Second, he calls upon fund companies to revisit risk management and make this an important part of every customer communication.Fund companies need to make a case for active management by demonstrating greater accountability through performance fees that tie management fees directly to results, he adds.In addition, the tax structure is no longer competitive compared to managed money and ETFs. “Years like 2008, when many investors faced a taxable event despite deep losses, only further undermine investor trust and confidence in funds,” he said. “Now is the time to push for change, while we have capital losses on the books.”In conclusion, Swanson calls upon fund companies to respond in real time to market and economic conditions and to overhaul their shareholder communications completely. “Demand that your marketers and product team put forth a plan for how they are going to adapt their efforts to today’s environment and how they will start telling your story more effectively,” he says.

With his own fund down 35% in 2008, Bob Rodriguez, manager of the FPA Capital Fund, says the industry’s performance last year “stunk,” MarketWatch reports.“We managers did not deliver the goods, and we must explain why,” he told colleagues at the Morningstar Investment Conference.Rather than sticking with mutual funds’ traditional investment discipline of being fully invested and tracking a benchmark, Rodriguez said, fund managers should have wakened up to the magnitude and “extraordinary risk” of the financial crisis and taken a different tack.“Whether in stocks or bonds, it seems as though the same old strategies were followed: be fully invested and don’t diverge from your benchmark too far,” he said. “If active managers maintain this course, I fear the long-term outlook for their funds, as well as their employment, will be at high risk.”Funds must adjust their investment mandates so that they will be better focused on macroeconomic conditions and be able to respond to adverse market conditions in the future and retain investor trust, he urged.“A more focused strategy will be necessary to excel,” he said. “If active managers continue to adhere to their old practices, we should see a contraction in the active mutual fund management universe in the next five to 10 years.”

The Securities and Exchange Commission announced the members of its newly created Investor Advisory Committee. The committee’s mission is to give investors a greater voice in the regulator’s work.The 15-member panel will advise the Commission about matters concerning investors in the securities markets; provide investor perspective on current, non-enforcement regulatory issues; and be a source of information and recommendations to the Commission concerning its regulatory programs from the point of view of investors. The committee will be co-chaired by Richard “Mac” Hisey, president of AARP Financial and AARP Funds, and Hye-Won Choi, senior vice president and head of corporate governance for TIAA-CREF.

Putnam Investments, after being hit by the market-timing scandal, poor performance and the loss of 75% of its assets, is “starting to turn around,” Great-West Lifeco CEO Allen Loney told Bloomberg. Great-West acquired Putnam from Marsh & McLennan Cos. for $3.9 billion in 2007.

Older workers are much less confident about the outlook for their retirement security than they were two years ago, according to a survey of 2,200 workers by Watson Wyatt. Understandably, those with a pension plan are far more confident than those handling their own retirement savings through a 401(k).

Citi has launched a free Fund Governance Portal for its regulatory administration services clients.

With yields on money market funds dropping to all-time lows and more fund companies absorbing fees to prevent breaking the buck, even then, performance is an issue for investors, The Wall Street Journal reports. As a result, bank savings accounts that yield 2% on average are attracting more money.

Six years after health savings accounts were introduced, only 59% of the population has heard of them, only half of these people actually understand them, and only 14% of the overall population own them, Guardian Life Insurance found in its Spotlight on Consumer-Driven Health Plans Survey.

Vanguard will be merging the $6.7 billion Vanguard Treasury Money Market Fund into the $21.8 billion Vanguard Admiral Treasury Money Market Fund in August, and it has already closed the Vanguard Federal Money Market Fund to new accounts and additional purchases.

Investors’ unease with the stock market, despite its 40% rise since early March, does not augur well for the mutual fund industry, the Chicago Tribune reports; assets in equity funds remain at half the level they were before the crisis began in late 2007.

The Securities and Exchange Commission is creating the position of chief operating officer and looking to expand its ranks by 1,000 to better combat fraud.

The Securities and Exchange Commission began repaying more than 590,000 AIM investors $78 million in a fair funds distribution for the market timing that hurt their returns.

Pershing, a subsidiary of The Bank of New York Mellon, has added funds from Neuberger Berman, The Hartford and T. Rowe Price to its no-transaction-fee mutual fund platform, FundVest.

As it debuted its first exchange-traded fund on the NYSE Arca Tuesday, PIMCO announced it plans to launch six additional fixed income ETFs.

Although credit markets are improving, money market funds are struggling to deliver positive returns, and as a result, since late last year, nearly all money funds, perhaps as many as 90%, have been waiving fees to avoid breaking the buck, The Wall Street Journal reports.

Credit Suisse has formed an investment strategies and solutions group, to be led by David Russ, the former chief investment officer of Dartmouth College’s office of investments. The division will collaborate with the institutional distribution team.

Fidelity Investments promoted Abigail Johnson to chairman of the board of directors overseeing fixed income and asset allocation funds, yet another indication of the firm’s intention to eventually name the younger Johnson successor to her father, Edward C. “Ned” Johnson III, 78, as head of the company.

Invesco, manager of the Aim and PowerShares families of mutual funds, has launched the Aim Balanced-Risk Allocation Fund, an international balanced fund. Via derivatives, it will invest 60% of its assets in fixed income, 20% in equities and 20% in commodities.