Mutual funds

Investors continued to seek safety in cash as money market mutual fund assets crept closer to $4 trillion, rising $17.94 billion for the week ending March 4 to $3.906 trillion, according to the Investment Company Institute.

Justin Leverenz, manager of the Oppenheimer Developing Markets fund, says emerging market economies are more agile than developed nations, and will likely soar out of the recession.

In response to the market downturn and wide confusion among investors about what they should do, Charles Schwab has published a number of articles on its website offering guidance. Schwab is also holding seminars at its branches, town hall discussions and webcasts.

Legg Mason announced Thursday that it has sold all $1.8 billion of the structured investment vehicles held at par value by its money market funds, the company and through a total return swap with a bank. The sale includes $1.4 billion of SIVs held by the money funds, $57 million by the company and $355 in the swap. All told, Legg Mason spent $1.2 billion on the transactions. It retains only $49 million in SIVs.“With the sales announced today, our money market funds are now completely SIV-free,” said Legg Mason Chairman and CEO Mark R. Fetting. “We are pleased that our business teams were able to resolve this issue and protect our money market franchise while our investment teams have focused on [their] goal of providing principal stability, credit quality and current income.”Fetting added: “In persistently difficult markets, we took this final proactive step not only to resolve the SIV issue, but also to keep our balance sheet strong. With the expected tax refund, we will have $1 billion in available cash” which will help “protect Legg Mason’s profitability.”

In spite of the market downturn, the trading services that Fidelity Investments provides for intermediaries is doing a brisk business, the company announced Thursday.Daily average commissionable trade, new breakaway brokers joining the platform, equity order flow, prime brokerage and adviser-sold 401(k) plans are all doing well. Combined, the divisions serving these markets had $1.1 trillion in assets under administration by the end of last year.Daily commissionable trades rose 18% in 2008 and averaged 259,000 and 314,000 in September and October. Fidelity also sold 702 new Fidelity Advisor 401(k) plans in 2008, up 36%. Money market assets rose 44% to a record $137 billion, and 102 breakaway brokers selected Fidelity as custodian.Assets in Fidelity’s prime brokerage services also rose, by 127%, aided by a 57% increase in new clients. “Despite arguably one of the most volatile business environments in recent memory, we repeatedly demonstrated our ability to help intermediary clients navigate challenging financial markets,” said Michael K. Clark, president of Fidelity Institutional Products Group. “Our ability in 2008 to achieve record trading volumes, equity order flow and institutional money market flows, among others, was a direct result of the trust our diverse base of clients placed in the strength and reputation of Fidelity,” Clark added.Even in this challenging market environment, Fidelity plans to continue to invest in these businesses’ technology, trading tools and services in 2009.“We are in an unprecedented business environment that is rapidly transforming the financial services industry, and those firms which do not have all the pieces to serve these converging markets and new financial business models will be at a competitive disadvantage,” Clark said.

Nearly 30% of long-term care costs are paid for out-of-pocket, according to research by Avalere Health, far higher than the 10% widely estimated previously. One of the reasons for the discrepancy, according to the public policy and research firm, is that Avalere has included assisted living costs.

Independent financial advisers are somewhat optimistic about the economy, with 44% saying they believe the recession will end this year, and another 41% pointing to next year, Charles Schwab found in a survey of 1,200 advisers.

Equity mutual funds suffered redemptions in 2008, only the third time in their history that they have had outflows. Actively managed funds lost $221.08 billion, while index funds took in $17.6 billion.

Will Danoff, manager of the Fidelity Contrafund, admits he was too bullish on technology and retail stocks, but says he was right to pass on low-priced financial services stocks.

Between a mixture of its conservative, low-cost fund offerings that appeal to investors in this time of market stress, and a performance-based compensation plan, Vanguard has been able to retain enough assets and keep costs down to avoid mass layoffs.

Gamco has elected founder Mario Gabelli’s daughter, Elisa M. Wilson, to the board. She is a shareholder of Gamco’s privately held parent company, GGCP, and, along with her siblings, owner of the real estate partnership that leases office space to the firm. She is also president and a trustee of the charitable trust, Gabelli Foundation. Gabelli’s brother, John D. Gabelli, is also on the board.

Allstate has decided to cancel its seven ClearTarget Retirement Funds after only 10 months, saying that it has decided to exit the target-date mutual fund business due to lackluster sales.

To mitigate against any future financial catastrophes, the Investment Company Institute on Tuesday called for two new regulators that would focus on systemic risk and the capital markets, bridging the functions of the Securities and Exchange Commission and the Commodity Futures Trading Commission.

Index equity mutual funds saw average losses of 39.1% last year, while actively managed funds lost an average of 40.5%, according to Morningstar.

The chairman of the Senate Special Committee on Aging has called for more scrutiny of target-date retirement funds after several 2010 target-date funds posted huge losses in 2008.

Bank of New York Mellon Promotes Kilpatrick to Pres.

For all the education the asset management industry has on the importance of saving for retirement, it doesn't appear to have gotten through to the younger crowd, many of whom have completely unrealistic expectations for their golden years.

In this brutal market, mutual funds that have kept a large stash in cash have performed best, according to Morningstar. Plus, these funds are best-positioned to take advantage of the market once it turns around. "Many of the funds that held up the best in this brutal market have one thing in common-cash," said Greg Wolper, a Morningstar analyst.

Fidelity Investments is expanding its capital markets division by 20%, or 80 positions, in trading, sales, prime brokerage and operations to serve clients trading mutual funds and hedge funds.

ICI Tells Congress 401(k) Model is Still Strong