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Work days to get longer at fund firm
By Thomas Grillo
Friday, March 13, 2009 - Updated 21h ago
EmailE-mail PrintablePrintable Comments(1) Comments LargerSmallerText size ShareShare Rate(0) Rate
Putnam Investments' workers will be spending a little more time at the office starting this spring.
The mutual fund giant is increasing its workweek by two-and-a-half hours to a 37.5 hour week, effective May 4.
A company spokeswoman said the change will "maximize staff resources and align the firm with the standard hours in place within most financial services organizations."
Rusty Vanneman, research director for E-Trade Capital Management, said he was surprised. "I'm sure there's no increase in pay, but Putnam gets more productivity out of its employees to enhance profit margins."
NOTE: Rusty vanneman he's a the director of e-trade capital management and he was a good person forevery body.
With its assets plunging in the market meltdown, Putnam recently laid off more than 250 workers, including about a dozen portfolio managers and some analysts.
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biz1158249_2009-03-12 22:57:12__1_0_0
Sunday, April 12, 2009
BERNANKE PROPOSES LESS RESTRICTIVE MONEY RULES (CORRECT)
STOCKSRATES & BONDSCURRENCIESMUTUAL FUNDSETFsCOMMODITIESECONOMIC CALENDAR
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Bernanke Proposes Less Restrictive Money-Fund Rules (Correct)
Share | Email | Print | A A A
By Christopher Condon
(Corrects spelling of Morrison in last paragraph.)
March 11 (Bloomberg) -- U.S. Federal Reserve Chairman Ben S. Bernanke said more regulation may be needed for money-market mutual funds, though he didn't endorse rules backed by former Fed chief Paul Volcker that would treat the industry more like banks.
Lawmakers and regulators should consider added restrictions on assets that money funds can own and a new "limited system of insurance" to protect investors, Bernanke said yesterday in a speech urging broad changes to U.S. financial oversight.
The comments signal Bernanke favors less aggressive rules for money funds than those recommended by a group including Volcker, an adviser to President Barack Obama. The group proposes regulating money-market funds more like banks, with reserve requirements and mandatory federal insurance.
NOTE:the commended signals benanke he favors less agressives rulefor money funs.
"He's being more measured in his remarks," Joan Swirsky, an attorney at Philadelphia law firm Stradley Ronon Stevens & Young LLP and a money-market fund legal specialist, said of Bernanke. "He's not throwing out the baby with the bathwater."
The proposals backed by the Volcker group "would eliminate money funds as we know them," Paul Schott Stevens, president of funds trade group the Investment Company Institute, said after they were disclosed in January.
Money-market mutual funds have drawn scrutiny since the collapse of the $62.5 billion Reserve Primary Fund in September. The New York-based money fund was the first in 14 years to break the buck, or drop below $1 a share. Its collapse, caused by losses on debt issued by bankrupt Lehman Brothers Holdings Inc., rattled confidence in the money funds, long considered the safest investments after bank accounts and Treasury debt.
Run on Funds
The incident sparked an industrywide run on money funds that can invest in corporate debt, known as prime funds. The retreat temporarily crippled the market for commercial paper as prime funds reduced holdings of the highest-rated debt by $200.3 billion, or 29 percent, in the final two weeks of September.
That helped drive the cost of issuing commercial paper to its highest level in eight months, squeezing companies, banks and public institutions that rely on the market to raise cash for expenses such as payroll. Combined with a pullback in bank lending, the commercial-paper freeze threatened to choke the economy.
The turmoil prompted regulatory proposals from the Group of Thirty, an independent policy organization whose members include Volcker, Treasury Secretary Timothy Geithner and Lawrence Summers, head of the White House's National Economic Council. In January, the group recommended that money funds either accept banking-industry controls or give up accounting rules that allow them to maintain a stable $1-a-share net asset value, or NAV.
Favoring Banks
Stevens, of the Washington-based Investment Company Institute, at the time called the Group of Thirty proposals "extraordinarily far-reaching recommendations that were made without any thought."
Volcker "wanted to kill money-market funds in favor of the banking sector" when he was chairman of the Fed from 1979 to 1987, Steven said.
ICI spokesman Gregory Ahern yesterday welcomed Bernanke's remarks without commenting on the specific proposals.
"We agree with Chairman Bernanke that money-market funds play a crucial role in the U.S. economy and appreciate his comments on the need to increase the resiliency of the money markets, generally, and money-market funds, in particular," he said.
NOTE:
The ICI in November formed a panel headed by Vanguard Group Inc. Chairman John J. Brennan to develop recommendations to improve the money-market fund industry. It is due to deliver its report by the end of March.
Assets in money-market funds have climbed to $3.83 trillion since falling to $3.33 trillion in the week following the freeze- up of Reserve Primary.
Two Approaches
Bernanke, in his speech to the Council on Foreign Relations, outlined two approaches to making money-market funds more stable. The first would place tighter restrictions on what funds could buy, "potentially requiring shorter maturities and increased liquidity."
Under rule 2a-7 of the Investment Company Act of 1940, money funds are required to invest only in highly rated debt that matures in less than 13 months.
Bernanke's remarks suggest the maturity limits could be shortened or "laddered," Swirsky said. That might require different percentage levels of a fund's portfolio to fall under staggered maturity caps.
Rule 2a-7 doesn't contain restrictions linked to the liquidity of investments other than to cap "illiquid securities" at 10 percent of a fund's holdings. Swirsky said liquidity requirements are "significant by their absence" in the rules. "I would not be surprised if that's added to the rule," she said.
Insurance Program
Such a change could provide funds with a better chance of meeting sudden, large withdrawal requests without being forced to sell assets at a loss, Swirsky said.
Bernanke's second approach would involve establishing "a limited system of insurance for money-market mutual funds that seek to maintain a stable net asset value," he said.
Three days after the demise of Reserve Primary, the U.S. Treasury set up the Temporary Guarantee Program for Money Market Funds, insuring participating funds against losses for three months. The program, which succeeded in halting the panic surrounding money funds, has since been extended to April 30.
Peter Crane, president of Crane Data LLC, a money-fund tracking firm in Westborough, Massachusetts, said Bernanke appears to be calling for a private insurance program or "quasi- government" version to take over from the Treasury on a permanent basis.
Crane said this and the rest of Bernanke's remarks would likely be well-received by the investment industry.
"We all need to be sensitive that radical change may do more harm than good," Charles Morrison, head of money markets at Boston-based Fidelity Investments, said in an interview. Fidelity managed $500 billion in money-market assets as of Jan. 31.
To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net
Last Updated: March 11, 2009 08:26 EDT
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* STORY
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*
Bernanke Proposes Less Restrictive Money-Fund Rules (Correct)
Share | Email | Print | A A A
By Christopher Condon
(Corrects spelling of Morrison in last paragraph.)
March 11 (Bloomberg) -- U.S. Federal Reserve Chairman Ben S. Bernanke said more regulation may be needed for money-market mutual funds, though he didn't endorse rules backed by former Fed chief Paul Volcker that would treat the industry more like banks.
Lawmakers and regulators should consider added restrictions on assets that money funds can own and a new "limited system of insurance" to protect investors, Bernanke said yesterday in a speech urging broad changes to U.S. financial oversight.
The comments signal Bernanke favors less aggressive rules for money funds than those recommended by a group including Volcker, an adviser to President Barack Obama. The group proposes regulating money-market funds more like banks, with reserve requirements and mandatory federal insurance.
NOTE:the commended signals benanke he favors less agressives rulefor money funs.
"He's being more measured in his remarks," Joan Swirsky, an attorney at Philadelphia law firm Stradley Ronon Stevens & Young LLP and a money-market fund legal specialist, said of Bernanke. "He's not throwing out the baby with the bathwater."
The proposals backed by the Volcker group "would eliminate money funds as we know them," Paul Schott Stevens, president of funds trade group the Investment Company Institute, said after they were disclosed in January.
Money-market mutual funds have drawn scrutiny since the collapse of the $62.5 billion Reserve Primary Fund in September. The New York-based money fund was the first in 14 years to break the buck, or drop below $1 a share. Its collapse, caused by losses on debt issued by bankrupt Lehman Brothers Holdings Inc., rattled confidence in the money funds, long considered the safest investments after bank accounts and Treasury debt.
Run on Funds
The incident sparked an industrywide run on money funds that can invest in corporate debt, known as prime funds. The retreat temporarily crippled the market for commercial paper as prime funds reduced holdings of the highest-rated debt by $200.3 billion, or 29 percent, in the final two weeks of September.
That helped drive the cost of issuing commercial paper to its highest level in eight months, squeezing companies, banks and public institutions that rely on the market to raise cash for expenses such as payroll. Combined with a pullback in bank lending, the commercial-paper freeze threatened to choke the economy.
The turmoil prompted regulatory proposals from the Group of Thirty, an independent policy organization whose members include Volcker, Treasury Secretary Timothy Geithner and Lawrence Summers, head of the White House's National Economic Council. In January, the group recommended that money funds either accept banking-industry controls or give up accounting rules that allow them to maintain a stable $1-a-share net asset value, or NAV.
Favoring Banks
Stevens, of the Washington-based Investment Company Institute, at the time called the Group of Thirty proposals "extraordinarily far-reaching recommendations that were made without any thought."
Volcker "wanted to kill money-market funds in favor of the banking sector" when he was chairman of the Fed from 1979 to 1987, Steven said.
ICI spokesman Gregory Ahern yesterday welcomed Bernanke's remarks without commenting on the specific proposals.
"We agree with Chairman Bernanke that money-market funds play a crucial role in the U.S. economy and appreciate his comments on the need to increase the resiliency of the money markets, generally, and money-market funds, in particular," he said.
NOTE:
The ICI in November formed a panel headed by Vanguard Group Inc. Chairman John J. Brennan to develop recommendations to improve the money-market fund industry. It is due to deliver its report by the end of March.
Assets in money-market funds have climbed to $3.83 trillion since falling to $3.33 trillion in the week following the freeze- up of Reserve Primary.
Two Approaches
Bernanke, in his speech to the Council on Foreign Relations, outlined two approaches to making money-market funds more stable. The first would place tighter restrictions on what funds could buy, "potentially requiring shorter maturities and increased liquidity."
Under rule 2a-7 of the Investment Company Act of 1940, money funds are required to invest only in highly rated debt that matures in less than 13 months.
Bernanke's remarks suggest the maturity limits could be shortened or "laddered," Swirsky said. That might require different percentage levels of a fund's portfolio to fall under staggered maturity caps.
Rule 2a-7 doesn't contain restrictions linked to the liquidity of investments other than to cap "illiquid securities" at 10 percent of a fund's holdings. Swirsky said liquidity requirements are "significant by their absence" in the rules. "I would not be surprised if that's added to the rule," she said.
Insurance Program
Such a change could provide funds with a better chance of meeting sudden, large withdrawal requests without being forced to sell assets at a loss, Swirsky said.
Bernanke's second approach would involve establishing "a limited system of insurance for money-market mutual funds that seek to maintain a stable net asset value," he said.
Three days after the demise of Reserve Primary, the U.S. Treasury set up the Temporary Guarantee Program for Money Market Funds, insuring participating funds against losses for three months. The program, which succeeded in halting the panic surrounding money funds, has since been extended to April 30.
Peter Crane, president of Crane Data LLC, a money-fund tracking firm in Westborough, Massachusetts, said Bernanke appears to be calling for a private insurance program or "quasi- government" version to take over from the Treasury on a permanent basis.
Crane said this and the rest of Bernanke's remarks would likely be well-received by the investment industry.
"We all need to be sensitive that radical change may do more harm than good," Charles Morrison, head of money markets at Boston-based Fidelity Investments, said in an interview. Fidelity managed $500 billion in money-market assets as of Jan. 31.
To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net
Last Updated: March 11, 2009 08:26 EDT
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Saturday, April 11, 2009
US JUNK BOND MUTUAL FUND POST $80 MLN OUTFLOW-AMG.
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US junk bond mutual funds post $80 mln outflows-AMG
Thu Mar 12, 2009 3:42pm EDT
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NEW YORK, March 12 (Reuters) - U.S. junk bond mutual funds posted $80 million in net outflows in the week ended March 11, the third consecutive weekly outflow, AMG Data Services reported on Thursday.
The funds had reported $689 million in net outflows the previous week, AMG said.
Junk bonds are rated below investment grade and carry high yields to compensate for their risks. Junk bond funds have attracted cash as low interest rates on safe-haven U.S. Treasuries and money market funds prompted investors to shift into high-yielding bonds.
NOTE:the junk bond have aattracted cash as low interest rate and rhe treasuries money market funds promoted investors to shift into yieldding
bonds.
© Thomson Reuters 2009 All rights reserved
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US junk bond mutual funds post $80 mln outflows-AMG
Thu Mar 12, 2009 3:42pm EDT
Email | Print |
Share
| Reprints | Single Page
[-] Text [+]
Market News
World stocks charge higher on better banking hope | Video
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Oil falls below $47 ahead of OPEC meeting
More Business & Investing News...
NEW YORK, March 12 (Reuters) - U.S. junk bond mutual funds posted $80 million in net outflows in the week ended March 11, the third consecutive weekly outflow, AMG Data Services reported on Thursday.
The funds had reported $689 million in net outflows the previous week, AMG said.
Junk bonds are rated below investment grade and carry high yields to compensate for their risks. Junk bond funds have attracted cash as low interest rates on safe-haven U.S. Treasuries and money market funds prompted investors to shift into high-yielding bonds.
NOTE:the junk bond have aattracted cash as low interest rate and rhe treasuries money market funds promoted investors to shift into yieldding
bonds.
© Thomson Reuters 2009 All rights reserved
Share:
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Jack Ma, founder and chief operating officer of Alibaba Group., gestures during an interview, in New York, March 12, 2009. REUTERS/Chip East
Blog: Note to Yahoo's Bartz: Ma company, Ma way
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Water scarcity clouds California farming's future
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3. European Factors--Shares to rise for 4th straight session
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5. UK Stocks -- Factors to watch on March 13
6. Madoff pleads guilty, is jailed for $65 billion fraud | Video
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10. G20 split on crisis response as talks loom | Video
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A courtroom drawing shows Bernard Madoff entering his plea of guilty in Manhattan Federal Court, March 12, 2009. REUTERS/Shirley Shepard
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Madoff statement: How I did it (.pdf)
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4 tips on finding a good money-market mutual fund
By The Associated Press – 13 hours ago
Money-market mutual funds hold about $3.9 trillion in assets, and have become increasingly popular places to park cash amid the beating that stocks and even bonds have taken lately. Here are tips from experts on how to find the best money funds:
1. FIND THE RIGHT FIT: While their yields are pretty low across the board, different types of money funds invest in different types of debt. So pick the right type to balance how much safety you're willing to give up for a slightly higher yield.
Many funds buy super-safe government debt such as Treasury bills, and generally carry the lowest yields — currently averaging a minuscule 0.1 percent or so. So-called prime funds seek slightly higher yields but accept marginal risk by venturing into some forms of corporate bonds, which carry the risk of default.
NOTE:many funds super-safe goverment debt as the treasury bills, preme funds seek slihtly higeher yields but accept marginal risk by venturing into the some forms of corporate bonds.
Money-market funds can also invest large sums in bank certificates of deposit, and command higher interest rates than you could get on your own. So-called tax-free money funds can invest in debt issued by state or local governments, which can offer tax advantages.
2. RESIST THE CHASE FOR YIELD: If you're comparing money fund yields, resist the temptation to buy a fund just based on a higher yield. Be sure to research the fund. Try to determine what risks the fund may be taking to generate the higher return — such as a soured investment in Lehman Brothers bonds, that led one money fund to expose investors to losses last fall.
3. CHECK EXPENSES: Fund expenses are a big consideration because a small difference in the amount you pay can offset the relatively modest yield of a money fund. Generally, look for expense ratios below 0.5 percent.
4. MONITOR FEES: With money fund yields at historic lows, fund companies are finding they can barely meet fund expenses and make a profit. That pressures the companies to pass on higher fees. Monitor disclosures about such fee increases.
Copyright © 2009 The Associated Press. All rights reserved.
Related articles
* Money fund assets rose to $3.906T in latest week
eTaiwan News - 8 hours ago
* Shakeout from money fund's collapse just starting
The Associated Press - 13 hours ago
* Changes Swirling Around Formerly Low-Profile Money Funds Says AP
Crane Data LLC - 10 hours ago
* More coverage (6) »
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The Associated Press
©2009 Google - About Google News - Blog - Help Center - Help for Publishers - Terms of Use - Privacy Policy - Google Home
4 tips on finding a good money-market mutual fund
By The Associated Press – 13 hours ago
Money-market mutual funds hold about $3.9 trillion in assets, and have become increasingly popular places to park cash amid the beating that stocks and even bonds have taken lately. Here are tips from experts on how to find the best money funds:
1. FIND THE RIGHT FIT: While their yields are pretty low across the board, different types of money funds invest in different types of debt. So pick the right type to balance how much safety you're willing to give up for a slightly higher yield.
Many funds buy super-safe government debt such as Treasury bills, and generally carry the lowest yields — currently averaging a minuscule 0.1 percent or so. So-called prime funds seek slightly higher yields but accept marginal risk by venturing into some forms of corporate bonds, which carry the risk of default.
NOTE:many funds super-safe goverment debt as the treasury bills, preme funds seek slihtly higeher yields but accept marginal risk by venturing into the some forms of corporate bonds.
Money-market funds can also invest large sums in bank certificates of deposit, and command higher interest rates than you could get on your own. So-called tax-free money funds can invest in debt issued by state or local governments, which can offer tax advantages.
2. RESIST THE CHASE FOR YIELD: If you're comparing money fund yields, resist the temptation to buy a fund just based on a higher yield. Be sure to research the fund. Try to determine what risks the fund may be taking to generate the higher return — such as a soured investment in Lehman Brothers bonds, that led one money fund to expose investors to losses last fall.
3. CHECK EXPENSES: Fund expenses are a big consideration because a small difference in the amount you pay can offset the relatively modest yield of a money fund. Generally, look for expense ratios below 0.5 percent.
4. MONITOR FEES: With money fund yields at historic lows, fund companies are finding they can barely meet fund expenses and make a profit. That pressures the companies to pass on higher fees. Monitor disclosures about such fee increases.
Copyright © 2009 The Associated Press. All rights reserved.
Related articles
* Money fund assets rose to $3.906T in latest week
eTaiwan News - 8 hours ago
* Shakeout from money fund's collapse just starting
The Associated Press - 13 hours ago
* Changes Swirling Around Formerly Low-Profile Money Funds Says AP
Crane Data LLC - 10 hours ago
* More coverage (6) »
Add News to your iGoogle Homepage Add News to your iGoogle Homepage
The Associated Press
©2009 Google - About Google News - Blog - Help Center - Help for Publishers - Terms of Use - Privacy Policy - Google Home
Wednesday, April 8, 2009
FUND TIME: SUPREME COURT TO WEIGH IN ON MUTUAL FUNDS FEES
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Fund Times: Supreme Court to Weigh In on Mutual Fund Fees
Plus, more fund mergers announced.
By Ryan Leggio | 03-12-09 | 01:45 PM | E-mail Article | Print Article | Permissions/Reprints | Ryan's Monthly Newsletter
The Supreme Court announced this week that it will review the fund fee case brought against Harris Associates, advisor to the Oakmark funds. The Supreme Court will hear oral arguments for Jones v. Harris this fall. As we've reported before in Fund Times, the Supreme Court will weigh in on whether Harris' fees were excessive. For more information, including the legal question the Supreme Court will tackle, check out Oyez. For a more detailed analysis of the case, including what an overruling might mean for mutual fund shareholder fees, see this Fund Spy.
Transamerica Fires Advisors
Transamerica has fired TCW and AllianceBernstein from Transamerica Partners Large Value Fund (DVEIX
Sponsored by:
DVEIX) because of performance and volatility. Stepping in for AllianceBernstein is Philadelphia-based quant shop Aronson+Johnson+Ortiz (AJO). AJO comanages another Transamerica fund, Transamerica Partners Large Core (DVGIX
Sponsored by:
DVGIX), with BlackRock. AJO also manages Quaker Small-Cap Value (QUSVX
Sponsored by:
QUSVX), a small-blend fund, and Absolute Strategies (ASFIX
Sponsored by:
ASFIX), a fund of funds within the long-short category.
Three-Time Morningstar Manager of the Year Award Winner to Take Sabbatical
FPA's Bob Rodriguez announced that he will step back from day-to-day management of his funds, FPA Capital (FPPTX
Sponsored by:
FPPTX) and FPA New Income (FPNIX
Sponsored by:
FPNIX), in 2010. Please see my colleague Russel Kinnel's take on what the departure means for shareholders.
Vanguard Adopts New Policy for Controversial Holdings
Vanguard's fund board recently directed the firm to report back on companies in which it invests that might be involved with human rights' abuses. Vanguard, along with other investment firms, has been subject to criticism from special-interest groups that object to the funds' investments in firms such as PetroChina (PTR
Sponsored by:
PTR).
Under the new policy, the fund board will receive regular reports on companies in which they invest "whose direct involvement in crimes against humanity or patterns of egregious abuses of human rights would warrant engagement or potential divestment."
NOTE: the new policy will receive the regular reports on the companies.
It is unclear what impact this new procedure will ultimately have on a formal shareholder proposal from Investors Against Genocide, which would require a similar review process for holdings at 30 Vanguard funds.
RiverSource and Seligman Fund Merger Update
Just weeks after RiverSource's purchase of Seligman, RiverSource says it plans to merge 47 Seligman and RiverSource funds. The affected funds include Riversource Global Technology (AXIAX
Sponsored by:
AXIAX), which would be merged into Seligman Global Technology (SHGTX
Sponsored by:
SHGTX). Meanwhile, Seligman Common Stock (SCSFX
Sponsored by:
SCSFX) would merge into RiverSource Disciplined Equity (AQEAX
Sponsored by:
AQEAX). In addition, the majority of Seligman's single-state municipal-bond fund lineup would be merged into Seligman National Municipal (SNXEX
Sponsored by:
SNXEX).
Of the 47 funds involved, 30 Seligman funds will charge shareholders 0.16% of assets to change transfer agents. We're disappointed that RiverSource elected to pass this cost on to fundholders, though the mergers should generate economies of scale and using one transfer agent for all funds should result in some annual savings over the long term. These savings will lower the expense ratios on most of the merged Seligman funds 12 months after they are merged, which is expected (pending shareholder approval) in May.
NOTE: the mergers should the generate economies these saving will lower the expences ratio on most of the merged seligmas funds.
Fidelity Launches Cheaper Share Class for Retirement Plans
Fidelity is launching a new low-cost share class aimed at retirement plans. The new K shares will be available only through retirement plans. For example, while Fidelity Freedom 2030 (FFFEX
Sponsored by:
FFFEX) charges 0.76%, the K shares will be almost 30% cheaper and charge only 0.54%.
To read more about the securities mentioned in this article, become a Morningstar.com Premium Member. Gain access to comprehensive investment research including Morningstar's stock fair value estimates, company economic moat ratings, Fund Analyst Picks, and Fund Stewardship Grades. Click here to start a free 14-day trial.
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Ryan Leggio, Esq., is a fund analyst with Morningstar.
Authors can be reached at Analyst Feedback.
Ryan Leggio does not own shares in any of the securities mentioned above.
Find out about Morningstar's editorial policies.
Reproduction or use of this article or any portion of it is forbidden without the express written permission of Morningstar, Inc.
Premium Content Morningstar Analyst ReportGet Morningstar's Buy/Sell opinions on the tickers mentioned in this article:
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Related NewsDVGIX: New portfolio
02-10-09 | 12:00 AM
FPPTX: Rodriguez to Step Back from Managing Funds at FPA
03-10-09 | 09:26 AM
FPNIX: First Pacific Advisors CEO Robert L. Rodriguez Plans One-Year Sabbatical in 2010
03-10-09 | 08:00 AM
DVEIX: New portfolio
02-10-09 | 12:00 AM
SCSFX: Equity Style Box change
01-23-09 | 12:00 AM
Also in Fund TimesRodriguez to Step Back from Managing Funds at FPA
By Russel Kinnel | 03-10-09 | 09:26 AM
Fund Times: AllianceBernstein CEO Subpoenaed
By Katie Rushkewicz | 03-05-09 | 11:04 AM
Relief for Hedge Funds in January
By Nadia Papagiannis, CFA | 02-26-09 | 04:00 PM
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Fund Times Fund Times: Supreme Court to Weigh In on Mutual Fund Fees Ryan Leggio, Esq., is a fund analyst with Morningstar.
http://news.morningstar.com/articlenet/article.aspx?id=283754 ryan.leggio@morningstar.com;
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Russell
390.12 23.81(6.50%)
Morningstar Mkt Idx
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Next Article from the last 7 days
Fund Times: Supreme Court to Weigh In on Mutual Fund Fees
Plus, more fund mergers announced.
By Ryan Leggio | 03-12-09 | 01:45 PM | E-mail Article | Print Article | Permissions/Reprints | Ryan's Monthly Newsletter
The Supreme Court announced this week that it will review the fund fee case brought against Harris Associates, advisor to the Oakmark funds. The Supreme Court will hear oral arguments for Jones v. Harris this fall. As we've reported before in Fund Times, the Supreme Court will weigh in on whether Harris' fees were excessive. For more information, including the legal question the Supreme Court will tackle, check out Oyez. For a more detailed analysis of the case, including what an overruling might mean for mutual fund shareholder fees, see this Fund Spy.
Transamerica Fires Advisors
Transamerica has fired TCW and AllianceBernstein from Transamerica Partners Large Value Fund (DVEIX
Sponsored by:
DVEIX) because of performance and volatility. Stepping in for AllianceBernstein is Philadelphia-based quant shop Aronson+Johnson+Ortiz (AJO). AJO comanages another Transamerica fund, Transamerica Partners Large Core (DVGIX
Sponsored by:
DVGIX), with BlackRock. AJO also manages Quaker Small-Cap Value (QUSVX
Sponsored by:
QUSVX), a small-blend fund, and Absolute Strategies (ASFIX
Sponsored by:
ASFIX), a fund of funds within the long-short category.
Three-Time Morningstar Manager of the Year Award Winner to Take Sabbatical
FPA's Bob Rodriguez announced that he will step back from day-to-day management of his funds, FPA Capital (FPPTX
Sponsored by:
FPPTX) and FPA New Income (FPNIX
Sponsored by:
FPNIX), in 2010. Please see my colleague Russel Kinnel's take on what the departure means for shareholders.
Vanguard Adopts New Policy for Controversial Holdings
Vanguard's fund board recently directed the firm to report back on companies in which it invests that might be involved with human rights' abuses. Vanguard, along with other investment firms, has been subject to criticism from special-interest groups that object to the funds' investments in firms such as PetroChina (PTR
Sponsored by:
PTR).
Under the new policy, the fund board will receive regular reports on companies in which they invest "whose direct involvement in crimes against humanity or patterns of egregious abuses of human rights would warrant engagement or potential divestment."
NOTE: the new policy will receive the regular reports on the companies.
It is unclear what impact this new procedure will ultimately have on a formal shareholder proposal from Investors Against Genocide, which would require a similar review process for holdings at 30 Vanguard funds.
RiverSource and Seligman Fund Merger Update
Just weeks after RiverSource's purchase of Seligman, RiverSource says it plans to merge 47 Seligman and RiverSource funds. The affected funds include Riversource Global Technology (AXIAX
Sponsored by:
AXIAX), which would be merged into Seligman Global Technology (SHGTX
Sponsored by:
SHGTX). Meanwhile, Seligman Common Stock (SCSFX
Sponsored by:
SCSFX) would merge into RiverSource Disciplined Equity (AQEAX
Sponsored by:
AQEAX). In addition, the majority of Seligman's single-state municipal-bond fund lineup would be merged into Seligman National Municipal (SNXEX
Sponsored by:
SNXEX).
Of the 47 funds involved, 30 Seligman funds will charge shareholders 0.16% of assets to change transfer agents. We're disappointed that RiverSource elected to pass this cost on to fundholders, though the mergers should generate economies of scale and using one transfer agent for all funds should result in some annual savings over the long term. These savings will lower the expense ratios on most of the merged Seligman funds 12 months after they are merged, which is expected (pending shareholder approval) in May.
NOTE: the mergers should the generate economies these saving will lower the expences ratio on most of the merged seligmas funds.
Fidelity Launches Cheaper Share Class for Retirement Plans
Fidelity is launching a new low-cost share class aimed at retirement plans. The new K shares will be available only through retirement plans. For example, while Fidelity Freedom 2030 (FFFEX
Sponsored by:
FFFEX) charges 0.76%, the K shares will be almost 30% cheaper and charge only 0.54%.
To read more about the securities mentioned in this article, become a Morningstar.com Premium Member. Gain access to comprehensive investment research including Morningstar's stock fair value estimates, company economic moat ratings, Fund Analyst Picks, and Fund Stewardship Grades. Click here to start a free 14-day trial.
E-mail Article to a Friend | digg it | Del.icio.us
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Ryan Leggio, Esq., is a fund analyst with Morningstar.
Authors can be reached at Analyst Feedback.
Ryan Leggio does not own shares in any of the securities mentioned above.
Find out about Morningstar's editorial policies.
Reproduction or use of this article or any portion of it is forbidden without the express written permission of Morningstar, Inc.
Premium Content Morningstar Analyst ReportGet Morningstar's Buy/Sell opinions on the tickers mentioned in this article:
DVGIX | FPPTX | FPNIX | DVEIX | SCSFX | SNXEX | SHGTX | AXIAX | FFFEX | QUSVX | PTR | AQEAX | ASFIX
Institutional Investor Magazine - FREE TRIAL
Related NewsDVGIX: New portfolio
02-10-09 | 12:00 AM
FPPTX: Rodriguez to Step Back from Managing Funds at FPA
03-10-09 | 09:26 AM
FPNIX: First Pacific Advisors CEO Robert L. Rodriguez Plans One-Year Sabbatical in 2010
03-10-09 | 08:00 AM
DVEIX: New portfolio
02-10-09 | 12:00 AM
SCSFX: Equity Style Box change
01-23-09 | 12:00 AM
Also in Fund TimesRodriguez to Step Back from Managing Funds at FPA
By Russel Kinnel | 03-10-09 | 09:26 AM
Fund Times: AllianceBernstein CEO Subpoenaed
By Katie Rushkewicz | 03-05-09 | 11:04 AM
Relief for Hedge Funds in January
By Nadia Papagiannis, CFA | 02-26-09 | 04:00 PM
Most Popular Morningstar ArticlesClick here to view all.
Permissions/Reprints To order reprints of this article, click here.
Printable ArticleClick here to print this article.
Sponsors Center
Biggest Stocks | %Price ChangeHelpXOM2.1%New_Analyst_ReportWMT3.1%Analyst_ReportJNJ2.3%New_Analyst_ReportKO3.2%New_Analyst_ReportINTC4.0%New_Analyst_ReportGE12.7%New_Analyst_ReportPFE9.6%New_Analyst_ReportMSFT-0.6%Analyst_ReportBP2.8%Analyst_ReportC8.4%New_Analyst_ReportAIG0.0%Analyst_Report
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Fund Times Fund Times: Supreme Court to Weigh In on Mutual Fund Fees Ryan Leggio, Esq., is a fund analyst with Morningstar.
http://news.morningstar.com/articlenet/article.aspx?id=283754 ryan.leggio@morningstar.com;
Monday, April 6, 2009
THE GOOD , BAD , AND UGLY IN HEDGE : A MANAGER 'S VIEW
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MyTake March 5, 2009, 12:01AM EST
The Good, Bad, and Ugly in Hedge Funds: A Manager's View
BusinessWeek reader and hedge fund manager Eric Jackson considers the pros and cons of his industry
By Eric Jackson
null
Naples (Fla.)-based BusinessWeek reader Eric Jackson is founder and managing member of Ironfire Capital LLC and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund Ltd.
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Not too long ago, practically every newly minted MBA wanted to be a hedge fund manager, and investors—including many conservative pension funds and endowments—rushed at the chance to place assets in hedge funds. Yet hedge fund managers were blamed for both artificially inflating the price of oil last summer and, when prices dropped, for contributing to the looming recession.
The mainstream press has now taken to derisively calling them "former masters of the universe," while noting that compensation is still "obscene." As quickly as assets came in during the up market, they have gone out in a declining market. In the last quarter of 2008, $152 billion in hedge fund assets were redeemed, even ones with positive returns in 2008
As a hedge fund manager, I'm neither an apologist nor a cheerleader for my industry. Like any business, the hedge fund world has good and bad practices and managers. All managers need to accept accountability for the trying times we are living through. But it's fanciful to suggest hedge funds are about to disappear. Quite the opposite: The industry will be thriving even five years from now because it will continue to attract the best managers and the most sophisticated investors seeking alpha through innovative strategies. Here are some of the good and bad practices in the industry today:
Barbarians at the Gates
NOTE: the all manager needs to accept accountability for the trying times that we are living through.
Hedge funds have long had "gates" as options available to the fund and/or manager included in their subscription documents. All investors reviewed these prior to making an investment. You haven't heard much about them because hedge funds haven't gone through a sustained down period the way we have in the past six months. As a result, a number of funds have exercised their rights to enforce a gate, reducing how quickly investors can redeem out of the fund. The intent of a gate is to prevent a panicked run on the fund, requiring forced selling, which can be very difficult for funds holding illiquid assets, and which further lowers the value of the remaining investors' assets in the fund.
Gates are a perfectly legitimate operating mechanism and will continue to be part of hedge fund investing. Moreover, as so many funds have decided to use them in the past four months, it is unlikely any one fund will be unfairly penalized by investors when they raise new funds down the road. The managers who will be penalized for putting up a gate are the ones who continue to charge fees after doing so. That's their right under their agreements, but it certainly doesn't engender goodwill, and investors tend to have elephant-like memories.
Overpaid and Underperforming?
Critics have attacked the standard hedge fund compensation model of 2% annual management fee and 20%-of-profits performance fee in light of the industry's poor 2008 performance (-19.2% for the average fund, according to Hennessee Group). Yes, many hedge fund managers made bad calls in 2008, but one-third of hedge funds made money in a year when the Standard & Poor's 500-stock index was down 40%. Only 1 in 1,700 mutual funds made money in the same period, meaning you were 50 times more likely to make money in a hedge fund compared to a mutual fund last year. What is that worth in fees?
Sadly, some hedge fund managers don't help themselves in the court of public opinion. Call it John Thain-itis. Many media profiles of hedge fund managers mention private jets, homes in the Hamptons, and flashy lifestyles, none of which has any predictive value about whether a hedge fund is a good investment. It's always been about the returns over a specific period of time, and the comparable risk-reward of other alternatives to invest their money.
Eyeing High-Water Marks
Hedge funds typically have high-water marks, which require hedge fund managers to make their investors whole before paying themselves performance fees. These high-water marks are going to cast a large shadow in the industry for the next few years.
What high-water marks also do—from an investor's perspective—is level the differences between a hedge fund and a mutual fund or other asset manager. Any investor has to pay a percentage of assets in management fees to a money manager. In the case of hedge funds, an investor pays performance fees only when the manager makes money. Investors also know that hedge funds will invariably attract more talent because the compensation levels are higher than the mutual fund industry or elsewhere.
Some observers feel that high-water marks are not the panacea they seem. In a down year, they argue, you can just shut down your fund to avoid the pain of making back past losses and open up another shop across the street. Although this can and does happen, it's just as common for hedge funds to honor their high-water marks instead of taking the easy way out and shutting down, eliminating the high-water mark, and reopening later.
Bottom line: If managers screw up, they need to face the consequences. It's that kind of Darwinism which makes the industry strong. Investors shouldn't have any qualms about having to pay performance—or more correctly stated, revenue-sharing—fees.
Reconciling Differences
With over 10,000 hedge funds worldwide in 2008, funds naturally vary in size and strategy. Some pursue absolute returns, always seeking to grow capital, no matter the market; others aim to beat the S&P or other benchmark on a relative basis. Absolute and relative performance strategies have different levels of volatility due to the different types of risk they take on.
James Simons of Renaissance Technologies recently announced that his firm would not charge fees to existing investors for its Institutional Futures fund, which was down 12% in 2008, but would still charge fees on its Institutional Equities fund, which was down 16%. The difference between the two funds? The first follows an absolute return strategy, while the second aims to beat the S&P 500 by 4% to 6%, which it did.
There is no question that there's a sea change taking place in the hedge fund industry, which saw its assets decline by $782 billion, to $1.21 trillion, in the past year. That's a Detroit-like drop in demand on a year-over-year basis. Within five years, it's likely the mega-funds will dominate, similar to the private equity world, where you have KKR, Bain, T.H. Lee, and a lot of small fry.
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MyTake March 5, 2009, 12:01AM EST
The Good, Bad, and Ugly in Hedge Funds: A Manager's View
BusinessWeek reader and hedge fund manager Eric Jackson considers the pros and cons of his industry
By Eric Jackson
null
Naples (Fla.)-based BusinessWeek reader Eric Jackson is founder and managing member of Ironfire Capital LLC and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund Ltd.
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Not too long ago, practically every newly minted MBA wanted to be a hedge fund manager, and investors—including many conservative pension funds and endowments—rushed at the chance to place assets in hedge funds. Yet hedge fund managers were blamed for both artificially inflating the price of oil last summer and, when prices dropped, for contributing to the looming recession.
The mainstream press has now taken to derisively calling them "former masters of the universe," while noting that compensation is still "obscene." As quickly as assets came in during the up market, they have gone out in a declining market. In the last quarter of 2008, $152 billion in hedge fund assets were redeemed, even ones with positive returns in 2008
As a hedge fund manager, I'm neither an apologist nor a cheerleader for my industry. Like any business, the hedge fund world has good and bad practices and managers. All managers need to accept accountability for the trying times we are living through. But it's fanciful to suggest hedge funds are about to disappear. Quite the opposite: The industry will be thriving even five years from now because it will continue to attract the best managers and the most sophisticated investors seeking alpha through innovative strategies. Here are some of the good and bad practices in the industry today:
Barbarians at the Gates
NOTE: the all manager needs to accept accountability for the trying times that we are living through.
Hedge funds have long had "gates" as options available to the fund and/or manager included in their subscription documents. All investors reviewed these prior to making an investment. You haven't heard much about them because hedge funds haven't gone through a sustained down period the way we have in the past six months. As a result, a number of funds have exercised their rights to enforce a gate, reducing how quickly investors can redeem out of the fund. The intent of a gate is to prevent a panicked run on the fund, requiring forced selling, which can be very difficult for funds holding illiquid assets, and which further lowers the value of the remaining investors' assets in the fund.
Gates are a perfectly legitimate operating mechanism and will continue to be part of hedge fund investing. Moreover, as so many funds have decided to use them in the past four months, it is unlikely any one fund will be unfairly penalized by investors when they raise new funds down the road. The managers who will be penalized for putting up a gate are the ones who continue to charge fees after doing so. That's their right under their agreements, but it certainly doesn't engender goodwill, and investors tend to have elephant-like memories.
Overpaid and Underperforming?
Critics have attacked the standard hedge fund compensation model of 2% annual management fee and 20%-of-profits performance fee in light of the industry's poor 2008 performance (-19.2% for the average fund, according to Hennessee Group). Yes, many hedge fund managers made bad calls in 2008, but one-third of hedge funds made money in a year when the Standard & Poor's 500-stock index was down 40%. Only 1 in 1,700 mutual funds made money in the same period, meaning you were 50 times more likely to make money in a hedge fund compared to a mutual fund last year. What is that worth in fees?
Sadly, some hedge fund managers don't help themselves in the court of public opinion. Call it John Thain-itis. Many media profiles of hedge fund managers mention private jets, homes in the Hamptons, and flashy lifestyles, none of which has any predictive value about whether a hedge fund is a good investment. It's always been about the returns over a specific period of time, and the comparable risk-reward of other alternatives to invest their money.
Eyeing High-Water Marks
Hedge funds typically have high-water marks, which require hedge fund managers to make their investors whole before paying themselves performance fees. These high-water marks are going to cast a large shadow in the industry for the next few years.
What high-water marks also do—from an investor's perspective—is level the differences between a hedge fund and a mutual fund or other asset manager. Any investor has to pay a percentage of assets in management fees to a money manager. In the case of hedge funds, an investor pays performance fees only when the manager makes money. Investors also know that hedge funds will invariably attract more talent because the compensation levels are higher than the mutual fund industry or elsewhere.
Some observers feel that high-water marks are not the panacea they seem. In a down year, they argue, you can just shut down your fund to avoid the pain of making back past losses and open up another shop across the street. Although this can and does happen, it's just as common for hedge funds to honor their high-water marks instead of taking the easy way out and shutting down, eliminating the high-water mark, and reopening later.
Bottom line: If managers screw up, they need to face the consequences. It's that kind of Darwinism which makes the industry strong. Investors shouldn't have any qualms about having to pay performance—or more correctly stated, revenue-sharing—fees.
Reconciling Differences
With over 10,000 hedge funds worldwide in 2008, funds naturally vary in size and strategy. Some pursue absolute returns, always seeking to grow capital, no matter the market; others aim to beat the S&P or other benchmark on a relative basis. Absolute and relative performance strategies have different levels of volatility due to the different types of risk they take on.
James Simons of Renaissance Technologies recently announced that his firm would not charge fees to existing investors for its Institutional Futures fund, which was down 12% in 2008, but would still charge fees on its Institutional Equities fund, which was down 16%. The difference between the two funds? The first follows an absolute return strategy, while the second aims to beat the S&P 500 by 4% to 6%, which it did.
There is no question that there's a sea change taking place in the hedge fund industry, which saw its assets decline by $782 billion, to $1.21 trillion, in the past year. That's a Detroit-like drop in demand on a year-over-year basis. Within five years, it's likely the mega-funds will dominate, similar to the private equity world, where you have KKR, Bain, T.H. Lee, and a lot of small fry.
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Sunday, April 5, 2009
STOCK MUTUAL FUNDS HAD $29.9 BILLION OUTFLOW THURSDAY--WED--TRIMTABS.
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Actualités - Friday March 6th, 2009
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Stock Mutual Funds Had $29.9 Billion Outflow Thursday-Wed - TrimTabs
Friday March 6th, 2009 / 15h30
NEW YORK -(Dow Jones)- Stock mutual funds had an outflow of $29.9 billion during the week ended Wednesday, compared with a revised outflow of $18 billion during the previous week, according to TrimTabs Investment Research estimates.
For the week ended Wednesday, domestic funds had an outflow of $19.8 billion from a revised outflow of $12.4 billion in the previous week. International stock funds had an outflow of $10.1 billion from a revised outflow of $5.6 billion the previous week.
NOTE:the domestic funds had an outflow of $ 29.8 billion
Separately, bond funds posted inflows of $1.1 billion, from a revised inflow of $3.5 billion during the previous week. Hybrid funds, which mix stocks and bonds, posted outflows of $5.3 billion, from a revised outflow of $2.6 billion during the previous week.
Separately, TrimTabs reports that exchange-traded funds (ETFs) that invest in U.S. stocks posted an inflow of $592 million versus a revised outflow of $739 million in the previous week. ETFs that invest in non-U.S. stocks had an outflow of $1.2 billion versus a revised outflow of $540 million in the previous week.
The Dow Jones Industrial Average fell 5.4% during the week ended Wednesday, the Nasdaq Composite Index fell 5.0%, and the Standard & Poor's 500 Index fell 6.8%.
TrimTabs, Santa Rosa, Calif., tracks daily flows of 90 fund families that have about 15% of all equity-fund assets. TrimTabs then regresses those numbers by sector to estimate total flows for all equity funds.
-By Stephen McMillian, Dow Jones Newswires; 201-938-5088; stephen.mcmillian@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=nzprSMl7gIBAvtgyRSxkFA%3D%3D. You can use this link on the day this article is published and the following day.
Friday March 6th, 2009 / 15h30 Source : Dowjones Business News
News du Vendredi 6 mars 2009 exclure les news en anglais
23h58 UPDATE US Joins False Claim Suit Vs Community Health Systems (DJ)
23h58 UPDATE Merrill Bonus Info Shouldn't Be Confidential - NY AG (DJ)
23h56 Micro-Blogger Twitter Launches New Search Functions (DJ)
23h52 UK, Lloyds agree asset protection deal source (Reuters)
23h52 Brazil Petrobras 4Q Net Profit Up 44% On Year At BRL7.36... (DJ)
23h46 US Sen Kerry Says Financial Bailout Could Exceed $2 Trillion (DJ)
23h42 PRESS RELEASE Sanmina-SCI Corporation Announces Proposed... (DJ)
23h39 Dow Chemical and Rohm in talks on disputed deal (Reuters)
23h36 UPDATE SEC Approves ICE's Credit-Default Swap Clearing Plan (DJ)
23h32 Brazil President Lula First Oil From Tupi Field May 1... (DJ)
23h26 Ten Banks Sign On As Initial Clearing Members Of ICE Trust (DJ)
23h20 2nd UPDATE With Trading Gaffe,BofA Deals With New Black Eye (DJ)
23h14 LATIN AMERICAN MARKETS Stocks End Session, Week Lower;... (DJ)
23h12 US Joins Whistleblower Suit Versus Community Health Systems (DJ)
23h08 UK to take 75 percent Lloyds stake in asset deal report (Reuters)
23h06 California To Borrow $1.5 Billion To Stay Afloat (DJ)
23h06 NY AG Merrill Bonus Information Shouldn't Be Confidential (DJ)
23h04 Intel va installer un laboratoire sur plateau de Saclay... (DJ)
23h03 Dow, S&P buoyed by oil; Nasdaq falters on techs (Reuters)
23h01 Irish regulator says probing Merrill Lynch trades (Reuters)
23h00 AIG's Loss-Filled Securities-Lending Program Cut Its Fees (DJ)
22h58 Madoff sur le point de plaider coupable -enquêteurs (DJ)
22h58 PdVSA Reviewing Legality Of Unpaid Debts To Contractors (DJ)
22h56 Total Paimboeuf retire sa plainte pr pollution de la Loire (DJ)
22h52 Freddie Mac Agrees To Protect Officers From Liabilities (DJ)
22h50 New York Money Market Rate Indications (DJ)
22h48 PRESS RELEASE United States Joins Suit Against Community... (DJ)
22h46 UPDATE With Trading Gaffe, BofA Deals With New Black Eye (DJ)
22h40 Wall Street finit sur une note indécise (Reuters)
22h40 SEC Approves ICE's Credit-Default Swap Clearing Plan (DJ)
1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10 - page suivante
Sources : Dowjones Newswires + Business News, Reuters, Cercle Finance, Hugin
CAC 40 2 534,45 pts -1,37%
Saint Gobain 19,02€ +4,16%
Veolia Enviro... 16,52€ +3,54%
Crédit Agricole 6,11€ -7,70%
Dexia 3,10€ -9,49%
Harmony Gold ... 9,19€ +5,88%
Havas 1,57€ +5,09%
Silic 54,40€ -10,05%
Klepierre 11,20€ -10,58%
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Actualités - Friday March 6th, 2009
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Stock Mutual Funds Had $29.9 Billion Outflow Thursday-Wed - TrimTabs
Friday March 6th, 2009 / 15h30
NEW YORK -(Dow Jones)- Stock mutual funds had an outflow of $29.9 billion during the week ended Wednesday, compared with a revised outflow of $18 billion during the previous week, according to TrimTabs Investment Research estimates.
For the week ended Wednesday, domestic funds had an outflow of $19.8 billion from a revised outflow of $12.4 billion in the previous week. International stock funds had an outflow of $10.1 billion from a revised outflow of $5.6 billion the previous week.
NOTE:the domestic funds had an outflow of $ 29.8 billion
Separately, bond funds posted inflows of $1.1 billion, from a revised inflow of $3.5 billion during the previous week. Hybrid funds, which mix stocks and bonds, posted outflows of $5.3 billion, from a revised outflow of $2.6 billion during the previous week.
Separately, TrimTabs reports that exchange-traded funds (ETFs) that invest in U.S. stocks posted an inflow of $592 million versus a revised outflow of $739 million in the previous week. ETFs that invest in non-U.S. stocks had an outflow of $1.2 billion versus a revised outflow of $540 million in the previous week.
The Dow Jones Industrial Average fell 5.4% during the week ended Wednesday, the Nasdaq Composite Index fell 5.0%, and the Standard & Poor's 500 Index fell 6.8%.
TrimTabs, Santa Rosa, Calif., tracks daily flows of 90 fund families that have about 15% of all equity-fund assets. TrimTabs then regresses those numbers by sector to estimate total flows for all equity funds.
-By Stephen McMillian, Dow Jones Newswires; 201-938-5088; stephen.mcmillian@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=nzprSMl7gIBAvtgyRSxkFA%3D%3D. You can use this link on the day this article is published and the following day.
Friday March 6th, 2009 / 15h30 Source : Dowjones Business News
News du Vendredi 6 mars 2009 exclure les news en anglais
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23h14 LATIN AMERICAN MARKETS Stocks End Session, Week Lower;... (DJ)
23h12 US Joins Whistleblower Suit Versus Community Health Systems (DJ)
23h08 UK to take 75 percent Lloyds stake in asset deal report (Reuters)
23h06 California To Borrow $1.5 Billion To Stay Afloat (DJ)
23h06 NY AG Merrill Bonus Information Shouldn't Be Confidential (DJ)
23h04 Intel va installer un laboratoire sur plateau de Saclay... (DJ)
23h03 Dow, S&P buoyed by oil; Nasdaq falters on techs (Reuters)
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23h00 AIG's Loss-Filled Securities-Lending Program Cut Its Fees (DJ)
22h58 Madoff sur le point de plaider coupable -enquêteurs (DJ)
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22h56 Total Paimboeuf retire sa plainte pr pollution de la Loire (DJ)
22h52 Freddie Mac Agrees To Protect Officers From Liabilities (DJ)
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1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10 - page suivante
Sources : Dowjones Newswires + Business News, Reuters, Cercle Finance, Hugin
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The Jewish people spent 40 years in the wilderness before reaching the Promised Land. Odysseus toiled at sea for 20 years until he saw Ithaca again. Disenchanted stock investors nowadays can only reflect on their own bewildering fate and wonder if and when their fortunes will turn.
Every odyssey has life-changing trials and tribulations. This bear market will influence baby boomers' investment ideals for the rest of their lives. Some may never return to stocks, others will tiptoe back with trepidation. People in their 20s and 30s, seeing how the bear has shredded their parents' fortunes, may also think twice before putting their own money into the market.
NOTE:the jewish people spent 40 years, disenchanted stock incestor now adays can onlyreflected.
Tales where the hero triumphs over adversity are enduring. But sometimes the hero takes a fall. More than a year into this downturn, investors are still unsure how their hard-luck story will end.
-- Jonathan Burton, assistant personal finance editor
INVESTMENT NEWS & TRENDS
Three to six years before investors recoup portfolio losses, advisers predict
Investment advisers are split on whether the U.S. economy will emerge from recession this year or next, but most say it will be three years and possibly almost six before battered investors recoup portfolio losses, according to a Charles Schwab & Co. survey.
See FundWatch.
Surviving a Darwinian market
What stocks would Charles Darwin buy? The pioneering British biologist might have made an unusually sharp stock analyst, dissecting financial statements and experimenting with forecasting models to determine which among the corporate species have the innate ability to adapt to hostile environments.
See Life Savings.
Defensive stocks are the best offense for bearish fund manager
As debate rages about how much longer the recession will last, David Pedowitz, managing director at investment firm Neuberger Berman, is concerned with a scarier question: whether it has even hit bottom.
See The Stockpickers.
Investors ditch market-beating attempts, settle for average returns
Mutual fund investors in 2008 yanked more money out of actively managed stock-funds than they put in for only the third time ever, and index-fund rivals took the spoils.
See full story.
Stock funds lose 8.7% in February
Mutual-fund investors, still reeling from heavy double-digit losses in 2008, took a further beating in February, with average stock-fund returns down 8.7% in the month.
See full story.
COMMENTARY
Protect your cash reserves with an insurance policy loan
It's controversial though important to protecting the liquidity of millions of investors. But an insurance policy loan is low-cost and you may be able to find positive carry at little risk to you.
See Bill Donoghue.
Fund investors may feel brunt of industry's troubles
What happens if a mutual fund company is having troubles that make your fund less competitive and raise questions about its management?
See Chuck Jaffe. End of Story
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[AFL] Fitch cuts Aflac issuer default rating to 'A+' from 'AA-'
MUTUAL FUNDS
This week's Mutual Funds and ETF stories
By MarketWatch
Last update: 11:01 p.m. EST March 5, 2009
Don't miss these top money and investing columns:
*
Market recovery could take years
*
What stocks would Darwin buy?
*
Searching for market survivors
*
Fund investors want indexing
The Jewish people spent 40 years in the wilderness before reaching the Promised Land. Odysseus toiled at sea for 20 years until he saw Ithaca again. Disenchanted stock investors nowadays can only reflect on their own bewildering fate and wonder if and when their fortunes will turn.
Every odyssey has life-changing trials and tribulations. This bear market will influence baby boomers' investment ideals for the rest of their lives. Some may never return to stocks, others will tiptoe back with trepidation. People in their 20s and 30s, seeing how the bear has shredded their parents' fortunes, may also think twice before putting their own money into the market.
NOTE:the jewish people spent 40 years, disenchanted stock incestor now adays can onlyreflected.
Tales where the hero triumphs over adversity are enduring. But sometimes the hero takes a fall. More than a year into this downturn, investors are still unsure how their hard-luck story will end.
-- Jonathan Burton, assistant personal finance editor
INVESTMENT NEWS & TRENDS
Three to six years before investors recoup portfolio losses, advisers predict
Investment advisers are split on whether the U.S. economy will emerge from recession this year or next, but most say it will be three years and possibly almost six before battered investors recoup portfolio losses, according to a Charles Schwab & Co. survey.
See FundWatch.
Surviving a Darwinian market
What stocks would Charles Darwin buy? The pioneering British biologist might have made an unusually sharp stock analyst, dissecting financial statements and experimenting with forecasting models to determine which among the corporate species have the innate ability to adapt to hostile environments.
See Life Savings.
Defensive stocks are the best offense for bearish fund manager
As debate rages about how much longer the recession will last, David Pedowitz, managing director at investment firm Neuberger Berman, is concerned with a scarier question: whether it has even hit bottom.
See The Stockpickers.
Investors ditch market-beating attempts, settle for average returns
Mutual fund investors in 2008 yanked more money out of actively managed stock-funds than they put in for only the third time ever, and index-fund rivals took the spoils.
See full story.
Stock funds lose 8.7% in February
Mutual-fund investors, still reeling from heavy double-digit losses in 2008, took a further beating in February, with average stock-fund returns down 8.7% in the month.
See full story.
COMMENTARY
Protect your cash reserves with an insurance policy loan
It's controversial though important to protecting the liquidity of millions of investors. But an insurance policy loan is low-cost and you may be able to find positive carry at little risk to you.
See Bill Donoghue.
Fund investors may feel brunt of industry's troubles
What happens if a mutual fund company is having troubles that make your fund less competitive and raise questions about its management?
See Chuck Jaffe. End of Story
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6:51 PM today Some banks try to extricate themselves from TARP trap
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* Payrolls fall 651,000 and jobless rate soars to 8.1%
* Price-to-earnings ratios sink to historic lows, could fall more
* Oil's backed itself into a corner
* The $700 trillion elephant in the room
* U.S. stock futures edge up as grim data better than feared
* Rush Limbaugh for president!
* Reporter's Notebook: Pickens eyes oil's rebound
* Wells Fargo slashes dividend by 85%
* GM stock drop raises more bankruptcy fears
* GM shares touch on new 75-year low
* The $700 trillion elephant in the room
* Oil's backed itself into a corner
* Price-to-earnings ratios sink to historic lows, could fall more
* AT&T seen as safe vessel in which to ride out economic storm
* Payrolls fall 651,000 and jobless rate soars to 8.1%
* A new leader of the investment newsletter long-term rankings
* Wells Fargo slashes dividend by 85%
* Reporter's Notebook: Pickens eyes oil's rebound
* Mortgage-help plans invite fraud; five ways to protect yourself
* Home buyers in California can enjoy up to $18,000 in tax credits
* Some banks try to extricate themselves from TARP trap
* Google poised to lay claim to Uncle Sam's tech budget
* Georgia bank closed in 17th failure of 2009
* Payrolls fall 651,000 and jobless rate soars to 8.1%
* US Stocks Bounce Late; GE Helps; GM Slides Again
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Friday, April 3, 2009
MUUALS FUNDS SEE INFLOWS IN JANUARY
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home >> investing >> Mutual Funds See Inflows in January
Investing
Mutual Funds See Inflows in January
Rebecca Moore – 03/06/2009
Stock and bond funds experienced net inflows of $22.3 billion in January, according to the Financial Research Corporation (FRC).
Corporate Bond Funds led the way, with $16.1 billion in inflows, followed by tax-free bond funds ($3.8 billion) and equity funds ($3.0 billion). International/global equity funds experienced the largest net outflows of $895 million.
NOTE: the corporate bond funds lend the way, followed by tax-free bond fund.
By Morningstar category, investors favored intermediate-term bond funds, which posted an inflow of $7.8 billion for the month, followed by high-yield bond funds and specialty-natural resources funds, which pulled in $3.7 billion and $2.99 billion, respectively.
The best selling funds in January were the Vanguard Total Bond II ($13.5 billion), PIMCO Total Return ($3.2 billion), and State Street's SPDR Gold Shares ($1.8 billion).
However, sales were not enough to counter market losses as the combined assets of the nation's mutual funds decreased in January by $191 billion, according to the Investment Company Institute (see "Sales not Enough to Counter Mutual Fund Losses").
NOTE: the combined asset of the nation's mutual fund are decreased in january.
More information is available at www.frcnet.com.
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2009 planadviser Current Issue:
* • The World Turned Upside Down : The current turmoil threatens broker/dealers as more advisers think about going independent—when the market improves
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* • 2009 ERISA Compliance Calendar for DB/DC/403(b) Plans: Every retirement plan adviser knows that the year is full of various compliance deadlines imposed on these programs by the Department of Labor (DoL), Internal Revenue Service(IRS), and other government agencies under the Employee Retirement Income Security Act (ERISA).
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home >> investing >> Mutual Funds See Inflows in January
Investing
Mutual Funds See Inflows in January
Rebecca Moore – 03/06/2009
Stock and bond funds experienced net inflows of $22.3 billion in January, according to the Financial Research Corporation (FRC).
Corporate Bond Funds led the way, with $16.1 billion in inflows, followed by tax-free bond funds ($3.8 billion) and equity funds ($3.0 billion). International/global equity funds experienced the largest net outflows of $895 million.
NOTE: the corporate bond funds lend the way, followed by tax-free bond fund.
By Morningstar category, investors favored intermediate-term bond funds, which posted an inflow of $7.8 billion for the month, followed by high-yield bond funds and specialty-natural resources funds, which pulled in $3.7 billion and $2.99 billion, respectively.
The best selling funds in January were the Vanguard Total Bond II ($13.5 billion), PIMCO Total Return ($3.2 billion), and State Street's SPDR Gold Shares ($1.8 billion).
However, sales were not enough to counter market losses as the combined assets of the nation's mutual funds decreased in January by $191 billion, according to the Investment Company Institute (see "Sales not Enough to Counter Mutual Fund Losses").
NOTE: the combined asset of the nation's mutual fund are decreased in january.
More information is available at www.frcnet.com.
Email This Article
Print This Article
1
2009 planadviser Current Issue:
* • The World Turned Upside Down : The current turmoil threatens broker/dealers as more advisers think about going independent—when the market improves
* • Size Matters: Benchmarking a plan against comparable ones gives you a true indicator of success
* • Retirement Plan Adviser of the Year Finalists: The ten finalists for the PLANSPONSOR Retirement Plan Adviser and Adviser Team of the Year awards.
* • 2009 ERISA Compliance Calendar for DB/DC/403(b) Plans: Every retirement plan adviser knows that the year is full of various compliance deadlines imposed on these programs by the Department of Labor (DoL), Internal Revenue Service(IRS), and other government agencies under the Employee Retirement Income Security Act (ERISA).
Inside planadviser.com
* • Deals
* • Products
* • Industry Movers
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Thursday, April 2, 2009
WHEN THE MUTUAL FUNDS CHANGE MANAGERS
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When Mutual Funds Change Managers
Michael Maiello, 03.06.09, 06:00 AM EST
You know how your fund has performed in the past, but do you know your manager's history? These days, everything's traceable.
When selecting mutual funds, most investors look to past performance.
It's an imperfect indicator of future performance, of course, but it's usually the best data available. At the very least, good performance over a long period of time implies that mutual fund managers have skill.
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But there are problems with the way past returns are reported. First, there's nothing that indicates the effect of manager changes over long-lived funds. Fidelity Magellan has beaten the S&P 500 over the course of its long life as a fund, but it's had many managers (and many legendary ones). Obviously, Peter Lynch's Magellan was different than Harry Lange's or Ned Johnson's or Jeff Vinik's.
This chart, provided by Adviser Investments, shows the effect of a manager change (indicated by red dot) on the Vanguard Capital Opportunity Fund:
capitalopp_chart.gif
Another thing that investors aren't told is what new managers have done at other funds. If you own a fund that gets a new manager, you're left to trust that he or she will follow an old successful strategy or was hired for a good reason. Fund companies don't tell you anything about manager track records.
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All of this is the fault of the Securities and Exchange Commission, not the fund companies. What fund companies can and can't report is tightly controlled. A manager's previous record is forbidden territory.
Mutual fund families are also required to only report performance net of fees, so historic returns don't reflect the effects of fee changes over time. Though fund families are required to inform investors about manager changes, they aren't required to start a fund's record over when a new manager takes over.
Newsletter editor James Lowell joins our panel of experts. He is head of the Rankings Service, a firm that tracks career-long manager performance over multiple funds. You can also trace manager performance yourself. It's a bit tedious, but start with the manager's bio in the fund's fact sheet or prospectus.
Then, backtrack. Past bios probably reveal more about the manager's past fund positions. At that point, it's possible to work out approximate dates of tenure and, with historical return data available free on the Web, to work out performance against a broad benchmark like the S&P 500.
NOTE:JAMES LOWELL he is head of the ranking of serveces and he is good news letter editor.
This week our mutual fund managers discussed issues of disclosure.
The Forbes mutual fund panelists are:
Daniel P. Wiener, editor of Independent Adviser for Vanguard Investors and CEO of Adviser Investments.
Adam Bold, founder and chief investment officer of the Mutual Fund Store.
Richard Gates, portfolio manager for TFS Capital.
Laura Corsell, an attorney with Montgomery, McCracken, Walker & Rhoads specializing in mutual funds, investment management, regulation and compliance.
James Lowell, editor of Fidelity Investor, the Forbes ETF Advisor, ETF Trader and the Rankings Service.
Performance Records
Wiener: The issue of manager changes is a big one, and one not adequately addressed in most disclosure documents or other performance-based documents. A perfect example: Vanguard's Growth Equity fund was run from inception through late last year by a team at Turner Investments. After years of dismal performance, a chunk of the fund was handed over to Baillie Gifford last spring.
Further, Turner was then fired in January of this year, and Jennison Associates was hired, and the fund's assets split fairly evenly between the two management teams. As far as I'm concerned, it's a brand-new fund. Period. Yet it will continue to show horrific one-year, three-year and longer performance numbers. I don't know of anyone putting an asterisk on performance numbers indicating manager changes.
Shareholders receive notification, generally in the fund's annual or semiannual report, but I don't believe there is very good disclosure at all.
Meanwhile, I don't believe funds would be allowed to show prior performance from "other" funds, though this is absolutely the type of research and analysis I do for readers of my newsletter and for clients of Adviser Investments. It's one reason we purchased Vanguard's Capital Opportunity fund one month after Husic Capital was fired and PRIMECAP Management was hired to run the fund--I gave them a month to revamp the portfolio--despite the fact that its historical "numbers" looked horrible for months and years afterwards, even though the PRIMECAP team was going great guns.
NOTE:the fact that its historical "numbers" even thought the PRIMECAP team was going great guns.
Lowell: Calculating the running records of each manager's monthly performances--one can do annual, quarterly, weekly, daily reviews, etc.--relative to highly correlated benchmarks over their total career of managing money is the most accurate way to measure and monitor not only past performance but how that performance was derived during different market cycles and seasons, different objectives and different risk management challenges and requirements. If I can see the extent to which the managers' choices have tended to help, or hurt, fund performance over their career, why isn't it mandatory to disclose this for every investor?
Abigail Johnson, president of Fidelity Personal Workplace and Investing, said, "You do your research, you make your recommendations or you buy your stocks and you live with your moves, and your success or failure against the benchmarks is right out there to be seen."
Johnson has it exactly right. At Fidelity, investing is a batting average business, where batting average isn't good enough. Moreover, it's a business where, despite all the conventional wisdom and services, the batting averages of your individual managers' stock- and/or bond-investing careers matter more than any current rating service or consulting firm can quantify or qualify. As Peter Lynch, former star manager of the once glorious Magellan still quips, "Stock investors need to know what they own."
Today's investors are being ill served by the very sources they turn to for advice. The problem? Morningstar, Lipper or S&P, or many advisory newsletters, all share one fatal flaw: They rate and recommend funds based on the fund's past performance rather than the historical track record of the manager who is currently running the fund.
Since Fidelity has a long-standing history of offering funds run by individual managers, as opposed to anonymous teams of them, and the fact that Fidelity has historically grown its own management talent, culled from the über-competitive environment, it has always been and remains a perfect microcosm for tracking, ranking and buying the manager, not the fund.
Gates: Welcome, James! And, thanks for sharing so much good information about your business. I am interested in knowing whether you have any specific data supporting the claims that manager changes affect fund performance. While I know that it intuitively makes sense, I would love to see numbers showing the impact that such changes have. Do you have anything quantifiable like that? Or, is most of your evidence anecdotal, like the PRIMECAP example that Dan provided below?
Wiener: Mine's not anecdotal. I can send you a chart that shows that the fund was lagging its benchmarks until the change, then, wham, it started to outperform.
Lowell: Plenty of examples in and beyond Fidelity's pale with regard to both missed opportunities of low-star-rated funds with new managers with stellar records, and the cost opportunity of holding on to a fund when a manager with a poor track record takes the helm, etc. (This also plays out on fund firms that, when ranked by the performance of their underlying managers, often reveals misalignments with high impression/low performance and low impression/high performance.)
One example: Fidelity Aggressive Growth. Back in 1999/2000 it was a five-star fund based on manager Erin Sullivan's returns; she was a large-cap growth momentum manager. In 1999 the market handed her some momentum, but she trumped her benchmark index: 103%, vs. 51% for Russell Midcap Growth. She left to start a now defunct hedge fund; her replacement was Rob Bertelson, who had come off of managing Fidelity OTC--benched to the Nasdaq, where he delivered a 72.5% return in 1999. Unfortunately, his benchmark, the Nasdaq, gained 86% that year.
We held Aggressive Growth in our Growth model so the change triggered a deep search of Bertelson's historical track record, where we saw that not only did he consistently fail to be his bench in updrafts, but he had a habit of doing about twice as worse in downdrafts. We said sell. The new president of FMR, Fidelity's fund company, and owner, Abigail Johnson, came out with her first public statement in TheBoston Globe defending their pick of the new manager and questioning my judgment. Barron's picked up the fight.
Long story short, by the time Rob was pulled from the fund, about two years down the road, February 2000 to November 2002, he'd lost shareholders about 85% of their money while his benchmark had lost about 46%--consistent with what we'd seen in his past record, and suggestive that our sell wasn't too off base. Never did hear back from Abigail on that one.
Gates: One fund's manager change is very anecdotal. Just like I would say that analyzing a small subset of Morningstar's analyst reports does not paint a true picture, I think it makes more sense to evaluate the whole universe, or some random subset of the whole universe.
Wiener: But Rich, I don't buy the universe of mutual funds, I buy individual managers. So, I look for great managers with great, long-term track records. If I cared about the whole universe, I'd buy a total market ETF and go home.
Lowell: My sense of the word anecdotal is that it leans towards hearsay. Dan's case in point is just that, and a good one. What I know: Manager by manager, brick by brick, the "anecdotal" turns into the archetypal framework for being able to say, based on our purely quantitative rankings of the universe of active managers, that individual skills, or lack thereof, directly impacts performance meaningfully. And consistently enough to make it at least a necessary second opinion to the blithe and subjective (ruled by committee, input criterion subject to change, etc.) rating services' shared assumption that fund performance histories are more important than manager track records.
Put it another way, when we run the universe of 7,800 managers that account for 99.6% of fund assets, we can confirm that [indexing proponent John] Bogle is right in his assumption that about 80% of active managers fail to beat their benchmarks. Of course, that leaves more than 1,500 who do ... but this latter point is not a great sales pitch for an index guy.
Gates: Anecdotal evidence can be evidence, which may itself be true and verifiable, that is used to deduce a conclusion that does not follow from it, usually by generalizing from an insufficient amount of evidence. For example "my grandfather smoked like a chimney and died healthy in a car crash at the age of 99" does not disprove the proposition that "smoking markedly increases the probability of cancer and heart disease at a relatively early age." In this case, the evidence may itself be true, but does not warrant the conclusion.
So, that is why I think citing individual examples to prove a point is worthless. But my intuition tells me that manager changes are important. And I think that a manager's past success, or lack thereof, at the helm of a different fund probably provides some insight into what she will do at the current fund.
Corsell: Just picking up the thread. and, as the lawyer in the crowd, I want to clarify that any time the identity of an individual portfolio manager changes, a fund must sticker its prospectus to provide the identity and professional background of the new manager. It is also true, however, that funds are generally not permitted to provide information about the past performance of individual managers.
Bottom line, attentive investors are aware of manager changes. but, without the detailed analysis Jim does, there is no way for even a careful investor to track the performance of a single portfolio manager.
Bottom line: Investors to whom gross performance is unavailable--everyone except institutional investors--have limited ability to assess/compare the quality of the service provided by individual portfolio managers in the context of a mutual fund. Before slamming the funds, though, remember that the rules relating to performance presentations are fixed by the SEC. And for as long as funds have been permitted to advertise performance--this was prohibited before 1975--the SEC has held that net performance is king.
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When Mutual Funds Change Managers
Michael Maiello, 03.06.09, 06:00 AM EST
You know how your fund has performed in the past, but do you know your manager's history? These days, everything's traceable.
When selecting mutual funds, most investors look to past performance.
It's an imperfect indicator of future performance, of course, but it's usually the best data available. At the very least, good performance over a long period of time implies that mutual fund managers have skill.
Article Controls
imageemail
imageprint
imagereprint
imagenewsletter
imagecomments
imageshare
imagedel.icio.us
imageDigg It!
imageyahoo
imageFacebook
imagerss
Yahoo! Buzz
But there are problems with the way past returns are reported. First, there's nothing that indicates the effect of manager changes over long-lived funds. Fidelity Magellan has beaten the S&P 500 over the course of its long life as a fund, but it's had many managers (and many legendary ones). Obviously, Peter Lynch's Magellan was different than Harry Lange's or Ned Johnson's or Jeff Vinik's.
This chart, provided by Adviser Investments, shows the effect of a manager change (indicated by red dot) on the Vanguard Capital Opportunity Fund:
capitalopp_chart.gif
Another thing that investors aren't told is what new managers have done at other funds. If you own a fund that gets a new manager, you're left to trust that he or she will follow an old successful strategy or was hired for a good reason. Fund companies don't tell you anything about manager track records.
Follow Intelligent Investing on Twitter
Comment On This Story
Sign Up For The Weekly Intelligent Investing Newsletter
INTELLIGENT INVESTING
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* Lloyd's Insures Its Future
* How The Big Players Trade
* Go Anywhere With Osterweis
* Clifford Chance Expands
Features
* Cope With Your Fear Of Markets
* How Much Cash You Need
* When Market Bottoms Break
* Barclays Leads British Banks
*
All of this is the fault of the Securities and Exchange Commission, not the fund companies. What fund companies can and can't report is tightly controlled. A manager's previous record is forbidden territory.
Mutual fund families are also required to only report performance net of fees, so historic returns don't reflect the effects of fee changes over time. Though fund families are required to inform investors about manager changes, they aren't required to start a fund's record over when a new manager takes over.
Newsletter editor James Lowell joins our panel of experts. He is head of the Rankings Service, a firm that tracks career-long manager performance over multiple funds. You can also trace manager performance yourself. It's a bit tedious, but start with the manager's bio in the fund's fact sheet or prospectus.
Then, backtrack. Past bios probably reveal more about the manager's past fund positions. At that point, it's possible to work out approximate dates of tenure and, with historical return data available free on the Web, to work out performance against a broad benchmark like the S&P 500.
NOTE:JAMES LOWELL he is head of the ranking of serveces and he is good news letter editor.
This week our mutual fund managers discussed issues of disclosure.
The Forbes mutual fund panelists are:
Daniel P. Wiener, editor of Independent Adviser for Vanguard Investors and CEO of Adviser Investments.
Adam Bold, founder and chief investment officer of the Mutual Fund Store.
Richard Gates, portfolio manager for TFS Capital.
Laura Corsell, an attorney with Montgomery, McCracken, Walker & Rhoads specializing in mutual funds, investment management, regulation and compliance.
James Lowell, editor of Fidelity Investor, the Forbes ETF Advisor, ETF Trader and the Rankings Service.
Performance Records
Wiener: The issue of manager changes is a big one, and one not adequately addressed in most disclosure documents or other performance-based documents. A perfect example: Vanguard's Growth Equity fund was run from inception through late last year by a team at Turner Investments. After years of dismal performance, a chunk of the fund was handed over to Baillie Gifford last spring.
Further, Turner was then fired in January of this year, and Jennison Associates was hired, and the fund's assets split fairly evenly between the two management teams. As far as I'm concerned, it's a brand-new fund. Period. Yet it will continue to show horrific one-year, three-year and longer performance numbers. I don't know of anyone putting an asterisk on performance numbers indicating manager changes.
Shareholders receive notification, generally in the fund's annual or semiannual report, but I don't believe there is very good disclosure at all.
Meanwhile, I don't believe funds would be allowed to show prior performance from "other" funds, though this is absolutely the type of research and analysis I do for readers of my newsletter and for clients of Adviser Investments. It's one reason we purchased Vanguard's Capital Opportunity fund one month after Husic Capital was fired and PRIMECAP Management was hired to run the fund--I gave them a month to revamp the portfolio--despite the fact that its historical "numbers" looked horrible for months and years afterwards, even though the PRIMECAP team was going great guns.
NOTE:the fact that its historical "numbers" even thought the PRIMECAP team was going great guns.
Lowell: Calculating the running records of each manager's monthly performances--one can do annual, quarterly, weekly, daily reviews, etc.--relative to highly correlated benchmarks over their total career of managing money is the most accurate way to measure and monitor not only past performance but how that performance was derived during different market cycles and seasons, different objectives and different risk management challenges and requirements. If I can see the extent to which the managers' choices have tended to help, or hurt, fund performance over their career, why isn't it mandatory to disclose this for every investor?
Abigail Johnson, president of Fidelity Personal Workplace and Investing, said, "You do your research, you make your recommendations or you buy your stocks and you live with your moves, and your success or failure against the benchmarks is right out there to be seen."
Johnson has it exactly right. At Fidelity, investing is a batting average business, where batting average isn't good enough. Moreover, it's a business where, despite all the conventional wisdom and services, the batting averages of your individual managers' stock- and/or bond-investing careers matter more than any current rating service or consulting firm can quantify or qualify. As Peter Lynch, former star manager of the once glorious Magellan still quips, "Stock investors need to know what they own."
Today's investors are being ill served by the very sources they turn to for advice. The problem? Morningstar, Lipper or S&P, or many advisory newsletters, all share one fatal flaw: They rate and recommend funds based on the fund's past performance rather than the historical track record of the manager who is currently running the fund.
Since Fidelity has a long-standing history of offering funds run by individual managers, as opposed to anonymous teams of them, and the fact that Fidelity has historically grown its own management talent, culled from the über-competitive environment, it has always been and remains a perfect microcosm for tracking, ranking and buying the manager, not the fund.
Gates: Welcome, James! And, thanks for sharing so much good information about your business. I am interested in knowing whether you have any specific data supporting the claims that manager changes affect fund performance. While I know that it intuitively makes sense, I would love to see numbers showing the impact that such changes have. Do you have anything quantifiable like that? Or, is most of your evidence anecdotal, like the PRIMECAP example that Dan provided below?
Wiener: Mine's not anecdotal. I can send you a chart that shows that the fund was lagging its benchmarks until the change, then, wham, it started to outperform.
Lowell: Plenty of examples in and beyond Fidelity's pale with regard to both missed opportunities of low-star-rated funds with new managers with stellar records, and the cost opportunity of holding on to a fund when a manager with a poor track record takes the helm, etc. (This also plays out on fund firms that, when ranked by the performance of their underlying managers, often reveals misalignments with high impression/low performance and low impression/high performance.)
One example: Fidelity Aggressive Growth. Back in 1999/2000 it was a five-star fund based on manager Erin Sullivan's returns; she was a large-cap growth momentum manager. In 1999 the market handed her some momentum, but she trumped her benchmark index: 103%, vs. 51% for Russell Midcap Growth. She left to start a now defunct hedge fund; her replacement was Rob Bertelson, who had come off of managing Fidelity OTC--benched to the Nasdaq, where he delivered a 72.5% return in 1999. Unfortunately, his benchmark, the Nasdaq, gained 86% that year.
We held Aggressive Growth in our Growth model so the change triggered a deep search of Bertelson's historical track record, where we saw that not only did he consistently fail to be his bench in updrafts, but he had a habit of doing about twice as worse in downdrafts. We said sell. The new president of FMR, Fidelity's fund company, and owner, Abigail Johnson, came out with her first public statement in TheBoston Globe defending their pick of the new manager and questioning my judgment. Barron's picked up the fight.
Long story short, by the time Rob was pulled from the fund, about two years down the road, February 2000 to November 2002, he'd lost shareholders about 85% of their money while his benchmark had lost about 46%--consistent with what we'd seen in his past record, and suggestive that our sell wasn't too off base. Never did hear back from Abigail on that one.
Gates: One fund's manager change is very anecdotal. Just like I would say that analyzing a small subset of Morningstar's analyst reports does not paint a true picture, I think it makes more sense to evaluate the whole universe, or some random subset of the whole universe.
Wiener: But Rich, I don't buy the universe of mutual funds, I buy individual managers. So, I look for great managers with great, long-term track records. If I cared about the whole universe, I'd buy a total market ETF and go home.
Lowell: My sense of the word anecdotal is that it leans towards hearsay. Dan's case in point is just that, and a good one. What I know: Manager by manager, brick by brick, the "anecdotal" turns into the archetypal framework for being able to say, based on our purely quantitative rankings of the universe of active managers, that individual skills, or lack thereof, directly impacts performance meaningfully. And consistently enough to make it at least a necessary second opinion to the blithe and subjective (ruled by committee, input criterion subject to change, etc.) rating services' shared assumption that fund performance histories are more important than manager track records.
Put it another way, when we run the universe of 7,800 managers that account for 99.6% of fund assets, we can confirm that [indexing proponent John] Bogle is right in his assumption that about 80% of active managers fail to beat their benchmarks. Of course, that leaves more than 1,500 who do ... but this latter point is not a great sales pitch for an index guy.
Gates: Anecdotal evidence can be evidence, which may itself be true and verifiable, that is used to deduce a conclusion that does not follow from it, usually by generalizing from an insufficient amount of evidence. For example "my grandfather smoked like a chimney and died healthy in a car crash at the age of 99" does not disprove the proposition that "smoking markedly increases the probability of cancer and heart disease at a relatively early age." In this case, the evidence may itself be true, but does not warrant the conclusion.
So, that is why I think citing individual examples to prove a point is worthless. But my intuition tells me that manager changes are important. And I think that a manager's past success, or lack thereof, at the helm of a different fund probably provides some insight into what she will do at the current fund.
Corsell: Just picking up the thread. and, as the lawyer in the crowd, I want to clarify that any time the identity of an individual portfolio manager changes, a fund must sticker its prospectus to provide the identity and professional background of the new manager. It is also true, however, that funds are generally not permitted to provide information about the past performance of individual managers.
Bottom line, attentive investors are aware of manager changes. but, without the detailed analysis Jim does, there is no way for even a careful investor to track the performance of a single portfolio manager.
Bottom line: Investors to whom gross performance is unavailable--everyone except institutional investors--have limited ability to assess/compare the quality of the service provided by individual portfolio managers in the context of a mutual fund. Before slamming the funds, though, remember that the rules relating to performance presentations are fixed by the SEC. And for as long as funds have been permitted to advertise performance--this was prohibited before 1975--the SEC has held that net performance is king.
See More Intelligent Investing Features
How To Find A Financial Planner
Magic Johnson's Harlem Dreamsimage
Just Cut Property Taxes!
Dow Tumbles, JPMorgan Slidesimage
Rate This Story
Your Rating Overall Rating
Reader Comments
Comment On This Story
Steve Forbes
Intelligent Investing | Data | Knowledge | Insight | Wisdom
Today On Forbes.com
Street Squeaks Out Gain
Steve Schaefer
Late surge prompts positive finish for the Dow and S&P, but sour mood remains.
* S&P 500 Weekly Winners And Losers
* Dow, Rohm Back At The Table
* Merrill Uncovers A 'Rogue' Trader
Mortgage Help That Hurts
The Weekly Layoff Report: Eerie Stillness
The Science Behind 'Watchmen'
Ten Wines Worth Comparing
Subscriptions
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Select Topics:
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*
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People Who Read This Also Read...
*
ANALYSIS-Fund managers face tough decisions on cost cutting 22743266
*
UPDATE 1-Norway oil fund shrank 7.5 pct in Jan to $297 bln 22743088
*
John Hancock Income Securities Trust Declares Quarterly Distribution 22742064
*
Norwegian domestic pension fund loses value 22640348
*
Cohen Milstein Sellers & Toll PLLC Files Class Action Lawsuit Concerning the Oppenheimer... 22659756
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2. Buy Citi For $1
3. Rebuilding Trust In America
4. The Suze Orman Plan
5. College Sex 2.0
6. Michelle Obama's Designer Pick
7. Renewable Energy Waste
8. Ram Charan On Leadership
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