Week In Review
March 1, 2010
Conn. May Reintroduce Hedge Fund Bills
Because neither Congress nor the Securities and Exchange Commission require hedge funds to register or reveal key information, Connecticut General Assembly Sen. Robert Duff (D-Norwalk), vows to reintroduce as many as three bills that would require them to reveal conflicts of interest, be licensed and disclose financial information to prospective investors.
Last May, the main bill, "No. 953, An Act Concerning Hedge Funds," passed the Connecticut Senate by a vote of 24 to 12 along partisan lines but died in the House. Likewise, a bill introduced in the U.S. Senate by Sen. Christopher Dodd (D-CT), also stalled.
Duff, chairman of Connecticut's banking committee and an advocate of hedge fund regulation for the past four years, says the inaction in Washington behooves the state legislature to revisit the issue. This time, however, Duff vows to expand the bill beyond disclosure of conflicts of interest between a manager and an investor to include further information on investment strategies and fees. "I've had a lot of people inside the industry tell me that I was right on with this bill," Duff said. "Even in their opinion, we could go further."
Indeed, Connecticut Attorney General Richard Blumenthal has long called for further hedge fund oversight, saying the funds exist in "a regulatory black hole. Non-binding best practices or voluntary guidelines are an imaginary fence-and virtual farce: They stop nothing," Blumenthal said. "The Treasury Department is suggesting faux regulation, creating a dangerous illusion of oversight and engendering a false sense of security. Federal officials are proposing a speed limit, but making compliance voluntary: Some will fail to comply, imperiling all."
The Connecticut Hedge Fund Association maintains the proposed bills would duplicate federal securities law as well as information already available in prospectuses.
Fidelity Creates iPhone Brokerage Trading App
Fidelity Investments has introduced a brokerage trading application complete with real-time news and quotes, interactive charting and watch lists for the iPhone and iPod Touch. The program lets users trade stocks, options, exchange-traded funds and mutual funds.
"At Fidelity, we recognize the growing popularity of the iPhone and iPod Touch, and, in fact, nearly half of the customers using our current mobile trading application, Fidelity Mobile, log in from an iPhone," said James C. Burton, president of Fidelity's retail brokerage business. "Our new app takes full advantage of the revolutionary technologies of iPhone and iPod Touch to allow us to deliver powerful trading and account management services in a very user-friendly format."
Fidelity is rolling out the new technology in conjunction with its recently announced $7.95 online trades and free trades for 25 iShares exchange-traded funds.
Citi Offers Middle-Office Software With Heat Maps
Citigroup has introduced CitiDirect Performance and Risk Management Service, a risk-reporting middle-office application that uses heat-mapping visualization technology. It permits asset managers to aggregate multiple, manually generated reports into a single-information view.
"CitiDirect PRISM demonstrates our ongoing commitment to market innovative and leading-edge technology for the benefit of our clients," said Neeraj Sahai, global head of securities and fund services at Citi. "The heat-mapping technology tool enables a fund's executives and asset owners to view performance and risk exposure in an intuitive manner that aids in their investment and risk-management processes."
The tool is designed specifically for chief investment officers, portfolio managers, risk managers and product distribution teams to let them readily see complex data relationships across performance, attribution, investment operations and sales.
AllWeather Indexes Aim to Minimize Downside Risk
F-Squared Investments has created the AlphaSector AllWeather Indexes, which aim to serve as a new tool for retirement income and pension plan sponsor funding requirements by concentrating on minimizing downside risk. F-Squared is offering separately managed accounts tracking them, and is currently exploring other product options with several providers.
"The average investor has been through a long period of minimal asset growth," said Ron Santangelo, managing director of Santangelo Investment Management and Research, and manager of the fixed income and alternative components of the new indexes.
"In the last 15 years, we have had periods of attractive gains completely eliminated by market reversals," Santangelo continued. "The goal of the AllWeather Indexes is downside risk mitigation; it's not how much investors make on the upside, it's what you keep on the downside that is crucial to long-term asset growth."
F-Squared claims the new indexes hold great promise, since its flagship AlphaSector Premium Index gained 198% over the last nine years, whereas the S&P 500 rose 14%. Investment portfolios for retirees that tracked the AlphaSector index during that time were able to permit 8% annual withdrawal fees, double financial advisers' recommended 4% annual withdrawal rates, said Howard Present, president and CEO of F-Squared Investments.
The new offerings are also an outgrowth of F-Squared's new AllWeather Advisory Board, a diverse group of industry professionals who will work to improve state-of-the-art retirement income solutions.
ETFs Gaining Traction Among Wealthy Investors