Week in Review
October 29, 2007
Mass. Investigating Failed Bear Stearns Hedge Funds
Massachusetts' securities regulator has joined other regulators in investigating whether executives at Bear Stearns traded at fair prices in the two hedge funds that recently failed, without informing other investors, Reuters reports.
"We are looking at trading in those two funds and whether there might have been conflicts," said Brian McNiff, a spokesman for Massachusetts Secretary of the Commonwealth William Galvin.
Galvin began investigating Bear Stearns research on subprime lenders in March, according to McNiff.
The two funds, Bear Stearns High-Grade Structured Credit Strategies and High-Grade Structured Enhanced Leverage, collapsed after losing $1.6 billion.
California Looking to Register Hedge Funds
California is looking to require hedge funds and private equity firms to register as investment advisors, HedgeWorld.com reports. The California Department of Corporations would achieve this by canceling a rule that has exempted those types of organizations from having to register.
California would also require out-of-state hedge funds and private equity firms that have more than six clients in the state to register. However, California is defining a client as a fund.
All venture capital firms would continue to be exempt.
California said it agreed with the Securities and Exchange Commission's hedge fund registration rule that the SEC passed in 2004 but that a hedge fund manager successfully overturned through a lawsuit.
Fidelity Combines Critical RIA Functions on Platform
Fidelity Investments will be launching a new Web-based platform for registered investment advisers. Called WealthCentral, it is designed to combine the various functions and tools that RIAs need, including financial planning, portfolio management and customer relationship management.
Supporting the platform in the back office is Advent Software's portfolio exchange software. Oracle is providing a CRM solution.
"Today, advisers must buy their various technology applications in a piecemeal fashion and then try and make the systems work together as best they can, something that can be costly and extremely inefficient," said John W. "Jack" Callahan, president of Fidelity Institutional Wealth Services.
"That's why Fidelity is investing $50 million in developing what we believe will be the strongest and most integrated platform in the industry, helping address this critical market need," Callahan said.
According to Fidelity research, two-thirds of RIAs view a single platform as valuable and half see it as very valuable. WealthCentral will be available late next year.
Vanguard, Bear Among Six Planning Active ETFs
There's been talk of actively managed exchange-traded funds for nearly 10 years now, and six companies have either submitted filings or requests for regulatory relief with the Securities and Exchange Commission to offer such funds, Pensions & Investments reports.
Vanguard and Bear Stearns have submitted the filings, while Firsthand Capital Management, Managed ETFs, Alpha Equity Research and XShares have submitted the relief papers.
Transparency has long been the stumbling block for ETFs, as investment advisors have feared that revealing holdings would enable front running. Firsthand claims it can get around that problem by completing trades in a single day. That, said Firsthand Marketing Consultant Phil Mosakowski, won't be a problem for liquid stocks. However, less liquid stocks could pose a problem, he admitted.
Vanguard believes it can get around the transparency issue by only providing a sampling of 50% to 75% of its bond holdings represented by similar securities with the same maturities, credit quality and yield.
T. Rowe Price Adding 1,400 Staff at New Campus
As a result of expanding business, T. Rowe Price will build two new offices totaling 40,000 square feet adjacent to its existing campus in Owings Millis, Md., to accommodate 1,400 additional workers. They will be built on a 38-acre site T. Rowe acquired.
Construction will begin before winter, with the buildings scheduled to open in the second half of 2009.
"This plan reflects the ongoing growth in our business, as well as our goals of continuing to provide our clients with world-class services and our associates with high-quality facilities," said T. Rowe Chairman Brian C. Rogers.
T. Rowe Price currently employs 5,000 and has $379.8 billion in assets under management.
75% of Hedge Fund Execs Dissatisfied With Salary
For all of the talk about tremendous salaries for hedge fund managers and executives, they earn an average of $250,000 a year, and only 3% earn more than $1 million a year or more. Managers earn an average of $364,566 a year, and analysts earn $205,381.
But 75% are dissatisfied with that level of compensation, Dow Jones reports, citing a Hedge Fund Search Digest survey of 232 executives from 200 hedge fund firms.
Evidently, greed is good, but greedier is better. When hedge fund executives hear about peers earning hundreds of millions of dollars a year, that leads to jealousy, said David Kochanek, president of the Digest.