Week in Review
March 24, 2008
CalPERS' Returns Dip
The California Public Employees' Retirement System (CalPERS) has posted its first negative returns in 2-1/2 years due to the subprime mortgage crisis and high oil prices, the fund announced last week.
For the final quarter of 2007, CalPERS reported a total return of -0.5%, which equals a loss of $1.6 billion. The plan's consultant, Wilshire Associates said that the fund's investments underperformed their respective benchmarks by 0.9%. Overall, CalPERS saw returns of 10% for 2007, compared to 15.4% for 2006.
Wilshire added that investments in international and U.S. fixed-income helped to curb these losses. Additionally, the fund has reportedly returned -0.65% for January 2008.
- Investment Management Weekly
Bear PE Unit Affirms Doral Commitment
Bear Stearns Merchant Banking, the private equity unit partly owned by Bear Stearns Cos., reiterated its commitment to Doral Financial Corp. of Puerto Rico after speculation it might try to liquidate its position now that JPMorgan Chase & Co. is buying the investment bank.
"We don't rely on Bear Stearns for our funding," said David E. King, a senior managing director and partner at the private equity firm, told American Banker in an interview Tuesday.
The investment bank cannot force Bear Stearns Merchant Banking to liquidate private-equity stakes to generate money, King said.
In June, Doral Financial sold a 90% stake in itself to Doral Holdings Delaware LLC for $610 million to repay debt. Doral Holdings is owned by a consortium of private-equity investors including Marathon Asset Management, Perry Capital, D.E. Shaw Group and Tennenbaum Capital Partners.
King's firm-which led the structuring of the deal that prevented Doral Financial from going bankrupt-has long maintained that it was not making a short-term investment in Doral Financial. He dismissed the speculation that it might try to liquidate its position in the banking company.
However, Adam C. Barkstrom, an analyst with Sterne, Agee & Leach Group Inc., said questions about Bear Stearns Merchant Banking's commitment to Doral Financial intensified last week when Bear Stearns Cos.' liquidity deteriorated.
SEC Fines Two Brokers In Trading Scheme
The Securities and Exchange Commission recently suspended and fined two brokers with Wachovia Securities $250,000 each for their roles in a market-timing scheme that cost mutual fund shareholders hundreds of thousands of dollars in losses, writes The Miami Herald.
Thomas C. Bridge, 41, of Fort Lauderdale and James D. Edge, 46, of Lake Worth, both worked at Wachovia's Boca Raton office. Edge was Bridge's supervisor.
According to Judge Brenda Murray, Bridge engaged in numerous market-timing trades, prompting complaints from mutual fund companies. Instead of stopping Bridge, Edge helped him circumvent trading restrictions, including the use of multiple account numbers and broker ID numbers to hide transactions.
Bridge has been suspended for a year and Edge has been suspended for 30 days, with the stipulation that he never be a supervisor again.
Money Fund Assets Rise To $3.454 Trillion
The Investment Company Institute said total money market mutual fund assets rose for the week ending March 12 by $6.46 billion to $3.454 trillion.
Retail money market mutual fund assets rose by $5.55 billion to $1.246 trillion, taxable money market fund assets in the retail category rose by $3.17 billion to $951.36 billion, and tax-exempt fund assets rose by $2.37 billion to $294.66 billion.
Institutional money market fund assets rose by $913 million to $2.208 trillion, taxable money market fund assets fell by $1.98 billion to $2.027 trillion, and tax-exempt fund assets rose by $2.89 billion to $180.99 billion.
Money Fund Report, a service of iMoneyNet Inc., said the seven-day average yield on money market mutual funds fell from 2.78% on March 4 to 2.73% on March 11. The 30-day average yield fell from 2.96% to 2.88% during the same period.
The seven-day compounded yield fell from 2.82% to 2.77%, while the 30-day compounded yield fell from 3.01% to 2.92%. The average maturity of portfolios held by money funds was 42 days, up from 41 days, Money Fund said.
Visa IPO Soars Nearly 60% On First Day in the Market
Shares of Visa surged as much as 57% in their first day of trading last Wednesday, despite analysts growing concerns about consumer spending, litigation, regulation, and competition.
Amid a broad market selloff, the shares closed at $56.50, 28% higher than the price Visa gave them Tuesday evening.
Joseph W. Saunders, Visa's chairman and chief executive, said the credit card giant's new public structure will help it respond to global changes in payment systems. We operate in a large global market undergoing a significant shift from cash and check to electronic payments, he said. Visa is well positioned to take advantage of this migration to electronic payments.
Analysts said that since Visa, which operates the world's largest payment network and is believed to become the biggest IPO in U.S. history, does not issue cards, it is in good position to weather the credit crisis.