Paulson's Funds Lead Wall Street Winners
April 21, 2008
John Paulson, founder of the hedge fund Paulson & Company, made an unprecedented $3.7 billion last year by betting against subprime mortgages and the financial products that held them.
Paulson took the top place in Institutional Investor's Alpha magazine's ranking of the 50 most highly paid hedge fund managers. George Soros ranked second with $2.9 billion and James Simons came in third place with $2.8 billion in earnings. The top 25 managers on the list earned an average of $892 million.
Starting in 2005, Paulson created two funds that focused on the credit markets and shorted subprime mortgages. One of his funds returned 590%, while the other made 353%. Paulson's $6 billion fund group rose to $28 billion in assets in a year.
"The enormous riches being generated by hedge funds come at a time of extraordinary distress in financial markets, as millions of homeowners face potential foreclosure and the U.S. plunges into recession," Alpha wrote. "Undoubtedly, the huge paydays chronicled here are sure to cause a heightened level of envy and resentment toward hedge funds, and will draw additional scrutiny by Washington, which is already weighing whether to increase regulation."
Gen Xers Fear Serious Retirement Shortfall
Gen Xers are stressed out about the prospect of retirement, with only 31% of them believing they will be able to retire from the workforce.
A survey commissioned by Scottrade and BetterInvesting found that 43% of people between the ages of 27 and 42 feel they will never be able to fully retire, and 26% said they are unsure about their ability to retire.
"The study shows Gen Xers are the most stressed group financially right now," said Chris X. Moloney, chief marketing officer for Scottrade. "They are earning money and paying into Social Security and yet - they fear they may never see the payback. They feel they deserve it, but it looks like a financial black hole to them right now."
Approximately 40% of Gen Xers surveyed said they are saving more today because they can't rely on Social Security, even though 87% said they deserve to get benefits from Social Security. Gen Xers are saving their money primarily in 401(k)s, IRAs and retirement savings accounts.
"Investors are being slammed with tidal waves of discouraging news about the economy, which certainly contributes to their long-term fears about retirement," said Bonnie Reyes, president of BetterInvesting. "But the good news is this, too, shall pass. Those who invest early and regularly and stay the course during these more challenging times are the ones for whom history shows great rewards."
The survey found that Gen Xers are taking action, saving more and spending less, compared to other age groups. Also, the survey found a large percentage of Gen Xers are paying off debts and credit cards.
China Grows Weary Of U.S. Financial Advice
Chinese regulators are becoming increasingly skeptical of financial advice from the U.S. to sacrifice the country's stability for the greater good of stabilizing the global economy, Reuters reports.
"For China, the challenge is to save less and consume more," said U.S. Treasury Secretary Henry Paulson.
By leaning toward a market-driven economy and loosening supervision, U.S. officials say China can increase consumption and help stabilize the global economy. Chinese officials worry that such a move could put the country at a greater risk for problems like the subprime mortgage crisis in the U.S.
"The United States has, for a long time, been advocating free-market capitalism, believing the market can allocate resources effectively without government interference. But this is not really the case," said Liu Mingkang, chairman of the China Banking Regulatory Commission. "Sometimes the market does not work and if you wait until then to correct it, the costs are usually tremendous."
Liu said his agency would make sure Chinese banks don't lower standards for housing loans and increase scrutiny for borrowers who have more than one home, as well as prevent banks from lending to companies with a high debt ratio.
Japanese Mutual Fund Net Inflows Plunge in FY07
Net inflows into Japanese mutual funds dropped by about 26% in 2007, according to the Nikkei Report.
"Since the new year, we have seen a number of redemptions, primarily among stock mutual funds as investors sought to lock in profits," said an official at a major asset manager.
Japan's stock mutual fund environment deteriorated last year due to a global slump spurred by the subprime mortgage crisis in the U.S. Overall investment returns in Japan's mutual funds fell to -10% on average.
Instead of stock mutual funds, many investors turned to foreign bond mutual funds, which had a smaller price fluctuation risk.
The top five biggest mutual fund sellers were Daiwa Asset Management Co. , Kokusai Asset Management Co. , Mitsubishi UFJ Asset Management Co. , Nikko Asset Management Co. , and Nomura Asset Management Co.
Russell Debuts LifePoints' For Retirement Income
Russell Investments has launched "LifePoints Funds, Target Distribution Strategies," a series of multi-manager funds designed specifically for the "decumulation" phase.
The funds leverage a dynamic asset allocation strategy designed to provide retirees with a way to replace pre-retirement income, the potential to preserve savings and the flexibility to make changes throughout retirement.
"As individuals reach retirement, they are faced with many competing needs and concerns: They want to enjoy retirement fully but also retain wealth; they are concerned about outliving their money, but want control of their assets; and they want a financial approach that stresses consistency and reliability but still [have] the flexibility to change course," said Timothy Noonan, managing director of Russell Investments.
Barclays Launches Singapore Fixed-Income Fund
Barclays has launched the Premier Fixed Income Fund in Singapore, aiming to provide retail investors with the potential for returns of 7% per annum. The fund invests in global bond funds, high-yield bond funds and emerging-market bond funds.
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