Week in Review
January 21, 2008
Vanguard Takes Top Spot from American Funds
Vanguard has bumped American Funds from its six-year run as the biggest-selling fund company in the U.S., reclaiming the leading role that Vanguard last held in 2001, the Financial Times writes.
Vanguard benefited from a surge of investment into money market funds in 2007 as risk-averse investors looked to secure their cash, as well as from the company's push into the exchange-traded funds market, taking its total assets under management to $1.3 trillion.
American Funds has approximately $1.0 trillion AUM and does not have a strong presence in money market funds.
Vanguard, American Funds and Fidelity are by far the three biggest U.S. mutual fund companies. Collectively, the three companies hold more than a third of U.S. fund assets.
Retirement Income Industry Gears Up for Exciting Year
This year will be a pivotal and exciting year of opportunity for the retirement income industry as more Americans start planning for the future, say industry experts.
"In 2007, we built upon our 2006 start-up efforts to further define ourselves in the industry and to discover in more detail what our membership wanted from us as a leading edge association," said Francois Gadenne, chairman of the Retirement Income Industry Association. "As we start 2008, our focus will be on scaling up our member-selected, member-tested, value-added programs and services. In addition, we'll continue to be a complementing companion to other associations."
The RIIA's education committee will continue to build on its body of knowledge, add curriculum for the retirement income expert designation and incorporate "cross silos" of industry expertise.
The association plans to steadily grow their membership and add new board members and new committees, and plans to hold more conferences and networking meetings to bring together top industry executives, financial advisors, leading academics and other experts.
The RIIA will hold its fourth-annual summit on managing retirement income Feb. 11-13 at the Doral Country Club and Resort in Miami, Florida.
Morningstar Warns Investors to Read the Fine Print in Ads
In a recent critique of mutual fund advertisements, Morningstar said many funds have improved their ads by emphasizing research, expenses and consistency over short-term returns, but there is still additional room for improvement.
Previous ads focused too much on short-term performance by listing big gains for various funds, but many customers expected the returns would be repeated. Even with a disclaimer that past performance does not guarantee future results, some investors were disappointed and turned elsewhere.
Morningstar looked at five recent print ads in the Wall Street Journal for Fidelity, Janus, American Century, T. Rowe Price and Vanguard. Some of the ads touted that their high returns were because of research, while other ads cited positive reviews from Morningstar and Kiplinger magazine.
To their credit, most ads had disclaimers listed in fine print, and savvy investors should continue to read the fine print and do their homework before purchasing any mutual fund, Morningstar said.
Fidelity Reopens Magellan
After 10 years in isolation, the Fidelity Magellan Fund has reopened to new investors, effective today.
"I strongly believe that reopening the fund is the right step for Magellan's shareholders at this time," said Harry Lange, who has managed the Magellan Fund since October 2005.
"Magellan's shareholder base has matured and, in the normal course of investing, many shareholders have continued to redeem assets as they've met their financial goals," said Walter Donovan, president of the Equity Division for Fidelity Management & Research Company.
"In fact," he added, "85% of the fund's assets are earmarked for retirement, and the Baby Boomer generation has now begun to retire and tap those dollars."
Reopening the fund will generate new sales and offset future redemptions, helping to stabilize cash flows, Donovan said.
Target-Date Funds: Friend or Foe?
Target-date funds recently got government approval as the default option in 401(k) plans. On the other hand, a recent study by Compass Investors, finds fault with the structure of these funds.
A recent study from the Compass Institute, a think tank affiliated with Compass Investors, criticizes the structure of target-date funds. It advocates shifting asset allocations based on market and other trends, instead of on a fixed schedule.
While critics say target-date funds are a better long-term investment than money-market funds - the former default option when workers didn't specify a choice - some say investors would fare better taking an active role.
The funds, which gradually shift out of stocks and into bonds to reduce risk, have mushroomed from 23 funds with $8 billion in 2000, to more than 250 with $160 billion under management, writes Andrew Clark, head of research for Lipper.
Tony Blair Takes Job at JP Morgan Bank
Tony Blair, the former prime minister of the United Kingdom, has taken a part-time job in a senior advisory capacity with the investment bank JP Morgan, according to BBC News.