Week In Review
August 11, 2008
Full Force: SEC Fills All Commissioner Positions
After months of vacancies, Chairman Christopher Cox finally has a full slate of commissioners to work with at the Securities and Exchange Commission. The final two vacant seats have just been filled as Luis Aguilar, who was nominated for a term to expire in 2010, and Troy A. Paredes, who was nominated for a term expiring in 2013, were sworn in.
Including Cox, who is also a commissioner, the full five SEC commissioner seats are now filled as last month, Elisse Walter, who was nominated for a term expiring in 2012, was also sworn in.
The full bench comes not a moment too soon. Both Paredes and Aguilar were sworn in just in time to sit in on the SEC's roundtable discussion about IFRS standards, as the pressure mounts for U.S. companies to utilize the international accounting standards rather than U.S. GAAP.
The SEC commissioners have a slew of other issues to weigh in on as well, including the future of the credit rating agencies in light of the SEC's findings of conflicts of interest at the big three agencies that contributed to the fallout in the CDO and residential mortgage backed securities markets. And the SEC will have to respond to calls to overhaul the U.S. financial regulatory system by Treasury Secretary Henry Paulson.
Janus Investors Finally Get Settlement Checks
After years of waiting to be compensated for damages done to their investment holdings by market timers and late traders, Janus investors will finally receive $100 million worth of restitution.
"Making these distributions is a priority for Janus," said company spokesman James Aber. The checks will be mailed to eligible investors in seven Janus funds, beginning Aug. 15. Anyone who lost less than $10 will not be compensated.
MassMutual Permits 401(k)s to Customize Plans
MassMutual's retirement services division is offering a customized 401(k) tool for plan sponsors and retirement plan advisers, based on asset allocation tools from Morningstar. Called CustomChoice Strategies, it takes the demographics of plan participants into consideration and allows the sponsor and/or adviser to package choices in the plan geared toward target retirement dates, investment objectives or a combination of the two, using the plan's existing lineup.
"MassMutual's CustomChoice Strategies also creates an opportunity for retirement plan advisers to provide additional value to plan sponsors and participants," said Paul Steven Henry, vice president of product development at the firm. "CustomChoice Strategies offers a custom solution that has many advantages over off-the-shelf alternatives." Morningstar will review the choices annually.
Fidelity Investments Buying Up China Shares
Fidelity is returning to China's stock markets, particularly consumer goods, healthcare and building companies, hoping to find values and that inflation has reached an apex. The MSCI index of ex-Japan Asian stocks shows a P/E multiple of 13.7, drastically down from a P/E of 21 last October. Stocks are also down more than 50% since last November's peak.
"We find lots of stocks across Asia that are very good buying opportunities," Kathryn A. Matthews, chief investment officer of Fidelity Investment Management, Asia Pacific, told Reuters. "We unloaded a lot of [China stocks] earlier this year on profit taking. We've been returning to China since.
"We don't believe inflation will be a significant problem in the long term," she continued. "The pressures of higher commodities and food prices probably have peaked. Year-on-year, inflation is going to get better."
Asset Manager M&A Expected to Remain Robust
Investment firms will continue to hone their specialties and look to raise capital through mergers and acquisitions throughout the rest of the year, according to a report by Jefferies Putnam Lovell.
M&A activity in the beginning of 2008-$10.6 billion spent in 104 deals-has been lower than the first half of 2007-$36.9 billion in 115 deals, according to the investment banking firm, primarily due to smaller transactions, more focus on alternatives and no fund company initial public offerings.
Nonetheless, Jefferies expects deals to pick up in the next six months.
"Pursuit of non-traditional investment products, international expansion, and attempts to restore balance sheets at banks and other financial institutions will drive asset management dealmaking activity in the months ahead," said Aaron Dorr, a managing director at Jefferies. "In the financial technology arena, strategic buyers will show enthusiasm for select technology vendors that appeal to the buy side, custodians and exchanges."
Nonetheless, the company expects deals will take longer to complete and run a higher risk of collapse. Prices will also begin to go all over the map as purchasers exercise discretionary buying power and aggregate multiples for asset managers soften.
Morningstar Makes Alternatives a Classification