Week In Review
September 15, 2008
Edward Jones to Pay $7.5M for Revenue Sharing
Edward Jones will pay $7.5 million to California to settle claims that it failed to disclose its revenue-sharing policies to investors. Although it earlier denied the attorney general's charges, in settling, the firm neither admitted to nor denied the allegations.
"We are pleased that we were able to negotiate a settlement with the California attorney general and put the issue of revenue-sharing disclosure behind us," said Jim Weddle, a managing partner with Edward Jones.
More Than a Third of Big Hedge Funds in the Red
Among the largest hedge funds, 35% are in the red so far this year, Hedge Fund Research data shows. As a group, their assets are down 4.3%, and among all of the listings in Hedge Fund Research's Fund Weighted Composite Index benchmark, they are down 0.75%. This is the first half-yearly decline in the index since the group started it in 1990.
Meanwhile, Absolute Return magazine's semi-annual report on the nation's largest hedge funds put JPMorgan at the top of the list, with $48.1 billion in assets, followed by Bridgewater Associates, with $43.5 billion.
Coming in at third place was D.E. Shaw Group ($37.1 billion); fourth, Paulson & Co. ($34.9 billion); and at fifth, Och-Ziff Capital Management ($33.3 billion).
Older Americans Have Dismal Economic Outlook
Although unemployment and inflation have been higher in the past 30 years, a majority of people age 60 or older have a very pessimistic outlook, according to a poll by the MetLife Mature Market Institute.
Fifty-three percent said they believe economic conditions are worse than they have experienced in the past. Eighty-seven percent said they are cutting back on spending, and of this group, 70% are budgeting themselves on such essentials as food and transportation. Eighty-two percent are cutting back on non-essentials, such as dining out and vacations, and 17% said they have had to help family members experiencing difficulties.
"There is no doubt that older Americans are being adversely affected by the current situation," said Sandra Timmermann, director of the MetLife Mature Market Institute. "A closer look at the findings shows that women are tightening their spending habits more than men, and not surprisingly, those who earn less are cutting back even more."
Timmermann went on to say that senior citizens are feeling "particularly vulnerable," and yet, they are not changing their retirement plans. A full 73% said they would not postpone their retirement date.
About 20% of respondents said they have a greater appreciation for Social Security, leading Timmermann to conclude that "many older Americans better understand the importance of guaranteed income."
The poll of 538 adults was conducted in July by Harris Interactive.
Plan Sponsors Hip to Fees
Fees have become the top reason that retirement plan sponsors switch providers, according to Spectrem Group.
Thirty percent of plan sponsors surveyed by the Chicago research firm cited cost and fees as the primary factor in a change in plan providers.
It was the first time in the survey's 19-year history that they were the main factor. Twenty-six percent cited poor service and 12% cited investment issues, said the report, "DC Market Needs."
Spectrem surveyed individuals who select and evaluate retirement plan providers at 1,052 companies with defined contribution plans. In 2005 cost/fees finished third (18%) to poor service (45%) and investment issues (26%). Fees also came in third in 1999 and 2002.
Spectrem said plan sponsors appear to have grown more knowledgeable about the fees they pay. Eighteen percent said in the online polling in May and June that they pay less than 1% of plan assets and 21% cited fees in excess of 2% of assets.
Spectrem said these responses are far more realistic than the ones plan sponsors provided in 2005, when a full 54% said they paid less than 1% of assets and just 4% said they paid more than 2% of assets.
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