Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Money Management Executive can deliver.
  • Exclusive Online Only Content
  • Free Daily Email News Alerts
  • Asset Management Blogs

Week In Review


85% of Advisers Believe Recession Will End by 2010

Independent financial advisers are somewhat optimistic about the economy, with 44% saying they believe the recession will end this year, and another 41% pointing to next year, Charles Schwab found in a survey of 1,200 advisers.

Fifty-three percent said they believe the S&P 500 Index will rise in the first half of this year, and 67% said they hope they country will become more united in the next six months, up from 23% who said so last July. Roughly 66% said they approve of Federal Reserve Chairman Ben Bernanke's leadership.

That said, 84% said achieving investment goals in the current environment is challenging. Fifty-five percent said it could take as long as three years for portfolios to return to their levels of last September, and 35% said it could take between three and five years.

"Advisers don't have a GPS to guide them, but they have the experience and savvy to see that there are still potholes on the road ahead," said Bernie Clark, senior vice president for Schwab's adviser services, which supports 5,700 independent investment advisers. "Their long-term view, reasoned outlook and steady approach will serve their clients well in this environment."

Vanguard's Offerings, Compensation Help Firm Avoid Layoffs-So Far

Between a mixture of its conservative, low-cost fund offerings that appeal to investors in this time of market stress, and a performance-based compensation plan, Vanguard has been able to retain enough assets and keep costs down to avoid mass layoffs.

Vanguard is now awarding a year-end bonus based on performance. In the past, compensation was more closely tied to a point system based on the company's overall performance.

"The intent is not to pay people more or less than previously, but to better align the rewards earned by each crew member with their personal performance and the overall performance of the company," said Vanguard spokeswoman Amy Chain.

Contrafund Manager Rues Tech, Retail Investments

Will Danoff, manager of Fidelity Contrafund, admits he was too bullish on technology and retail stocks last year, but says he was right to pass on low-priced financial services stocks.

The fund was down 37.2% in 2008, right along with the Standard & Poor's 500 Index. Still, Danoff says that is no excuse.

"I'm very disappointed with this result, and I take no solace in observing" that the fund was on par with its benchmark, Danoff tells investors in a letter. "I was late in reducing some of my holdings in the tech sector; in retrospect, I was too ebullient about their long-term prospects." His best call, Danoff said, was in biotech.

As far as this year is concerned, Danoff believes the market could begin to rise by the end of 2009, and he is particularly bullish on blue-chip stocks.

Berkshire Profits Tumble 96% in Fourth Quarter

Berkshire Hathaway's profits tumbled 96% in the fourth quarter to $117 million, from $2.9 billion a year earlier.

As bad as that performance was, the results "could have been a lot worse," Morningstar Analyst Bill Bergman told The Wall Street Journal. "It's the worst economic environment in recent history, and despite that, they've performed well."

Berkshire CEO Warren Buffett said he does not expect the economy to improve in the near term-and that the economy will continue to be "in shambles" throughout 2009. However, he believes the outlook is strong looking a few years out. In his annual letter to shareholders, Buffett said, "Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead."

Senator Calls for More Target-Date Fund Scrutiny

The chairman of the Senate Special Committee on Aging has called for more scrutiny of target-date retirement funds after several 2010 target-date funds posted huge losses in 2008.

"While it may be too late for those who already have suffered substantial and irreversible financial losses, it is vital that aggressive and timely action be taken to protect the retirement income of all Americans," said Chairman Herb Kohl (D-Wisc.), in a letter to Securities and Exchange Commission Chairman Mary Schapiro and Department of Labor Secretary Hilda Solis.

Target-date funds are meant to automatically rebalance an investor's portfolio to more conservative asset allocations as they approach retirement. In theory, 2010 funds should be very conservative, yet one 2010 fund lost 41% last year, Kohl said.

Because taking excessive risk can be devastating to investors who are close to retirement, he said new regulation or legislation may be needed to make investors more aware of the risk of these funds.

Employer Matches Boost 401(k) Contributions 9%

401(k) plans in which employers match contributions have contribution rates as much as nine percentage points higher than those that don't, Fidelity Investments found. And when combined with immediate vesting, contribution rates climb 11 percentage points higher.