Week In Review
March 23, 2009
Barclays Shopping iShares Unit
In what would be a tremendous upset in the mutual fund industry, Barclays is shopping its iShares exchange-traded fund unit. Firms reportedly interested in the unit include Fidelity, Goldman Sachs, JPMorgan Chase and Morgan Stanley.
"A broker/dealer buying iShares is the most likely scenario I see, if it happens," Matthew McCall, president of Penn Financial Group, an ETF specialist financial advisory firm, told MarketWatch. Rob Ivanoff, an analyst with Financial Research Corp., said that given the market's declines, the iShares unit could be worth $4 billion. Others said it could sell for $7 billion.
Matt Hougan, an editor with IndexUniverse.com, said he was shocked that Barclays-with 360 funds totaling $300 billion, the biggest provider of ETFs-would consider selling such a successful unit. Hougan said that even though Barclays has a 45% market share of the ETF industry, it would be a tough sale given the lack of liquidity in the mergers & acquisitions industry.
JPMorgan Funds Was Top-Selling Family in 2008
JPMorgan Funds was the best-selling mutual fund family in 2008, taking in $140 billion in net sales, Financial Times reports. Nearly all of that money was in money market funds; excluding those flows, JPMorgan was hit with $1.3 billion in outflows for the 12 months through February. Likewise, Fidelity's inflows were $53 billion, largely due to its money funds, while Vanguard took in $49 billion, $10 billion of which went to its money funds. However, total assets under management at Fidelity fell by $400 billion to $1.2 trillion. PIMCO, largely due to its bond funds, took in $19 billion in inflows.
American Funds, the top-selling firm for most of the past seven years following the mutual fund trading scandal, suffered in 2008 due to the fact it has no money market funds. Other fund giants have been hit with tremendous outflows, including Franklin Templeton ($20 billion in outflows), Putnam Investments ($13 billion), Legg Mason ($16 billion), and OppenheimerFunds and Dodge & Cox ($13 billion apiece).
Putnam Costs Power Fin'l First Loss in 15 Years
Power Financial experienced its first quarterly decline in 15 years, losing $773 million, or $1.12 a share, compared with profits of $532 million, or 73 cents a share, in the fourth quarter of 2007.
The writedowns included a $1.35 billion charge related to its Putnam Investments subsidiary.
Hedge Funds Unlikely To Recover Until 2013
Hedge funds will continue to suffer poor results and redemptions for the next four years, Sanford C. Bernstein Analyst Brad Hintz told Reuters. And over the next year, one in four hedge funds will shut down, Hintz added. Assets in hedge funds will decline 18.2% to less than $1 trillion this year, and won't recover until 2013, he said. At their height in the middle of 2008, they stood at $2.2 trillion.
As the hedge fund business wavers, prime brokers' revenue will drop 32% and their earnings will plummet 52%, Hintz said.
OppenheimerFunds Tackles Market Volatility
OppenheimerFunds has launched a new educational campaign, including personalized communications, to allay 401(k) investors', plan sponsors' and financial advisers' concerns about market volatility. Fidelity Investments and Charles Schwab, likewise, are conducting seminars and ad campaigns to walk investors through the merits of sticking with the markets and revisiting risk tolerance.
"OppenheimerFunds remains committed to delivering the best possible retirement plans," said Gayle Leavitt, vice president of retail retirement at OppenheimerFunds. "Considering the unprecedented volatility in the markets, it is vital that we provide tools and resources to help plan sponsors and financial advisers navigate this difficult environment, and encourage participants to review their retirement targets."
OppenheimerFunds will mail postcards to investors in its 401(k) plans on which there will be two messages: "Stay the Course" and "Enroll Today or Increase Deferral." Depending on a company's demographics, the messages will include additional details.
"We strongly believe that personalization increases the likelihood of action," Leavitt added. "The postcards are action-oriented and present simple, concise messages intended to motivate participants. Now more than ever, it's necessary for participants to remain focused on long-term goals."
For plan sponsors, OppenheimerFunds encourages them to revisit the investment offerings and fees in their plans to ensure they are meeting their fiduciary duties. The firm also tells them that now is a good time to ask the plan's financial adviser to develop a communication and education strategy for participants.
In conjunction with this, OppenheimerFunds has posted a series of articles on its website addressing investor concerns during the recent period of tremendous turmoil. In "Stop Trying to Time a Rebound," for instance, the firm advocates the merits of dollar-cost averaging.
Demand for Guaranteed Income Products on the Rise
Eighty-three percent of investors between the ages of 55 and 70 who are working with a fee-based adviser believe it's more important for their adviser to generate guaranteed income for retirees than to deliver above-average returns, Fidelity found.