Week In Review
June 8, 2009
Conn. Fails to Pass Hedge Fund Bill
The Connecticut House of Representatives ran out of time last week to vote on a hedge fund transparency bill, continuing the state's days as a hedge fund haven. The bill would have required hedge funds that have not voluntarily registered with the Securities and Exchange Commission to reveal any conflicts of interest to shareholders, be licensed in the state, undergo audits and disclose fees.
Ryan Barry, chairman of the joint banks committee and a member of the House who was the main supporter of the bill, said he had enough votes to pass the measure but that representatives from districts heavily populated with hedge funds maneuvered the docket so that the legislature would not be able to vote. The bill will now have to wait until next year, he said.
Yet, he had harsh words for hedge funds: "I wouldn't want any company in Connecticut if they're afraid of disclosing the truth. If they don't want to comply with that, then leave. We don't want you here."
Recovery Expected in 2009 But Unemployment to Lag
The U.S. economy will begin to recover by the end of the year but unemployment is another matter, fund managers speaking at the Morningstar conference said.
Growth will be sluggish, however, and more financial services regulations will be put in place, they said.
As consumers continue to pay down their debt, the nation's GDP will grow at 1% to 2% a year, rather than the historical 2% to 3%, said Bill Gross of PIMCO. "Our inclination to shop and to consume basically was exaggerated to an extreme proportion," he said. Going forward, he said, "Growth will be stunted. It will be a different type of world, and we have to get used to that."
Gross added that 401(k) balances will take years to recoup the average 41.4% losses experienced since the Dow reached a record high in October 2007.
Other speakers, however, were far more optimistic about the market outlook, citing bargain prices. "The reset button was hit in September," said Tom Marsico of Marsico Capital Management. "Valuations, especially in financials, are as compelling as I've ever seen."
Jeff Mortimer, chief investment officer of Charles Schwab, added, "The market is clearly saying the worst may be behind us, "though that doesn't mean good times are ahead."
SEC Begins $78 Million AIM Fair Funds Payment
The Securities and Exchange Commission began repaying more than 590,000 AIM investors $78 million in a fair funds distribution for the market timing that hurt their returns.
The fair fund includes $50 million in disgorgement and penalties collected from AIM Advisors and AIM Distributors following a case brought in 2004. This also includes $11 million in disgorgement, penalties and interest from Bank of America Capital Management Distributors and Bank of America Securities and $12.4 million in disgorgement, penalties and interest from Bear Stearns.
Asset Managers' Bonuses Seen Declining 25%-35%
With investment banking earnings set to improve this year, many executives will, despite government intervention, get bigger bonuses this year, but that will not be the case for mutual fund or other asset management executives, according to compensation consultant Johnson Associates.
On the other hand, the firm predicted, other bonuses may rise as much as 20% to 30%, helped by improvements in commodities, currencies, derivatives and interest-rate products. However, those who work in underwriting and advising may not fare as well, with their bonuses decreasing between 15% and 20%, according to Johnson Associates. And bonuses for those who work in asset management may drop 25% to 35%.
SEC Selects Members of Investor Advisory Group
The Securities and Exchange Commission has announced members of its newly created Investor Advisory Committee, to give investors a greater influence over its work. The co-chairs are Richard "Mac" Hisey, president of AARP Financial, and Hye-Won Choi, head of corporate governance for TIAA-CREF.
The other members are: Mark Anson, president and executive director of Nuveen Investments; Mercer Bullard, founder of Fund Democracy; Jeff Brown, SVP of legislative and regulatory affairs at Charles Schwab; Stephen Davis, senior fellow at Yale University's center for corporate governance; Abe Friedman, global head of corporate governance and proxy voting at Barclays Global Investors; Mellody Hobson, president of Ariel Capital Management; Dennis A. Johnson, managing director of Shamrock Capital Advisors; Adam Kanzer, general counsel of Domini Social Investments; Mark Latham, director of Proxy Democracy, a not-for-profit organization helping individual investors; Barbara Roper, director of investor protection at the Consumer Federation of America; Dallas Salisbury, president and chief executive officer of the Employee Benefit Research Institute; Kurt Schacht, managing director of the CFA Institute; Damon Silvers, associate general counsel for the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO); Kurt Stocker, chairman of the individual investors advisory board of the New York Stock Exchange; and Ann Yerger, executive director of the Council of Institutional Investors.
Only 59% Aware of Health Savings Accounts