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Week In Review


Labor Department Backs Off Proposed Retirement Advice Rule

The Department of Labor is dropping a rule proposed during the final days of the Bush administration that would have allowed 401(k) providers to offer advice to investors even if it involved a plan in which its own funds were sold. "We believe the final investment advice regulation published in the Jan. 21 Federal Register went too far in permitting investment advice arrangements not specifically contemplated by the statutory exemption," said Phyllis Borzi, assistant secretary of the Employee Benefits Security Administration at the DOL. "We are taking a fresh look at the regulation that was issued and are working to bring it more closely in line with the [Pension Protection Act of 2006] statutory language." Some legislators have voiced concern that the proposal would have allowed a conflict of interest for administrators that sell their own funds in 401(k) plans.

$226 Billion in Inflows Nearly Making Up For 2008's Redemptions

Open-end mutual funds have pulled in more than $226 billion through August, bringing them close to making up for ground lost in the second half of 2008, Morningstar said in a report.

For the month of August alone, investors put $54 billion into U.S. open-end mutual funds, representing the largest inflow since February 2007. "While that's certainly a positive for fund firms, it doesn't necessarily signal renewed enthusiasm for equities," said Sonya Morris, an editorial director with Morningstar. "As has been the case throughout much of the year, the vast majority of inflows have been to fixed-income funds."

Just as bond funds have benefited from investors' current decisions, so have individual funds. PIMCO Total Return, in particular, was the top-selling fund throughout 2009. The fund had its best month yet during August, taking in almost $5.5 billion in flows. It now holds a 13% share of the taxable-bond mutual fund market, and weighs in at $177.5 billion in assets. Its current size makes PIMCO Total Return almost twice as big as the next-most-popular fund, Vanguard Total Stock Market, which has $93 billion in total net assets.

Franklin Templeton has also capitalized on the recent popularity of bond funds. Its Templeton Global Bond fund reaped $1.3 billion in August, and more than $5 billion so far this year.

Putnam Launches Global Sector Funds

Putnam Investments has launched a suite of nine international sector funds that will invest in stocks in the MSCI World Index and specialize in consumer stocks, natural resources, energy, technology, financials, utilities, healthcare, telecommunications and industrials.

In conjunction with the launch of the global sector funds, Putnam has a new website devoted to the funds, www.putnam.com/globalsector.

Forward Offers Tactical Growth Fund

Forward Management has launched the Forward Tactical Growth Fund, which will try to take advantage of market inefficiencies all the while minimizing downside volatility, via long, short or neutral positions on individual securities, sectors or entire markets. Broadmark Asset Management is sub-advisor to the fund, which is a 40 Act version of a similar separately managed account the two firms already offer.

The primary holdings of the fund, which can leverage holdings up to 120% net long and 100% net short, will be exchange-traded funds and futures. Its research-driven approach combines qualitative top-down analysis and quantitative risk management.

S&P Rolls Out Enhanced Fund Research Product

Standard & Poor's equity research services has upgraded its open-end mutual fund research product for financial advisers and clients. The MarketScope Advisor platform uses bottom-up research to evaluate more than 20,000 mutual funds for performance, risk and cost analysis, and ranks the funds on a scale of one to five, with five being highest.

This new approach gives the S&P the ability to analyze and rank new funds, without having to wait for a three-year performance history.

"The poor performance of many highly rated funds during the recent market downturn highlights the limitations of backward-looking analysis and indicates to us that there is significant room for improvement in the way open-end mutual funds are analyzed and ranked," said Andrea Remyn, a managing director with S&P. "We believe our new methodology provides a more dynamic and functional view of the fund marketplace."

Nearly Half of Retirees Come to Aid of Relatives

Nearly half of those Americans who have retired are helping other members of their family, either by giving them money or managing their finances directly, according to the fourth Real Life Retirement quarterly survey from Charles Schwab.

The survey found that 44% of retired individuals are supporting at least one individual financially. Children (53%) and grandchildren (37%) top the list of such dependents. An additional 12% are contributing to their parents' finances.