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Week In Review


Crisis Has Not Prompted Mutual Funds, Other Institutional Investors to Change Portfolios

Mutual funds and other institutional investors have remained fundamentally committed to the same investment policies they were adopting prior to the credit crisis, The Conference Board said in its annual Institutional Investment Report.

"For decades, institutional investors had been shifting their allocation preferences from fixed income securities into equity," noted Matteo Tonello, associate director of corporate governance at The Conference Board. "Then last year came, and it had a devastating effect on institutions' expanded equity portfolios."

At the end of last year, institutions had only 36.6% of their assets in equities, down from 47.2% the year before-but the change was driven by market declines rather than changes to investment policies, Tonello said.

In aggregate, institutional assets fell 21.3% in 2008 to $22.25 trillion. Mutual funds and other investment companies, which had seen the fastest growth in the last few decades, were hit the hardest by the market decline and capital withdrawals, with outflows totaling $2.5 trillion for the year, or 30.7% of their 2007 asset value. By comparison, pension funds lost 24.7% of their 2007 asset value, and insurance companies experienced a 7.8% contraction.

75% of Americans Plan on Working Well Past 65

Americans are redefining retirement, with 75% now saying they intend to work as long as they can, Bankrate found in a survey of 1,003 adults 18 or older.

Thirty-nine percent said they would continue to work because they enjoy work, but nearly one-third said they will keep their nose to the grindstone because they will need the money.

This plan may not become a reality, for only 15% of those polled who are already retired are still working. In addition, 55% of retirees worry about money and wish they had saved more, compared to only 38% who think they have enough money.

Clearly, there is an opportunity for fund companies and their sales intermediaries to help Americans save for retirement, for only 27% are working with a financial adviser, 40% are self-directed, 18% don't invest in a retirement plan, and 9% don't utilize any strategies.

Blackrock, Wellington, AllianceBernstein Raise Another $1.94B for PPIP

Three other fund companies have raised an additional $1.94 billion for the Public Private Investment Program: Blackrock, Wellington and AllianceBernstein.

With the government's debt financing and matches, they have $7.74 billion available to invest in the program.

The Department of the Treasury indicated earlier this month that Invesco and TCW Group raised $1.13 billion for the program; with the government's aid, their pool totals $4.52 billion.

U.S. Stock Funds Rose 16.6% in Third Quarter

While the average U.S. stock fund rose 16.6% in the third quarter, the average international stock fund rose 17.4%. The two best-performing categories were Latin American funds (up 26%) and global real estate funds (up 23.2%), according to data from Morningstar.

Other strong performers were European stock funds (up 21.7%), diversified emerging markets funds (up 19.8%) and foreign small-cap and midcap funds (both up 19.6%). Since the bottom of the market on March 9, Latin American funds have soared 115%, emerging market funds have delivered 90.9%, U.S. stock funds are up 63.2% and international stock funds have risen 74.6%.

Investors Ignore Fund Fees But not Performance in Ads

The mutual fund advertising rule that the Financial Industry Regulatory Authority imposed in April 2007 that requires ads to contain fee information if they are also going to tout performance appears to be for naught. Even investors aware of the importance of fees concentrate more on performance, university researchers found in a study that will appear in the December issue of the Journal of Consumer Policy. The researchers suggest that rather than present fees in isolation, the average fee in a fund's style or sector should also be presented.

Fidelity Seeks Extension For Ohio Job Creation

Fidelity has asked local, county and state governments in Covington, Ohio for more time to create an additional 350 jobs at its campus there. Fidelity moved to the location in 2005 and agreed to create an additional 1,500 jobs in exchange for a number of incentives, including a $17.5 million, 1.7-mile road leading to its complex. Fidelity moved 2,750 employees to the new site and has created an additional 1,150 jobs. The grand total of employees that Fidelity agreed to employ by Dec. 31, 2010 is 4,250. The governments granted Fidelity's request. However, if the company doesn't meet the new deadline, it will have to pay the state and local governments $5,000 for each employee below the 4,250 target.

Actively Managed Funds Fail on Performance, Risk

A Morningstar report slams actively managed funds on performance, risk and style. Only about 50% of funds have outperformed their benchmark indexes over the past three, five and 10 years and only 37% on a risk-, size- and style-adjusted basis.

Pozen: Don't Reinstate Glass-Steagall Divisions

Some politicians and commentators are calling for the resurrection of the Glass-Steagall Act, saying it was partially responsible for the 2008 financial crisis.