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Week In Review

Senate Bill Would Disclose Projected Income of 401(k) Balances

U.S. Senators Jeff Bingaman (D-NM), Johnny Isakson (R-GA) and Herb Kohl (D-WI) have introduced a bill aimed at helping Americans save enough so that they will not be in danger of outliving their retirement savings. The Lifetime Income Disclosure Act would require 401(k) plan sponsors to use an annuity model to project how much income an investor would have each month in retirement based on how much they have saved, patterned on the Social Security Administration's annual statements it has been mailing to all working Americans since 1989.

"It is estimated that half of American households will lack sufficient retirement income to maintain their pre-retirement standard of living," Bingaman said. "Yet, many Americas are unaware of their financial vulnerability. Our bill is a common-sense approach to empowering Americans, and helping them determine whether they are on a path to a secure retirement."

Isakson added, "Defined contribution plans such as 401(k)s are the retirement plans of the present and future. This bill will enable participants to receive additional, helpful information so they can better plan for their retirement."

AARP, the Retirement Security Project and the Women's Institute for Secure Retirement issued separate statements applauding the bill.

Gross on Track to Run Biggest Fund in History

As investors ran from stock funds and sought the safety of bond funds this year, PIMCO's Total Return fund ballooned to $199 billion in assets, and should its heady inflows continue at this pace, the fund will soon top the $202.3 billion record sister fund Growth Fund of America set in 2007.

Part of the reason for investors' overwhelming choice of this fund, run by Bill Gross, is its remarkable 4.8% return last year, compared with the 37% plummet in the Standard & Poor's 500 Index, not to mention that every fund sector and virtually every stock fund was in the red. Since its inception in 1987, Total Return has delivered an average annual return of 8.5%.

Year-to-date through October, Total Return attracted $42 billion of new cash, four times more than any other U.S. mutual fund, according to Morningstar data. This one fund accounted for more than 14% of the $297 billion that investors added to all bond funds in that time.

Putnam Cuts 104 Jobs, or 5% of Workforce

Putnam is laying off 104 people, or 5% of its staff, this month, primarily in operations and technology. However, three portfolio managers and 13 asset management support staff are also getting the axe. After the cuts, Putnam's total staff will number 1,827, which includes 63 new hires this year, including 12 investment professionals.

This is the third round of layoffs at the company since Robert L. Reynolds took over as chief executive officer in June 2008. Putnam cut 27 positions in November 2008 and 260 positions in February. Those cuts extended beyond operations, technology and investment products to include sales and marketing.

The three portfolio managers who are leaving are Brad Libby of the Putnam Municipal Bond Fund Series, David Gerber of the Putnam Global Industrials Fund, and Coo Way Law of the Putnam Global Telecommunications Fund.

A Putnam spokesman said the company is positioning for growth and plans to continue making strategic hires.

Labor Secretary Vows to Heighten Awareness of Annuities in 2010

U.S. Labor Secretary Hilda Solis said that one of her top regulatory goals for 2010 is helping to ensure people don't outlive their retirement savings by increasing public awareness of annuities. Solis also believes 401(k) plans should offer annuities. Insured Retirement Institute President and CEO Cathy Weatherford said, "In our current financial environment, the value of a guarantee has never been greater. With the dramatic declines in the financial markets, the value of guaranteed investment products has never been more apparent."

American Funds Ranks As Best Marketer: FRC

Financial Research Corp. has released its list of the top 10 asset management marketers, with American Funds taking top honors, followed by Franklin Templeton and Fidelity.

"Successful firms have adopted a relatively similar marketing strategy," said Amy Strong, research analyst at FRC and co-author of the study. "This may be in large part due to the fact that firms have tried many different marketing strategies, and it is also in part because firms are quick to adopt the successful strategies of their peers. This is particularly true for larger firms."

Yet, FRC looked for and gave high marks for "overall differentiation," Strong said. For example, Fidelity continues to provide strong support directly to clients, including advisers. "They also call advisers who place business with the firm regularly and generate client-friendly marketing pieces, which the majority of advisers noted as the No. 1 feature firms should add to their adviser-oriented websites going forward."