February 16, 2009
States Offer Savings Accounts for 529 Investors
More states are offering conservative options in their 529 plans, with some, such as Utah, even now including FDIC-insured savings accounts.
"Nowadays, people are much more concerned about volatility and savings," Lynne Ward, director of the $2.1 billion Utah Educational Savings Plan told The Wall Street Journal. Not only are investors gravitating toward conservative investments, such as bond funds and Treasuries, but some are even cashing out, Ward said.
In Ohio, 529 assets in bank-deposits have doubled to $175 million in the past 12 months, and in Virginia, they jumped 62.5% in December alone.
Asset Management Will Prevail: Reamer
Due to the tremendous amount of money that high-net-worth and 401(k) investors have that needs to be put to work, the asset management industry will survive and thrive, despite the current gravitation to conservative investments amid the market turmoil.
That was the message of Norton Reamer, CEO of Asset Management Finance, speaking at the Managed Accounts Technology and Operations Summit last week.
However, leveraging will decline, and that will stifle economic growth somewhat, Reamer said.
"To be sure, we are going to have to deal with the effects of deleveraging for several years to come as the super-leveraged, pro-risk environment of the last decade is brought down to earth," Reamer said. "This should dampen the growth rate in the economic recovery but it need not dampen the growth rate of the markets, as high P/E ratios, connoting higher quality earnings, appear on the investment horizon.
He added: "I, for one, feel that we will recapture the market losses of the last six months much more rapidly because of this quality of earnings/lower leverage combination as 2009 and 2010 unfold."
Wealthy Investors Bailing Out of Hedge Funds
Tiger 21, a networking group for high-net-worth investors, reports that these investors reduced hedge fund weightings in their portfolios from 11% in 2007 to 2.8% in 2008. Without question, said Michael Sonnenfeldt, founder of Tiger 21, hedge fund redemptions are occurring at an unprecedented rate. "This move out of hedge funds is like an earthquake," he said. "Our members feel they have been played for a fool by hedge fund managers."
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