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Alternative Investments

The Future Goes to the Alternatives

February 1, 2010 - After the recent massive meltdown, it's no surprise that 81% of registered investment advisory firms and 79% of brokers and advisers now believe that traditional asset allocation relying on stocks, bonds and cash provides insufficient portfolio diversification.In a survey released Wednesday by Rydex/SGI, a majority of respondents used alternatives or were interested in them for portfolio diversification. The Rydex survey, conducted in November and December, polled 291 professionals-including RIAs and advisers from independent and wirehouse shops.

Obama Proposals Could Boost Annuity Sales

February 1, 2010 - To help the middle-class save for retirement, President Obama may have also given a boost to the annuities sector.Last Monday, Obama proposed a series of measures, including expanding existing tax credits for child care and retirement savings, and providing financial relief for families caring for children and the elderly.The White House also plans to promote "the availability of annuities and other forms of guaranteed lifetime income, which transform savings into guaranteed future income, reducing the risks that retirees will outlive their savings or that their retirees' living standards will be eroded by investment losses or inflation."

New Financial Regulations to Create Unprecedented 'Sea Change' at SEC

January 25, 2010 - BOSTON -- Mutual fund companies must stay on top of their compliance programs, particularly because Congress is likely to pass new financial regulations, executives warn. "Regulation writing is about resolving tensions and balancing purposes,' said Michael Novey, associate tax legislative counsel at the Office of Tax Policy at the Department of Treasury. "Our task is to implement legislative purpose, recognizing that Congress' acts ought to be workable. There is a tremendous amount of misunderstanding about many of the proposed regulations."

Funds Still Out of Touch With Adviser Needs

January 25, 2010 - BOSTON -- After all these years, mutual fund companies still don't understand their distribution partners, sales executives say. But before fund executives try to improve on their current models, they need to realize that distribution channels are changing yet again as investment advisers seek lower-cost, laser-focused solutions. Most investment advisers who choose to register with the Securities and Exchange Commission have been managing assets for at least eight years, said Matthew Bienfang, senior research director of securities and investments at TowerGroup.

BNY Mellon Aims to Curb Costs, Expand Wealth Unit

January 25, 2010 - As it waits for the fee income that will come once interest rates rise, Bank of New York Mellon will continue to try and control costs and focus on expanding its asset management and asset servicing businesses overseas, the firm said during an earnings call last Wednesday. Robert Kelly, BNY Mellon's chief executive, said the firm will cut expenses by $100 million, or 4.3%, this year. "There are a lot of opportunities to drive efficiencies in our businesses," he said. "Executives will re-engineer operations to make us more efficient."

C- Grade is Nothing To Crow About for 401(k)s

January 18, 2010 - The mutual fund industry should proudly celebrate Americans' 73% approval rating for 401(k)s, according to an Investment Company Institute report, "Enduring Confidence in the 401(k) System." In our book, a 73% rating equals a C- grade that, in fact, should be a wake-up call for the industry to do a far better job of equipping Americans to adequately prepare for a decent and healthy life in their old age.

Wholesalers Adapt to Advisers' Changing Needs

January 18, 2010 - The fundamentals of what advisers need from wholesalers are changing, and wholesalers have no choice but to adapt. Our research at kasina concludes that wholesalers should focus on serving advisers' needs for: *Better products and solutions for clients (advisers rate performance/risk/correlation at 7-8 on a 10 point scale of importance, well above other factors); *Improving their insights and context (news and market commentary trails only product info as a reason advisers visit asset manager websites); and, *Ideas and best practices to help build their businesses (the importance of which has jumped enormously in the last two years).

ICI Study Finds 401(k) Confidence, Apathy

January 18, 2010 - A new survey by the Investment Company Institute finds that most Americans are still confident that their 401(k) plans can help them reach their retirement goals, but last year's 31% average drop in account balances has also highlighted the need for improvements to this popular, critical retirement vehicle. Improving education and financial literacy among investors, as well as boosting participation among African American and Hispanic minorities, should be a top priority of the nearly $12 trillion mutual fund industry, said Mellody Hobson, president of Ariel Investments.

Distressed Debt Reaches for Fair Value

January 18, 2010 - NEW YORK -- It's difficult to determine what something is worth if no one is buying or selling it. While cryptic mortgage-backed derivatives stymied the markets at the beginning of the credit crisis, industry experts predict commercial real estate will be the next shoe to drop. Even though the stock market continues to mend, distressed commercial real estate and bank debt need to regain value before the economy recovers for real, they said.

'Boring is Great' Replaces 'Greed is Good'

January 11, 2010 - Vanguard was able to stand out in 2009 despite -- or perhaps because of -- a difficult market environment. In 2009, the Malvern, Pa., fund giant significantly increased its assets under management by 30%, or $93 billion; introduced equity products outside its traditional index sphere; and expanded distribution internationally, according to William McNabb, the company's newly appointed chairman, who still retains the titles of president and chief executive officer.

Climate Change Group Calls on Mutual Funds to Circle the Wagons

January 11, 2010 - Despite an overwhelming consensus among the scientific community that human activity is causing climate change, most of the world's largest investment managers do not factor climate-related trends into their short- and long-term investment decision making, a new study finds. According to a report by Ceres, a coalition of investors, environmental organizations and public interest groups, this short-sightedness is creating trillions of dollars worth of hidden risks in mutual fund and other investment portfolios, such as high energy costs, pollution, water shortages and insurance costs resulting from natural disasters. Sectors like utilities, energy, industrials, manufacturing and the automobile industry have significant exposure to climate risks, the report said.

2010 Outlook Looks Hopeful, Barring Any Surprises

January 11, 2010 - NEW YORK - U.S. and international regulators are widely credited with having saved the global economy from plummeting into a second Great Depression, and the fragile, recovering economy can expect to see continued support for much of 2010, experts say. This support could help stocks rebound anywhere from 2% to 12% this year, depending upon whom you ask, but markets can always defy expectations.

2010 Will Be The Year Fund Investors Get Real

January 4, 2010 - Since the recession hit two years ago, 80% of mutual fund firms have laid off tens of thousands of people, as total assets under management dropped from $11.999 trillion at the end of 2007 to $10.688 trillion as of October. In line with this 11% decline in assets, fees have undoubtedly plummeted by at least $1 billion a year. While the S&P 500 delivered a remarkable 24.9% return last year, the fact of the matter remains, the stock market is still down 30% from its peak in October 2007. This is why investors in 2009 remained stock-spooked, yanking $36 billion from U.S. equity funds and socking $357 billion into bond funds.

Downturn's Upside: Being Shocked Into Saving

January 4, 2010 - As investors begin to regain their confidence in the market, financial advisers and mutual fund executives are beginning to map out changes in investor behavior and give the old rules some new twists. The scorched-earth mentality that permeated the investing world last year has all but disappeared, and the market rally has given investors much of their confidence back. But, as many predicted, investors of all ages have been unalterably changed. They have gained renewed respect for diversification, are grateful for even single-digit returns, and are only slowly moving back into stocks.

IFRS Puts Focus On Fair Value

January 4, 2010 - As regulators work to converge U.S. Generally Accepted Accounting Principles (GAAP) with International Financial Reporting Standards (IFRS), several key differences remain, most notably the different measurement attributes of financial liabilities, the timing and approaches to projects and the difference between fair value and amortized costs. Under GAAP, investment companies like mutual funds, private equity holders and venture capital organizations are exempted from certain consolidation requirements and are allowed to account for separate fund holdings at fair value. No such exemptions currently exist under IFRS, though fair value concerns are being featured prominently in convergence discussions, and the U.S. has been adapting its rules on fair value to increase its international appeal.