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Wealthy Investors Grow Pessimistic

August 11, 2008 - As the stock market continues to stumble along, high-net-worth investors are becoming increasingly pessimistic about the economy and dissatisfied with the performance of their financial services providers. 'When times are going well, people don't complain about fees, they complain about softer stuff, like how they don't think their adviser is attentive enough,' said Walt Zultowski, senior vice president of research and concept development for The Phoenix Companies and author of the '2008 Phoenix Wealth Survey.'

SEC Helps Boards Get Over The Enigma of Trades

August 4, 2008 - The Securities and Exchange Commission issued guidance last week for fund boards of directors in assessing their firm’s soft-dollar practices. The SEC said it was issuing the guidance a full two years after the limitations it put on soft dollars in 2006, restricting it only to research, due to rapidly evolving market and trading practices. True enough, there are wide discrepancies among brokerages today, due to rapidly evolving markets, trading practices and electronic crossing networks. Fund companies have until Oct. 1 to comment on the SEC’s guidance. The Commission outlines numerous considerations for boards, which must rely on reports from top management, auditors, counsel and chief compliance officers in assessing day-to-day trading systems.

Regulators Aim to Stop Spread of Rumors

July 21, 2008 - Federal regulators are cracking down on the potential spread of false and misleading rumors that could potentially affect market conditions. While rumor mongering is not a widespread problem in the financial industry, a few high-profile cases-the SEC investigating 50 hedge funds last week for potentially spreading rumors on the fall of Bear Stearns and Lehman, and halting shorting Freddie Mac and Fannie Mae-have forced regulators to take a strong public stance against such actions. Then there were the arrests last month of former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin for securities fraud and the April settlement of securities fraud and market manipulation charges by Paul Berliner, a former trader with the Schottenfeld Group.

First-Half Losses for Hedge Funds Leads to Second-Half Worries

July 14, 2008 - The credit crisis continues to hit the $2 trillion hedge fund industry hard (see related story, page one). More funds have left the industry, and fewer have entered, over the past six months than collectively last year. In April and May it seemed the hedge fund market was rebounding as it experienced gains of 1.2% and 2.11% respectively, according to data from Hedge Fund Research. In June, however, losses returned, with the average hedge fund slipping 0.68%. Through June, the average hedge funds is off 0.75%.

Tax Warning to Hedge Funds Heading Overseas To Avoid Subprime Risks

July 14, 2008 - The ongoing credit crisis saga has taken a tremendous toll on hedge funds due to their exposure to structured mortgage-backed assets-and for those heading or parsing trades overseas to avoid U.S. taxes: Beware. The contracting demand for mortgage-backed securities-which had been dramatically overvalued by brokers who pushed more than 600 varieties of these assets to hedge fund managers through unregulated, highly leveraged repos-precipitated the tightening of unsecured term funding.

Talent Grabs Keep Flaring Despite High Cost

July 7, 2008 - Mutual fund companies and other financial services firms continue to battle one another for wealth management talent even though companies are forced to pay hefty salaries that crimp profits.

Samuel Israel III: The Great Hedge Fund Escape Artist

June 30, 2008 - 'I cheated my investors because I was afraid to admit my failure. I did not want the world to think I was not good enough and I did not want my family to see me as a failure.' Those are some of the choice, cowardly words from Samuel Israel III, the erstwhile Bayou Capital hedge fund manager who cheated investors out of $450 million, when begging the sentencing judge for leniency. Apparently, Israel believes he was justified in, and can earn sympathy for, ripping off his clients because he couldn't measure up to his prominent New Orleans family. His lawyer also pled on Israel's behalf, noting the swindler's pacemaker, back trouble and addiction to pain killers.

Hedge Fund Launches Fall to Eight-Year Low

June 30, 2008 - WASHINGTON - Volatile market conditions and the credit crisis have put the hard brakes on new hedge funds. The number of hedge funds launched in the first quarter was the lowest for a quarter since 2000, while fund liquidations increased from a year earlier. There were 247 hedge funds launched in the first quarter, down from 251 a year earlier, according to Chicago's Hedge Fund Research. One hundred seventy hedge funds were liquidated in the three months, 23.2% more than in last year's first quarter.

Hedge Funds Fear New SEC Regulations

June 30, 2008 - NEW YORK - The freewheeling days for hedge funds may be numbered. Depending on who gets elected to the White House in November, the next Securities and Exchange Commission may push to impose additional regulations on hedge funds that, many critics say, could strangle managers' ability to generate exceptional returns. Ironically, hedge fund experts say the best way for the industry to prepare for the new regulations may also be the best way to prevent the new regulations from happening.

Hedge Funds Balance Secrecy, Transparency

June 23, 2008 - NEW YORK - Hedge funds are notorious for being secretive, private investment pools, but the time has finally come for them to become more transparent in order to capture the billions of dollars floating around alpha-seeking institutional investors' pockets. Here's the key question: Assume you are a qualified investor with at least $1 million in assets. How do you conduct due diligence to find out what you're buying?

Trust Providers Broaden Adviser-Based Services

June 9, 2008 - Mutual fund and other financial services firms are making it easier for their investment advisers to address a broader array of clients' trust needs, ranging from estate planning to philanthropic giving. Pershing LLC, a Jersey City unit of Bank of New York Mellon Financial Corp., is now giving its investment advisers and broker/dealers access to a variety of investment services provided by four trust administration companies.

'Plain Vanilla' Funds in Investors' Plain Sight

June 9, 2008 - NEW YORK - As the turbulent economy begins to calm down, investors will likely gravitate toward index-based, middle-of-the-road mutual funds, opening the door for opportunists to sweep up bargains, industry experts say. And the safer, the better. 'Investors are looking for plain vanilla' opportunities,' said Paul Disdier, director of municipal securities for The Dreyfus Corp., at the annual BNY Mellon Asset Management press briefing June 3 at the MetLife building in Manhattan.

Oakmark Wins Fee Battle: Ruling Seen as Victorious Precedent

June 2, 2008 - While not exactly a national victory for the mutual fund industry, a recent court ruling regarding 'excessive fees' could set a strong precedent for further disputes. In the case Jerry N. Jones v. Harris Associates L.P., the U.S. Court of Appeals, Seventh Circuit affirmed a lower court's decision to dismiss claims that the Oakmark Funds, managed by Harris Associates, breached their fiduciary duties by charging retail investors excessive fees.

130/30s Seen as Rafts In the Whitewater Rapids

May 12, 2008 - NEW YORK - Cautious investors will be watching 130/30 funds over the next few years to see how the new products perform. Many investors are attracted to these active-extension strategies capable of hedge fund gains. But with higher fees than regular mutual funds and short-term track records, even though they are often under the supervision of well-established financial services companies, 130/30 funds are still very new and considered a gamble.

Big Players Have Yet to Break Into Absolute-Return Mutual Funds

May 5, 2008 - Absolute-return mutual funds that seek to provide investors with positive returns whether equity markets are rising or falling, are growing in rapid numbers in today's volatile market and hoping to attract a loyal investor following. But so far, it's largely been the fringe players, not the colossal mutual fund advisory firms, that have emerged with market-neutral, long-short, 130/30 and other funds that utilize hedging strategies to achieve positive returns, said Don Phillips, managing director at Morningstar of Chicago.