Fund Observer
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Target-Date Funds Go Under the Microscope
Continue reading… 0 CommentsAs retirement-age workers scramble to pick up the pieces from the downturn, Congress is putting target-date funds under the legislative microscope. At a hearing yesterday, senators expressed concern about the costs and structure of the funds, which are common options in 401(k) plans. In particular, they mulled over the possibility that target-date funds, also referred to as life-cycle funds, do not disclose enough information and that their management style lends itself to conflicts of interest.
[See Many Target-Date Funds Miss Their Mark.]
The portfolios of target-date funds typically start out with significant stock exposure and shift to more conservative fixed-income holdings as investors near retirement. They have ballooned in popularity since 2006, when employers got the option to make target-date funds the default investments in their workers' retirement plans. During last year alone, target-date funds saw $57 billion in new investments.
[Also see 7 Tips for Investing in a Target-Date Fund.]
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Mutual Funds Singled Out in Proposal
Continue reading… 1 CommentIn a move that has raised eyebrows in the financial community, Congress is considering a proposal that could alter the way mutual funds do business with new investors. Specifically, funds could face more stringent requirements regarding the information they must provide to prospective customers.
[See Kanjorski Discusses Hedge Fund Regulation.]
While the proposal, part of the Investor Protection Act of 2009, is designed to increase transparency, mutual fund lobbyists have called foul because the measure doesn't apply to any other type of security. This imbalance, they fear, could give a slight edge to similar vehicles such as annuities and separately managed accounts, which could become more attractive to brokers looking to avoid extra paperwork.
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4 Small Caps With Room to Run
Continue reading… 2 CommentsWith investors still cautious about the third-quarter rally, small caps have seen mixed results over the past few days. While smaller companies often charge to the head of the pack at the beginning of a recovery, they stalled earlier this week as investors pondered the health of the larger names that drive the market. Still, the Russell 2000, which tracks small caps, is up by 22.4 percent year to date.
[See 5 Myths About the Economic Recovery and Why Small Caps Are Sizzling.]
To get a sense of what small companies are looking attractive, U.S. News spoke with Sam Dedio, manager of the Artio U.S. Small Cap fund, which has gained 66.5 percent year to date. As small caps bottomed out during the credit crisis, Dedio picked up some debt-ridden companies that later surged when investor confidence began to rebound. Those gains have complemented his traditional strategy, which focuses on solid cash flows and market-changing innovation.
Here are some companies that Dedio says have strong fundamentals and room to run:
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A New Way to Invest?
Continue reading… 0 CommentsWith the release of a new product this week, kaChing wants to help you to invest like a genius. But will its idea, which is intended to uproot the traditional mutual fund model, take hold?
[See Should You Deep-Six Your Mutual Fund?]
Since last year, kaChing's Website has allowed the average person to track the holdings of a select group of investing "geniuses" with strong track records. Monday, the company began to allow users willing to commit at least $3,000 to actually mirror the trades of those investors.
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Brazil to Tax Foreign Investors
Continue reading… 0 CommentsWith news Monday that Brazil will impose a tax on foreign purchases of its debt and equity, stocks in the surging Latin American giant have taken a sharp hit. This decline has tempered enthusiasm about the red-hot MSCI Emerging Markets Index, which was up 73 percent year-to-date before Tuesday's outflows from Brazil.
To get a sense of what the new 2 percent tax, which went into effect Tuesday, means for investors with positions in Brazil, U.S. N ews spoke with Josephine Jiménez, manager of the emerging markets fund Victoria 1522. In recent months, her fund has shifted a large chunk of its portfolio into Brazil while dialing back its positions in China because of concern about the country's efforts to slow loan growth. Currently, about 34 percent of the fund's assets are invested in Brazil.
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Do Investors Need Protection From Themselves?
Continue reading… 3 CommentsYou've heard the old mantra "buyer beware." But now, with strains of consumer protectionism re-emerging in the market, get ready for "buyer be saved." Vanguard recently closed its top-performing fund, and one of its stated reasons was to protect consumers—from themselves.
"Despite our efforts—at both a company and an industry level—to educate investors about the perils of performance-chasing, we continue to be concerned about this behavior," Vanguard CEO Bill McNabb said in a statement announcing the closure of the Capital Value fund to new investors. "Closing the fund for a cooling-off period serves two purposes," he continues. "First, it protects existing shareholders from higher transaction costs that can result from short-term-oriented investors moving in and out of the fund. Second, it protects prospective investors from themselves, as high-performing funds will almost certainly drop off at some point."
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Kanjorski Discusses Hedge Fund Regulation
Continue reading… 6 CommentsAs Congress looks to reshape the country's battered financial sector, hedge funds have emerged as a key puzzle piece. And nearly a year after disgraced financier Bernard Madoff's Ponzi scheme ran out of gas, legislators are considering draft proposals that would tighten the leash around the secretive industry.
[See Judge Upholds Advertising Rules in Hedge Fund Case.]
The drafts, released by Democratic Rep. Paul Kanjorski of Pennsylvania, would require private pools of capital with more than $30 million in assets to register with the Securities and Exchange Commission, with an exception for venture capital funds. Practically, this would mean that affected funds would have to disclose information about their fees, risks, trading practices, and other elements of their business.
In an apparent attempt to "hedge" their bets and avoid further intervention, fund lobbyists have supported registration. This marks a rare concession from an industry known for jealously guarding its private status.
Meanwhile, Kanjorksi's drafts would also allow the SEC to ban mandatory-arbitration clauses in brokerage contracts. Separately, legislators have long been considering a similar bill, the Arbitration Fairness Act, which proposes that Congress make the clauses unenforceable. By leaving the decision up to the SEC, Kanjorski is hoping to strike a middle ground.
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Time to REIT-urn to Real Estate?
Continue reading… 0 CommentsIn the wake of the subprime mortgage crisis, real estate has been a taboo sector. Still, even as some investors continue to associate real estate with the worst of the downturn, shares of real estate investment trusts (REITs) have been on a roll recently.
After a strong third quarter, the Dow Jones Composite All REIT Index is up 11.85 percent so far this year, and as the Wall Street Journal noted recently, REIT stocks are trading at a premium to their underlying assets for the first time since the real estate downturn began.
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Study Shows Investors Pass Over Expense Ratios
Continue reading… 4 CommentsWhat do your mutual funds and a pack of cigarettes have in common? According to a recent study, it's more than just toxic assets. Both, it turns out, come labeled with important information that most buyers choose to ignore.
Like the tobacco industry, mutual funds have a number of regulations governing their ads. But just as many smokers pass over the warnings on their favorite cigarettes, investors tend to overlook readily displayed information about costs. In particular, researchers say investors pay little attention to the expense ratios that mutual funds are required to display on certain advertisements. Given that even tiny differences in ratios can either save or cost investors thousands of dollars, the study offers important insight into consumer behavior.
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More Firms Join Arbitration Experiment
Continue reading… 0 CommentsWith the downturn taking its toll on investors' portfolios, the Financial Industry Regulatory Authority (FINRA) is seeing a substantial increase in the number of complaints filed against brokers and advisers. But even as these firms are getting hit hard with arbitration, three more just signed up for a pilot program aimed at giving investors more choices in their bids to recover losses.
The program, run through FINRA, allows investors to choose whether the panels deciding their cases have a representative from the securities industry. While traditionally controversial, the issue of industry panelists has taken on increasing importance lately as the number of dispute-resolution cases balloons.
