The second largest seller of variable annuities is hooking up with three new fund companies as it unveils 25 new investment portfolios. Hartford Life, Inc. is tapping the Franklin-Templeton Group; American Funds Inc.; and MFS Investment Management, according to the WSJ.

The paper reports that each of the three fund companies will manage eight of the subaccounts. The final subaccount, a money-market portfolio, will be managed by Hartford Investment Management Co. Hartford said it is seeking well-known brand names with wide distribution networks, according to the WSJ. "These funds are broker-sold families" with vast distribution channels making them "very logical and very attractive" partners, Lon Smith, president of Hartford Life, told the paper.

The WSJ also reported that all may not be well between Hartford and Putnam. The Marsh & McLennan unit is "chafing" under the two firms' eleven year-old agreement, said the paper. But it added that Hartford will continue to aggressively market its two-best selling annuities, including Putnam Hartford Capital Manager. Last week Putnam joined with Allstate Corp. to sell variable annuities.

Weak performance is cutting the fees Vanguard pays to Wellington Management, according to the WSJ. The firm was paid only $9.4 million for managing the Vanguard Wellington Fund. If it had outperformed the S&P 500 it could have earned $24.9 million.

Financial Research Corp. contends that small funds provide better investment performance in a study that it released on Friday. "Stock funds with fewer assets beat their peers 87% of the time, while the largest stock funds beat their peer group only 48% of the time," the WSJ reported. Interestingly, the study found no correlation between past performance and returns. Critics also claim that the study is clouded by survivorship bias since underperforming small funds close and underperforming large funds do not. 

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