SEC to look at Window Dressing and Pumping

From TheStreet.com

Mercer Bullard, who is the founder of Fund Democracy and not exactly a disinterested party, says that the SEC is going to take a closer look at the issue of "window dressing" by funds. He writes that the SEC is following in the footsteps of the Ontario Securities Commission which forced a C$3 million settlement with the Royal Bank of Canada's investment management arm over "high-closing trading" -- a practice known in the U.S. as "portfolio pumping." Lori Richards, who heads the SEC's inspections program, established a task force to look into portfolio pumping. She adds that the SEC will also be looking into "managers window dressing their funds' portfolios to create a misleading impression of how the fund's assets were invested during the period."




401k brokerage accounts get media's attention

From New York Times

Brokerage accounts in 401(k) plans are getting media attention due to a recent survey by Cerulli Associates that said 15 percent of plans now include a brokerage option, and four percent of plan assets are invested in them. An Associated Press piece in the New York Times opines that "experts doubt many investors will take that [brokerage account] route." People in plans are "relatively conservative", "basically following a buy-and-hold strategy that financial planners have long advised," it says. On the other side, Schwab's Walt Bettinger says its assets in these accounts have risen 140 percent this year to $5 billion. "I believe it is part of the overall trend toward participant empowerment," Bettinger said. Paul Heller, head of Vanguard's DC business, takes the opposite side. More than half of the Vanguard's 2.5 million participants invest in just one or two mutual funds, while 80 percent have four or fewer funds.




Online brokers see a way to gain accounts

From Wall Street Journal

The Journal looks at the brokerage story as a business opportunity for online brokers. It reports that National Discount Brokers Group, DLJdirect and others are targeting retirement accounts as an efficient way to build their business. "What we like about self-directed 401(k)s is once a customer opens an account and starts putting funds in, they're going to stay there," Gregg Sharenow, executive vice president of National Discount Brokers is quoted as saying. NDB pays an average cost of $342 for each new customer, while DLJdirect pays $529. The paper takes a stand and says that brokerage accounts have been slow to take. At Fidelity, for example, only 5% of participants them. So what's in it for online brokers. They are seeking "sticky" customers and hope that 401(k) participants fit the bill.




Advisors foresee more fee income

From CBS.MarketWatch

Financial advisors are increasingly earning their income from fees, according to an AIM survey. The fund company says nearly half of the nation's top financial advisers (those with incomes in excess of $300,000) earned 26 to 50 percent of their income from fee-based accounts and that they expect their fee-based business to grow, with 79 percent of them predicting that more than half of their revenue will come from fees within five years.




Manager-of-manager funds grow in Europe

From Wall Street Journal

Manager-of-managers funds are taking root in Europe. Assets in these European funds have grown to $20 billion and could reach $56 billion in the next few years, says Cerulli Associates in London. Highlighted by the article is the Frank Russell U.S. Equity Fund and SEI Investments (Europe), which set up a fund last May.




Olstein tossed by JC Penney

From USA Today

The Olstein Financial Alert Fund is being rocked by the maelstrom surrounding J.C. Penney's turnaround. The paper says Bob Olstein "bought into the prospect of a turnaround too soon." Since last fall Olstein has made Penney one of the fund's top 10 holdings at an average cost of $19 a share compared with Wednesday's $15.56 close. The stock has been as high as $77. Olstein's reaction: "It buckles my knees, but I'm not ready to give up."
 

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