The Department of Labor issued an advisory letter at the end of May that clarified the circumstances under which defined contribution service providers such as record keepers could accept fees from mutual funds in which pension assets are invested without violating prohibited transaction rules of ERISA.
In letter 97-15A, the department said it was not a prohibited transaction for Frost National Bank of San Antonio, Texas, to receive administrative fees such as subtransfer and 12B-1 fees from mutual fund companies, even though the bank acts as a trustee to pension plans and directs or advises the plans to invest in such mutual funds.
Robert M. Kurucza, a partner at Morrison & Forster, said the DOL probably took its position because the bank discloses all fees upfront to clients and offsets the fees it collects from mutual fund companies against any account fees it charges the plan. In essence, he said, the bank is not profiting from the fees it receives and avoids double-dipping.
Separately, in letter 97-16A, Aetna Life & Casualty was advised that a plan administrator such as a record keeper can recommend to a plan fiduciary that a mutual fund be added or deleted from the plan's investment options without the administrator becoming a fiduciary.
With help from Hong Kong and Japan's markets, the MSCI EAFE Index climbed 6.4% in dollar terms in May, besting the MSCI World Index's 6% rise. The MSCI Emerging Markets Free Index gained 2.6%.
Among developed markets, the MSCI Hong Kong Index jumped 12.4% in May, while the Japan index rose 11%, followed by Canada, up 8.2%. Among emerging markets, Venezuela's led the pack with its 15.4% rise, followed by Greece with 13% and Russia, 12.4%. (Russia is not part of the MSCI EMF Index). In last place, was the Czech Republic, down 12.4%.
Fleet Financial Group set up a commercial real estate insurance group to provide financial products to insurance companies that invest in commercial real estate. Among its services, the group will offer construction loans, interim loans, permanent loans and lines of credit. A Fleet statement said the insurance industry has an estimated $249 billion invested in real estate.
Radnor Capital Management is launching new core value and enhanced index fixed-income products. Craig A. Moyer, former senior investment manager at Meridian Investment, will become vice president and lead portfolio manager for the new products, which will focus on relative value. The firm has so far managed only equity or balanced portfolios. The products have yet to be funded. At Meridian, Mr. Moyer has been replaced internally by Bill T. Lawrence.
The Association for Investment Management and Research will be producing specific guidelines for its members on soft dollar usage, said Jonathan J. Stokes, director of professional conduct for AIMR. The issue already is addressed in AIMR's code of ethics and standards, but the forthcoming report will be more specific. It should become available in 60 to 90 days he said.
Key Asset Management opened the Victory Real Estate Investment Fund, which will invest in REITs and commercial properties. The portfolio managers are Richard E. Salomon and Patrice Derrington, both of Spears, Benzak, Salomon & Farrell, a KeyCorp subsidiary.