HARTFORD, Conn. - Aetna Life Insurance and Annuity Co. Aug. 21 received SEC permission to restructure the lineup of outside mutual funds offered in its various defined contribution, deferred compensation, variable life and annuity, and other institutional investment management programs.
The changes will affect all investment products except retail mutual funds. They are being made to ensure that the fund offerings cover the spectrum of asset classes, said an Aetna spokeswoman.
Aetna wants to reduce the number of externally managed mutual funds offered to 31 from eight fund families, down from more than 40 funds from 12 families.
Following the Securities and Exchange Commission action, Aetna will make the fund changes in November.
Sales to break record
BOSTON - Total long-term mutual fund sales will likely break through the $700 billion in 1998, a 9% increase over the $655 billion record level that Financial Research Corp. estimates for 1997.
Domestic equity funds will enjoy sales of about $415 billion, or 58% of total 1998 fund sales. International/global funds will attract $139 billion, 19% of total sales and a growth rate of 16% over 1997 sales.
FRC predicts bond funds will increase sales a bit next year to $159 billion or 22% of the total market. However, FRC consultants noted in a recent report that bond sales still significantly lag 1994 sales levels.
High-yield funds are leading the race and pushing sales of corporate bond funds up past 60% of all fixed-income fund investments.
Schwab starts fund of funds
SAN FRANCISCO - Charles Schwab & Co. introduced a new fund-of-funds portfolio within its OneSource program. The Small Company Fund combines a portfolio of no-load mutual funds chosen from the 550 individual small-cap funds offered within the OneSource program. The portfolio management team, headed by Cynthia Liu, selects funds using both qualitative and quantitative criteria.
The small company fund is the fourth in Schwab's series of OneSource portfolios.
Schwab also enhanced its mutual fund Internet site, www.schwab.com/funds. Through an alliance with a test group of mutual fund families, Schwab's Web site will provide Net browsers with specific information about individual funds available through Schwab's OneSource program. Prospectus, manager philosophy and commentary will be available at the site from Janus, INVESCO, Strong, Oakmark, Neuberger & Berman, Montgomery, Founders, Robertson Stephens, Gabelli, Royce and SchwabFunds. Eventually, information from all the fund companies participating in OneSource will be available through the Web site.
Other improvements to the Web site are more in-depth portfolio information about each of the 1,300 funds available through OneSource, performance and expense ratio data for better comparison of funds and daily fund pricing.
Fund group dismisses BISYS
LITTLE FALLS, N.J. - The board of trustees of the 17 Pacific Horizon Funds dismissed BISYS Group Inc. as the administrator and distributor of the funds. Concord Holding Corp. and Concord Financial Group were the two BISYS subsidiaries responsible for the business. The funds have about $14 billion under management in six money market and 11 other diversified funds.
The board hired Bank of America, San Francisco, as administrator. Bank of America is the investment manager of all the assets in the fund family. Bank of America, in turn, hired PFPC Inc., Philadelphia. a subsidiary of PNC Corp., as the subadministrator. Provident Distributors Inc., Radnor, Pa., another PNC subsidiary, will provide distribution services.
After the termination, BISYS resigned as the transfer agent of the funds. The Pacific Horizon Funds' board is still seeking a replacement, said the board's legal counsel, W. Bruce McConnell, a partner at Drinker Biddle & Reath L.L.P., Philadelphia.
Mr. McConnell declined comment on why the board made the change.
Lynn J. Mangum, BISYS chairman and chief executive officer, said the company was "shocked and deeply disappointed" by the action taken by the Pacific Horizon Funds' board.
The loss of business will negatively impact BISYS' earnings growth for fiscal 1998 in the range of 15 cents per share, before one-time charges to realign operations. Revenues related to the Pacific Horizon agreements in 1997 were $15 million.
American Skandia launches funds
SHELTON, Conn. - American Skandia introduced a new family of manager-of-managers mutual funds with several innovative features. The 10 American Skandia Advisor Funds span the asset class spectrum with portfolio construction and allocation controlled by Skandia. American Skandia has used a multiple manager approach for years in its variable annuity programs.
Eight money managers were hired to manage portions of the funds - Janus, T. Rowe Price, INVESCO, Founders, American Century, Federated, PIMCO and J.P. Morgan.
The Advisor Funds is the first fund family to offer a new class of shares for employees leaving qualified retirement plans. The X shares provide a 2.5% bonus (of total assets) to employees who move money from their retirement plan into an individual retirement account using the Advisor Funds.
ASAF shareholders also are offered an optional life insurance product, with a death benefit provision keyed to the mutual fund account balance. The AS GoodWill benefit insures that beneficiaries receive at minimum the higher of all contributions, appreciated at 5% annually or the highest anniversary value of the account, if either value is higher than the actual account value.
Americans like foreign funds
BOSTON - American investors are climbing the learning curve when it comes to investing abroad and have developed an appetite for international mutual funds. A Scudder/Gallup Mutual Fund Investor Poll conducted in the late spring found that 29% of U.S. households with mutual fund investments now invest in international funds, compared to 26% in 1994. More than 400,000 new households invested in international funds in 1996 alone.
The survey also found that 3.1 million or nearly 20% of domestic fund owners intend to add an international component to their asset allocations this year.
One-third of those surveyed said they thought the greatest opportunities for growth over the next 12 months will be in markets outside the United States. Of the investors who already own international funds, 83% believe the rewards of investing abroad outweigh the risks.
ICI lawyer goes to Schwab
WASHINGTON - The Investment Company Institute lost its general counsel and senior vice president, Paul Schott Stevens, to Charles Schwab Co., San Francisco. Mr. Stevens is joining Schwab's corporate oversight group as senior vice president and general counsel of mutual funds, a new position.
Mr. Stevens joined the ICI in 1993 and was responsible for directing regulatory and policy issues in the mutual fund industry.
A replacement has not been named for Mr. Stevens, who will leave at the end of September.
Bankers Trust Co., New York, created five mutual funds targeted for use by insurers offering variable annuity programs. Three insurance companies have committed to offering the funds in their VA programs - Travelers Life & Annuity, Hartford, Conn., and Integrity Life Insurance and National Integrity Life Insurance, Louisville, Ky.
The Bankers Trust Insurance Funds are comprised of three index funds, based on the Standard & Poor's 500, the Russell 2000 and the Morgan Stanley Capital International Europe Australia Far East indexes. Two actively managed funds also are offered: the BT Insurance International Equity Fund and the BT Insurance Small Cap Fund. The move is intended to expand BT's share of the estimated $500 billion variable annuity marketplace above the $3 billion it manages.
Massachusetts Financial Services, Boston, restructured the MFS Union Standard Equity Fund into a mutual fund and has opened it to retail investors. The fund previously was an open-end institutional trust and was designed to be used as an investment vehicle for union pension funds or for companies with many union employees. The fund invests in a restricted list of stocks that meet certain labor sensitivity criteria. The minimum investment for retail investors is $1,000 with three share classes and loads.
Delaware Distributors L.P., Philadelphia, started a new mutual fund, the Growth & Value - Tax-Efficient Portfolio. The fund's portfolio manager, George H. Burwell, will use the same growth and value strategy he uses in managing Delaware's Devon Fund and the equity portion of the balanced Delaware Fund, but will overlay the strategy with tax-management techniques to lower capital gains.
MFR Advisors Inc., New York, introduced two new funds, the MFR Emerging Markets Total Return Fund and the Global Asset Allocation Fund.
The company's founder, Maria Fiorini Ramirez, is the manager of the funds.
The Enterprise Group of Funds Inc., Atlanta, acquired four retail mutual funds with $38 million in assets from Retirement System Fund Inc., New York. Two of the funds are the Retirement System Emerging Growth Equity Fund and the Core Equity Fund. Two other funds - the Intermediate-Term Fixed-Income and the Money Market - will be merged into existing Enterprise funds.
The subadviser for the Enterprise Small Company Growth Fund is Pilgrim Baxter & Associates Ltd., Wayne, Pa. Retirement System Investors Inc., New York, will remain the manager of the Enterprise Growth and Income Fund.