In an Oct. 5, page 3, article, "Soft-dollar mandate missing," I am inaccurately quoted as saying:
"It's obvious they are going to beat up on broker-dealers in a serious way, and it's appropriate they do that because the focus has too long been on investment advisers."
What I in fact said was, "It's obvious they are going to beat up on broker-dealers in a serious way, and they think it is appropriate to do so because the focus has too long been on investment advisers."
I did not express the view that I thought it appropriate. In fact, the lack of attention by the Securities and Exchange Commission to broker-dealers could well have given them a false feeling of security and led to lower scrutiny by broker-dealers of this activity.
David M. Brodsky
Schulte Roth & Zabel LLP
Pete Rose and gambling
I really liked the 25-year time line Sabine Schramm and Barry B. Burr put together for Pensions & Investments' 25-year anniversary edition (Oct 19).
However, I must correct you on an error that was made. Under the 1985 category, you state, "Pete Rose breaks Ty Cobb's all-time hit record and is banned from baseball for betting on games, including ones in which his team played."
This is inaccurate. There was no official finding that Rose bet on baseball, let alone the Reds. For some reason this point has been swept under the rug. The agreement was signed by Major League Baseball and Pete Rose.
Believe me, if baseball had proof of this, they would have went after Pete. Other than that, nice job.
Superb 25th anniversary
I wanted to commend the entire team at Pensions & Investments for a superb 25th anniversary issue.
I found myself reminiscing about experiences during my career, revisiting old friends in the various articles and enjoying the speculation on the future.
I was quite flattered and appreciative that you folks (indeed, that anyone) remembered our short piece in September 1986, about the potential implications of portfolio insurance. I think the most interesting quote was:
"Let us assume that by 1988 pension assets subject to portfolio insurance total $50 billion . . . What happens if, at this point, the market drops 5% during the course of several days? Managers of most insured portfolios would seek to reduce stock market exposure by perhaps 20%.
"Given this scenario, some $10 billion of sell orders would hit the S&P 500 futures pit in just a few days. Even with about $10 billion in daily liquidity in the S&P 500 contract, $10 billion in orders in the same direction at the same time would have a significant impact on the market. The S&P 500 contract could be forced to trade far away from fair value.
"The initial drop might fuel still further declines as arbitrageurs bought favorably mispriced S&P 500 futures and simultaneously sold an index portfolio. As these sales pressed the market lower, other protected portfolios -- those whose market exposure had not been effectively eliminated earlier -- would be forced to cut risky-asset exposure. More futures sales would drive the contracts even further from fair value. The decline would continue, feeding on itself."
Again, congratulations on a superb issue.
Robert D. Arnott
Chief executive officer
The Aug. 24 issue of Pensions & Investments included an article in the Frontlines section (on page 8) titled "New DC ventures seizes the reins," which was written by Christine Williamson and covered our new organization. We were gratified in the interest your publication took in the start-up of our firm and found the article to be fair in its presentation of our firm. The article, however, contained two misrepresentations that I would like to correct.
The first is a simple factual correction regarding our use of mutual funds. The article indicates that we would be "building a family of manager-of-managers mutual funds for investment options." We will not be doing so. We build customized pools of assets, utilizing either institutionally managed separate accounts or mutual funds based on the level of assets in our program for each plan. We use the pools to deliver diversified investment portfolios for each participant with the appropriate asset allocation and investment structure based on their individual circumstances.
The second issue involves a reference to a study by the Profit Sharing/401(k) Council of America regarding the percentage of 401(k) plan assets that are "appropriately invested." The Profit Sharing/401(k) Council of America statistics indicate that about 10% of 401(k) plans offer lifestyle options. We view lifestyle funds as an attempt to match an investment allocation with retirement needs, and we believe investment allocation based on retirement needs is the way to appropriately invest 401(k) assets.
Although our approach is significantly different from using lifestyle funds, we cited the Profit Sharing/401(k) Council of America's statistics to indicate that there is plenty of opportunity for the other 90% of employer's plans to introduce the concept of matching retirement needs and investment allocation. Even those plans with lifestyle funds could benefit from our approach. We have spoken to David Wray of the Profit Sharing/401(k) Council of America and made sure that his organization understood that neither your publication nor we had the intention of misstating the statistics in their survey.
We, like many other organizations in our market, find the work of the Profit Sharing/401(k) Council of America to be very valuable in its insights, and therefore we would like to be very careful in our use of these statistics.
Thank you again for your interest in us, and we hope to continue to have opportunities to bring new ideas to the marketplace that your readers will find of interest.
Carl L. Londe
Chief executive officer
Strategic Financial Concepts Inc.
Clarendon Hills, Ill.