The top-ranking story — Europe's ongoing debt crisis — fueled a volatile stock market that plunged in the third quarter as European Union countries scrambled for solutions and bailouts to prevent countries like Greece, Ireland, Portugal, Spain and, now, Italy from defaulting on their debt. The markets and general attitudes toward a resolution changed on nearly a daily basis with different ideas floated about that included dissolving the EU or issuing union-backed bonds.
The debt crisis has resulted in the resignations of Greek Prime Minister George Papandreou and Italian Premier Silvio Berlusconi, while officials from France and Germany led discussions to solve the crisis, keep the EU intact and calm global investors' concerns.
The second-ranked story dominated summer headlines as Mr. Gundlach and associates of his new money management firm, DoubleLine Capital LP, went head-to-head with former employer TCW Group, in arguably the highest-profile money manager case to go to trial in civil court. TCW accused Mr. Gundlach and associates of stealing trade secrets and breaching fiduciary duties in starting DoubleLine just days after Mr. Gundlach was fired in early December 2009. In turn, Mr. Gundlach sought $500 million in future and back compensation. TCW sued for more than $400 million in damages.
Mr. Gundlach's team was awarded $66.7 million in unpaid wages by a jury in September. Mr. Gundlach was found liable of stealing trade secrets, and to have committed breach of fiduciary duty and interfering with TCW client contracts, but no damages were awarded to TCW for interference and the fiduciary breach; the judge will decide damages for stealing trade secrets at a later date.
The two largest U.S. custodians, State Street and BNY Mellon, face a hit to their bottom lines after a string of lawsuits from public pension plans this year accusing the banks of causing significant losses due to excessive foreign-exchange trading fees covering the past decade.
Attorneys general in at least 20 states reviewed whether to sue over claims that public pension plans in their states were overcharged when they traded U.S. dollars and other currencies. States that have filed suit on behalf of retirement plans include Arkansas, California, Florida, New York, Massachusetts, Pennsylvania and Virginia.
A few more notable stories in 2011:
- A volatile third quarter sent pension plan returns and money manager assets under management plummeting amid the European debt crisis, U.S. congressional standoff over the debt ceiling and concern over a ratings downgrade, erasing a strong first half of 2011 for investment returns. For the quarter ended Sept. 30, the median of the 10 largest publicly listed money managers to announce their results reported an 11.5% drop in AUM, while key domestic and international equity indexes experienced declines of 14% to 23%.
MF Global Holdings filed for Chapter 11 bankruptcy protection on Oct. 31 amid its disclosure of heavy exposure to European sovereign debt, making it one of the largest bankruptcies in U.S. history. It listed total debt of $39.7 billion and assets of $41 billion. CEO and Chairman Jon Corzine resigned on Nov. 4. To compound matters, MF Global is now being investigated by regulators for up to $1.2 billion that may be missing from client accounts.