If your livelihood depended on the quality of your advice, wouldn’t you be your own best customer? Maybe not, especially if you’re a fund manager, according to a new study from Morningstar. Their analysis of SEC-required disclosure of managers’ holdings reveals some surprising numbers:
“In U.S.-stock funds, 47% report no manager ownership. And it gets worse from there. Fully 61% of foreign-stock funds have no ownership, 66% of taxable bond funds have no ownership, 71% of balanced funds put up goose eggs, and 80% of muni funds lack ownership.”
Should investors be concerned? Investment News quotes Morningstar’s Russel Kinnel:
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Coyright © 2007 by KLD Research & Analytics, Inc. All rights reserved.
Alicia H. Munnell, the Peter F. Drucker Professor of Management Science at Boston College, has asked, “Should Public Plans Engage in Social Investing?” in a briefing paper published by the Center for Retirement Research of which she is Director.1 Her answer:
But even assuming that divestment is an effective mechanism to stop genocide and reduce terror risk and that state legislatures and pension fund boards are the right place to make foreign policy, the issue remains whether pension funds are an appropriate vehicle for implementing that policy. The answer seems unquestionably “no”.2
Is Prof. Munnell saying something outrageous here? If divestment by public pensions could halt genocide and “reduce terror risk”, they still shouldn’t do it?
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At the end of July, the US federal government passed bills in the House of Representatives that would provide legal protections to investment managers who sell holdings in companies involved in key sectors of Iran’s or Sudan’s economy.
Several weeks ago, Florida became the first US state to pass a law requiring their state pensions funds to divest from companies operating in Iran’s oil and mining sectors. Other states including Michigan, Texas, and Illinois are seeking to pass similar legislation.
This comes on the heels of a very successful Sudan divestment movement that started in Illinois and has since been implemented in various forms in over a dozen states.
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The Congress of the United States spent more than two years on ERISA, the Pension Reform Act of 1974, hearing countless witnesses, conducting dozens of studies, and considering a raft of alternative proposals. Yet there is not one mention in those thousands of printed pages of the social or political implications of the pension funds, and very little concern for the economic impacts, on capital market or capital formation… -Peter F. Drucker (1976)1
The Ontario Teachers’ Pension Plan led a successful group of bidders for Bell Canada (BCE)2 on June 30. According to the New York Times (July 1, 2007), ‘The deal for Bell Canada, worth about 51.7 billion Canadian dollars ($48.8 billion), would be the largest leveraged buyout ever.’
The Canadian Pension Plan Investment Board put BCE in play, and a number of other large Canadian plans indicated interest in bidding before withdrawing.
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