A New Look

Under its new chief, OppenheimerFunds goes alterna

OppenheimerFunds is moving full speed ahead into the alternative investments arena with its plan to acquire Tremont Advisers, Inc., a financial services company specializing in hedge funds. Oppenheimer Acquisition Corp., the parent company of OppenheimerFunds, announced July 10 that it plans to purchase all outstanding Tremont shares at $19 per share. The acquisition is valued at approximately $140 million and is expected to close in the fourth quarter.

"The big [mutual fund] firms now recognize they have to lean much more to the alternative investments world," says Richard Sincere, president of Sincere & Co., a firm that markets and distributes alternative investments to independent RIAs. "This category of alternative investments is going to heat up significantly."

The two companies will combine OppenheimerFunds' highly rated distribution network and access to high-net-worth clients with Tremont's expertise in alternative investments. OppenheimerFunds is one of the leading asset management groups in the world, with $120 billion in assets under management, and is a subsidiary of Massachusetts Mutual Life Insurance Company (MassMutual).

John Murphy, chairman and CEO of OppenheimerFunds, says Tremont's less risky "multi-manager, fund-of-funds approach to hedge fund investing will appeal to many of our high-net-worth shareholders." Murphy is a relative newcomer to Oppenheimer, having most recently headed MassMutual's retirement services business. He replaced Oppenheimer CEO Bridget Macaskill, who abruptly resigned in early July. Since moving into the top spot, Murphy says he's "engaged a group of 20 senior people to really crystallize our strategy. Our goal is to grow at rates faster than our competition." Part of that growth could come from MassMutual's bid for Zurich Scudder Investments. Two-thirds of Oppenheimer's distribution is through financial advisors.

Tremont will be "working hard with OppenheimerFunds to create products that allow independent financial advisors to access hedge funds and alternative investments," says Robert Schulman, Tremont's president and CEO. "Alternative investments are becoming more readily available at the wirehouses and private banks, and this alliance [Oppenheimer and Tremont] can offer a more organized, more concrete, and better approach for the financial planner market to get at these types of investments."

Schulman says advisors can look forward to more fund-of-funds type products as well as private placement variable life insurance. "For Tremont, this [alliance] provides institutional and retail distribution and access to Oppenheimer's parent company, MassMutual, for our hedge-fund-related insurance efforts, which include private placement variable life insurance using hedge fund product investments," Schulman says. He notes that this type of insurance product is becoming popular with very high-net-worth clients with $20 million in wealth and more. And he also expects the product's popularity to trickle down to the $10- to $20-million-in-assets crowd.

Joel Isaacson, a planner with Isaacson & Co. in New York, thinks Oppenheimer's acquisition of Tremont is a "smart move. I think some of the custodians that deal with advisors like Schwab, Fidelity, and TD Waterhouse will also be looking at [alternative investments] and trying to find a platform for the advisor." He says Oppenheimer's alliance with Tremont will help the firm gain a stronger foothold in the financial advisor market, and beat its competitors to the high-net-worth purse. --Melanie Waddell

Vaporware No More?
Morningstar shows off the online version of its Principia research tool at its annual shindig

Since the launch last year of Morningstaradvisor.com, Chris Boruff, Morningstar's president of advisor business, has been pounding the pavement, hoping to wow advisors with the site's panoply of features. He'd tout its mutual fund due diligence research, continuing education, editorial content, chat rooms. And every time, a hand would pop up in the back of the room: "'Well, that's really nice, but when is Principia coming online?'"

Now he has an answer. Morningstar Advisor Workstation, the Web-based version of Principia, is scheduled to be up and running by the beginning of August. Previewed at the Morningstar Investment Conference in Chicago in June, the program is "everything Principia has been, plus a whole lot more," claims Boruff. No longer will advisors have to wait for a monthly CD-ROM to arrive in their mailboxes; the Web-based tool will display updates as soon as new data is available. Assessment tools, including a risk survey and goal/savings calculator, have been beefed up, and a new Report Builder can churn out slick, NASD-compliant, Morningstar-branded client reports as PDF files.

Current users need not make the Internet leap yet. "We believe the Workstation will answer the needs of most advisors," said Paul Fox, director of advisor tools at Morningstar, "but as long as there is a need, and as long as Principia is economically viable, it is here to stay." Planners interested in taking the plunge can do so by calling Morningstar at 800-735-0700. The price had not yet been finalized by press time.

Boruff says the firm has already snared one deal to customize Workstation for a large wirehouse, and he's actively seeking other institutional partners.

Advisors' reactions have been mixed, with control topping the list of concerns. One planner worried that all client data would reside on Morningstar's servers. And because the program is entirely Web-based, advisors' ability to use it is only as fast and as reliable as their Internet connections. Another limitation is the Report Builder, which, for reasons of NASD compliance, cannot be customized with an advisor's logo or firm name; instead, only Morningstar's logo appears on it.--Karen Hansen Weese

Bill for Advice

Under a new measure, financial services companies could dole out retirement planning advice

Anewly revived bill in Congress allowing financial services companies to dish out 401(k) advice is being viewed by advisors as a double-edged sword. The Financial Planning Association told members of Congress recently that while consumers need greater access to retirement planning advice, that type of advice should only be given by certified financial planners.

Advice givers like Financial Engines and the American Council of Life Insurers (ACLI) beg to differ, saying the burgeoning 401(k) advice market should be up for grabs.

The Retirement Security Advice Act of 2001 (H.R. 2269), introduced with strong bipartisan support by Rep. John Boehner, R-Ohio, would modernize provisions of the ERISA Act of 1974 that restricts the amount and type of advice that retirement plan administrators can make available to participants. A similar House bill stalled last year.

Todd Taskey, a planner with Solutions Planning Group in Bethesda, Maryland, who specializes in providing retirement plan advice to employees of companies like Marriott, says that while consumers "desperately need" advice, he's not sure the bill provides a remedy "because [the advice] has to be individualized."

Mary Ellen Kazimer, associate general counsel for Financial Engines, says the firm believes "anybody should be able to give investment advice so long as there are sufficient safeguards for participants." But the national retirement services firm Investmart says the bill doesn't protect 401(k) participants from biased investment advice. The bill allows money managers to recommend their own investment products to participants, creating a conflict of interest, Investmart says.

Jack Dolan, a spokesman for the ACLI, says the bill "would provide a real growth area for the life insurance business," noting that agents are now well versed on all types of investment products. "In the early 1980s, 60% of life insurers' premium income was from life insurance," Dolan says. "These days, two-thirds is from retirement products."-- Melanie Waddell

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