September 16, 2011

Top 6 Portfolio Products: Merk Currency; Invesco Bond Funds Launched; Goldman Shuts Alpha

Fidelity offered new searchable fixed-income research, and S&P said it will soon present its second annual mutual fund excellence awards

New products introduced over the last week include a new currency enhanced fund from Merk and a new investment-grade corporate bond product from Invesco PowerShares. Meanwhile, Goldman Sachs closed its Global Alpha hedge fund, Fidelity offered new searchable fixed-income research, and S&P said it will soon present its second annual mutual fund excellence awards.

1) Merk Launches Currency Enhanced U.S. Equity Fund

Axel MerkMerk Investments announced the launch of the Merk Currency Enhanced U.S. Equity Fund (MUSFX) on Sept. 12. The no-load mutual fund seeks to outperform the S&P 500 Index by managing the U.S. dollar and other currency exposures inherent in U.S. equity investments.

The fund employs a currency overlay on top of the S&P Index, seeking to improve risk-adjusted equity returns. Currency exposure allocations for the fund will be determined based on quantitative and qualitative analysis. Through the use of currency forward contracts, the fund applies the currency overlay while concurrently providing investment exposure to the S&P 500.

2) Invesco PowerShares Expands Fixed Income Line With High-Grade Corporate Bond Portfolio

Invesco PowerShares Capital Management LLC announced Sept. 12 that the PowerShares Fundamental Investment Grade Corporate Bond Portfolio (PFIG) was to begin trading on Sept. 15. The fund is the first investment grade corporate bond ETF to use Research Affiliates’ Fundamental Index methodology, and provides investors access to maturities ranging from 1-10 years.

PFIG is based on the RAFI Investment Grade Corporate Bond Index. The fund will normally invest at least 80% of its total assets in the securities that comprise the index, which is comprised of U.S. dollar-denominated bonds registered for sale in the U.S. whose issuers are public companies listed on a major U.S. stock exchange.

Only securities rated BBB/Baa or higher by both Moody’s and S&P, with greater than one year to maturity, qualify for inclusion in the index. PFIG is expected to issue monthly distributions.

3) Goldman Closes Global Alpha

Goldman Sachs says it is shutting its $1.6 billion Global Alpha funds, according to reports on Sept. 15, one day after it announced a management shake-up at the fund. The fund, once the pride of its quantitative trading business, will be closed in the next few weeks.

Global Alpha fell about 13% through early September. This was the second time in four years that the hedge fund suffered big losses; it fell about 22.5% in August 2007, according to a Reuters report. It gained 4% in 2008 and 30% in 2009.

At its peak, the fund had some $12 billion in assets at its peak over the past four years.

There is now some speculation that Goldman Sachs may not exit the quantitative hedge fund business, though it still manages billions in quantitative mutual funds.

The average quant fund is down less than 1% through early September, according to Hedge Fund Research Inc.

4) Fidelity Investments Debuts Fixed Income Research and Education

Fidelity Investments announced the launch of new fixed income market research and education on Sept. 12. The new resources provide a single‐source destination for fixed income research, news and insights, and fixed income education.

The information aims to help investors learn about the differences between bonds, bond funds and other fixed income investment vehicles, and understand key characteristics through comparison tables.

The research capabilities offer simplified search functionality for bond funds by asset type and Morningstar rating; investors can also search for CDs, as well as 30,000 individual bonds by asset type, maturity date, credit rating and geography

5) Save the Date: S&P Equity Research Second Annual Mutual Fund Excellence Awards

For the second year in a row, Standard & Poor’s Equity Research will recognize open-end mutual funds that have consistently achieved an overall ranking of five stars based on Standard & Poor’s Equity Research’s proprietary, holdings-based research methodology. A total of 30 finalists across 10 investment categories will be made known the week of Sept.19, and award recipients announced the week of Oct. 17.

Gold, silver and bronze recipients will be recognized in ten categories. Nine of the categories are strategy-based while the tenth is a separate category for “New and Notable Funds”—those in existence for three years or less. The award categories are International Equity, Global Equity, Domestic Equity Large-Cap, Domestic Equity Mid-Cap, Domestic Equity Small-Cap, Domestic Equity Multi-Cap, Blended Individual Securities, Blended Fund of Funds, Taxable Fixed Income, and New & Notable.

6) Morningstar Adds Active/Passive, Momentum, Global Tactical Strategies to Managed Portfolios

Morningstar Investment Services (MIS) introduced Thursday a group of new strategies to its Managed Portfolios fee-based investment management program offered through financial advisors. The strategies, which include active/passive, momentum ETF and global tactical ETF portfolios, use methods developed by Ibbotson Associates.

The active/passive portfolios use ETFs or indexed mutual funds in areas offering less opportunity for active managers, and actively managed funds in realms where a portfolio manager may add value after taking risk into account.

The momentum portfolios take advantage of trends by systematically under- or overweighting asset classes based on proprietary momentum signals developed by Ibbotson. The global portfolios combine momentum and “mean-reversion” signals to tactically allocate among asset classes.

MIS and Ibbotson are registered investment advisors within Morningstar’s Investment Management division.

Read last week’s Portfolio Products Roundup at AdvisorOne.com

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