Mutual of Omaha Announces New Strategic Alliance with W.E. Donoghue & Co., Inc.

April 4, 2012, 4:32 p.m. EDT

Article from Market Watch

OMAHA, Neb., Apr 04, 2012 (BUSINESS WIRE) -- Mutual of Omaha’s Retirement Plans Division and Mutual of Omaha Investor Services, Inc. (MOIS), have announced a new strategic alliance with W.E. Donoghue & Co., Inc. (WEDCO) to provide wholesale distribution of its long-term investments including WEDCO’s Power Income Fund.

This alliance with WEDCO is part of Mutual of Omaha’s Retirement Plans Division and MOIS’ strategy to expand its established and successful asset management distribution by building alliances with innovative fund companies with the objective of providing risk controlled or defensive strategies.

“The Power Income Fund’s strong track record of trading between high yield bond funds and money markets to maximize outcomes while minimizing risk during economic shifts is an attractive option for advisors looking for retirement and long-term savings solutions for their clients,” said Seth Friedman, national sales director for Mutual of Omaha’s Retirement Plans Division.

Friedman also noted that the company expects to form strategic alliances with additional fund managers that feature risk controlled or other defensive strategies in the coming months.

“W.E. Donoghue is proud to announce our distribution alliance with Mutual of Omaha. As a seasoned asset management wholesaling team, Mutual of Omaha fits perfectly into our business model and provides the depth of professionalism WEDCO is privileged to collaborate with,” said Curt Meyer, managing director, W.E. Donoghue & Co., Inc. “We are confident this alliance will impact our growth initiatives across all channels and look forward to a long, healthy relationship with Mutual of Omaha.”

About W.E. Donoghue & Co., Inc:

W.E. Donoghue & Co., Inc (WEDCO) is a registered investment advisor established in 1986. The firm is a pioneer in the industry in providing tactical asset allocation solutions. WEDCO manages in excess of $650 million for individual and institutional separate account clients as well as mutual fund clients. The firm has been recognized by institutional and independent advisors as an investment solution highly sought out by their clients.

About Mutual of Omaha

Founded in 1909, Mutual of Omaha is a full-service, multi-line provider of insurance and financial services products for individuals, businesses and groups throughout the United States. With a client base of nearly 21,000 employer groups nationwide, Mutual of Omaha offers a wide range of plan designs and delivery options for employee benefits, including disability, life, dental, voluntary, special risk and retirement plans.

Mutual Funds involve risk including the possible loss of principal. Derivatives are subject to credit risk and liquidity risk. Additionally, even a small investment in derivatives may give rise to leverage risk, and can have a significant impact on the Fund's performance. In general, the price of a fixed income security falls when interest rates rise. The Fund will invest in high yield securities, also known as "junk bonds." High yield securities provide greater income and opportunity for gain, but entail greater risk of loss of principal. Mutual funds and ETFs are subject to investment advisory and other expenses, which will be indirectly paid by the Fund. As a result, your cost of investing in the Fund will be higher than the cost of investing directly in other mutual funds and ETFs and may be higher than other mutual funds that invest directly in fixed income securities. The Fund will incur a loss as a result of a short position if the price of the short position instrument increases in value between the date of the short position sale and the date on which the Fund purchases an offsetting position. A higher portfolio turnover will result in higher transactional and brokerage costs.

Investors should carefully consider the investment objectives, risks, charges, and expenses of the Power Income Fund. This and other information about the Fund is contained in the prospectus and should be read carefully before investing. The prospectus can be obtained by calling toll free 1-877-779-7462 (1-877-7-PWRINC). The Power Income Fund is distributed by Northern Lights Distributors, LLC member FINRA.

SOURCE: Mutual of Omaha

       

        Mutual of Omaha 

        Lisa Wadell Smith, 402-351-5941 

        lisa.wadell@mutualofomaha.com

      

Article from Market Watch

Fact check: Is this mutual fund ad misleading?

April 2, 2012 11:17 AM

By Allan Roth

Article from CBS News

(MoneyWatch) Commentary Last month, I read an advertisement in Investment News, a weekly publication for financial advisors. The advertisement for Prudential mutual funds announced, in big bold capital letters, "HIGHLY RATED BY MORNINGSTAR. POWERED BY PRUDENTIAL INVESTMENTS." It went on to boast that "over 60% of our Morningstar-rated funds have earned 4 or 5 stars,*" the top two ratings of the five star historic performance rating system.

The ad was similar to this more updated Prudential brochure, which can be found on the company's web site. You can read the smaller print from this brochure, but I'll get back to that in a bit.

The claim that 60 percent of Prudential funds received the top two Morningstar ratings appears to be conclusive evidence that Prudential funds are indeed highly rated by Morningstar. That's because Morningstar only gives 10 percent of each category of funds a five star rating and 22.5 percent of the funds a four star rating. The big bold print appears to imply that 60 percent of Prudential mutual funds are in the top 32.5 percent of performers.

Fact Check

Now before handing your money over to Prudential Investments, you may want the following facts on how Morningstar actually ranked Prudential funds in each of four fund categories. Here are the average rankings:

Domestic stock: 3.1 stars

International stock: 2.5 stars

Municipal bonds: 3.0 stars

Taxable bonds: 3.2 stars

A three star ranking translates to average mutual fund performance, and, thanks to expenses, a mutual fund that turns in average performance typically underperforms the index it is trying to beat. The big bold print on the brochure claims that the funds are highly rated, but my interpretation is that Morningstar considers Prudential mutual funds merely average.

Prudential responds

I spoke to Scott Benjamin, Executive Vice President of Marketing for Prudential Investments, who defended the advertisement's accuracy. While he wasn't aware of the overall average Morningstar ratings I noted above, he pointed out that the advertisement clearly said "for class Z shares." It stated this in smaller print in the upper half of the Investment News advertisement and on page two of the brochure. 

Class Z shares are a lower cost version of a mutual fund that cannot be purchased directly by the investor and can only be purchased through an advisor or a company's retirement plan. For example, the brochure lists the Prudential Government Income Fund (PGVZX) as a four star rated fund with a 0.68% expense ratio. If you bought the B share class of the same Prudential Government Income Fund (PBGPX), you'd own a two star rated fund with a 1.68% expense ratio. That's an above average fee level and below average performance, according to Morningstar. Typically, the advisor charges the client an additional fee in the Z shares, while the B shares have fees built in, and Prudential pays a "distribution" fee. The overall ratings of the funds are based on a weighted average of all share classes. Morningstar notes Prudential Investments have an overall average expense ratio so it's not surprising to see average performance.

Benjamin insisted the advertisement was accurate and strongly disagreed with my assertion that it was misleading, noting that it was in compliance with FINRA regulations. He also stressed that the company's funds are sold largely through financial advisors, and because more and more sales are coming through broker/dealer platforms that feature Z shares, Prudential now sells more in this share class than any other. Benjamin further pointed out that the advertisement in Investment News was directed to financial advisors, who understand share class pricing.

Still, I asked him why not be more clear and have the advertisement state something like "60 percent of our lower cost share class funds are highly rated by Morningstar"? Benjamin responded by saying that's what the advertisement does state.

My take

This Prudential advertisement is just an example of how the financial services industry selectively includes certain facts. Nowhere in the advertisement was there a disclosure that Morningstar considers the overall average of all of Prudential's mutual funds to have ratings between 2.5 and 3.2 stars. And you have to read on to see that the claim of being highly rated by Morningstar only applies to certain share classes. I'm saddened to say that I'm sure Prudential is right in stating it complies with FINRA regulations.

Prudential and I are just going to have to agree to disagree on whether the advertisement and brochure could be more straight forward. Still, my advice is to read any advertisement with the following in mind:

Spend even more time reading the small print than the large. Ask yourself what's not in the advertisement.

© 2012 CBS Interactive Inc.. All Rights Reserved.

Allan Roth

Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month. His goal is to never be confused with Mad Money's Jim Cramer.

Article from CBS News

Are funds too full of Apple?

If stock drops, some investors could take hit

By David K. Randall, Reuters April 1, 2012 2:06

Article from Calgary Herald

When it comes to Apple, investors could become victims of their own success.

It is a dilemma more mutual fund managers are wrestling with after the company's nearly 48 per cent gain this year. Those who bought Apple well below its current price have seen the value of their investment balloon, sometimes to more than 10 per cent of their fund's assets.

That effectively turns a brilliant decision into a concentrated stake, undercutting the benefits of diversification and making some mutual funds riskier.

As Apple stock has marched higher, well-timed bets on the company have helped some growth-oriented and blended mutual funds outperform the broad market. But in doing so, many of those funds have now tied investor dollars closer to the performance of a single company.

This isn't much of an issue when it comes to funds that market themselves as narrow bets on technology. But many funds whose broad holdings could be the core of a retirement plan are stocking up on Apple.

A dramatic fall in Apple's shares, however unlikely that may seem at the moment, would quickly ripple across the retirement accounts of millions of investors who thought they were safer investing in funds than individual shares.

"It adds to the risk profile of a fund to have a significant stake in one stock because it makes them more susceptible to bad news on one or two stocks and they won't be able to cushion the blow with diversification," said Todd Rosenbluth, a senior fund analyst at Standard & Poor's Capital IQ.

Generally in the mutual fund industry, any position over five per cent of assets is considered a large bet that may influence a fund, said Dan Culloton, a fund analyst at Morningstar.

Shares of Apple have nearly doubled from the $310 they hit in June, and at about $600 a share are up nearly 48 per cent in 2012 alone. Apple, the world's most valuable company by market capitalization, now has a weighting of 4.2 per cent in the broad S&P 500 portfolio, the benchmark against which the performance of most U.S. mutual funds are judged. That means 4.2 cents of every $1 invested in an S&P 500 index fund will be allocated to Apple shares, before fees.

By definition, actively managed mutual funds have overweight positions in companies they think will outperform the broad market, but usually not more than five or six per cent.

But 46 funds tracked by Morningstar have stakes in Apple that exceed nine per cent of assets, or roughly double the company's weighting in the S&P 500 index. This does not include sector funds that focus on technology or other specialized investment.

Some reluctance on the part of portfolio managers to sell Apple shares is understandable. Trimming exposure could lead to underperformance for a fund.

Some fund managers are taking steps to lower the weighting of Apple in their portfolios. "We got to the point where it was an inordinate part of our portfolio, and in order to control risk it was only prudent to trim it back," said Robert S. Bacarella, a Wheaton, Ill., fund manager.

© Copyright (c) The Calgary Herald

Article from Calgary Herald

Analysis: Apple's gains make some mutual funds riskier

Article from Reuters

By David K. Randall

NEW YORK | Thu Mar 29, 2012 11:54am EDT

(Reuters) - When it comes to Apple, investors could become victims of their own success.

It is a dilemma more mutual fund managers are wrestling with due to the company's nearly 48 percent gain this year. Those who bought Apple well below its current price have seen the value of their investment balloon, sometimes to more than 10 percent of their fund's assets.

That effectively turns a brilliant decision into a concentrated stake, undercutting the benefits of diversification and making some mutual funds riskier.

As Apple stock has marched higher, well-timed bets on the company have helped some growth-oriented and blended mutual funds outperform the broad market. But in doing so, many of those funds have now tied investor dollars closer to the performance of a single company.

This isn't much of an issue when it comes to funds that market themselves as narrow bets on technology. But many funds whose broad holdings could be the core of a (401)k or similar retirement plan - Fidelity's $14.7 billion Blue Chip Growth and the $28.7 billion T. Rowe Price Growth fund among them - are stocking up on Apple.

Apple makes up nearly 9 percent of Fidelity's $80.8 billion Contrafund, for instance. The fund is the sixth-most popular holding in 401(k) plans nationwide, according to BrightScope, a firm that ranks company (401)k plans.

A dramatic fall in Apple's shares, however unlikely that may seem at the moment, would quickly ripple across the retirement accounts of millions of investors who thought they were safer investing in funds than individual shares.

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For a graphic on fund managers stocking up on Apple, click: link.reuters.com/qaq37s

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"It adds to the risk profile of a fund to have a significant stake in one stock because it makes them more susceptible to bad news on one or two stocks and they won't be able to cushion the blow with diversification," said Todd Rosenbluth, a senior fund analyst at Standard & Poor's Capital IQ.

Generally in the mutual fund industry, any position over 5 percent of assets is considered a large bet that may influence a fund, said Dan Culloton, a fund analyst at Morningstar.

CONCENTRATED BETS

Shares of Apple have nearly doubled from the $310 they hit in June 2011, and at about $600 a share are up nearly 48 percent in 2012 alone.

Apple, currently the world's most valuable company by market capitalization, now has a weighting of 4.2 percent in the broad S&P 500 portfolio, the benchmark against which the performance of most U.S. mutual funds are judged. That means 4.2 cents of every $1 invested in a S&P 500 index fund will be allocated to Apple shares, before fees.

By definition, actively managed mutual funds have overweight positions in companies they think will outperform the broad market, but usually not more than 5 or 6 percent.

But 46 funds tracked by Morningstar have stakes in Apple that exceed 9 percent of assets, or roughly double the company's weighting in the S&P 500 index. This does not include sector funds that focus on technology or other specialized investment.

The $1.5 billion Oppenheimer Main Street Select fund, for instance, blends value and growth stocks in its portfolio of 34 companies. It had 10.5 percent of its assets, or two and half times the benchmark weight, in Apple as of the end of January, according to Morningstar data.

That concentrated bet is one reason that the fund is up 13.9 percent so far this year, or 2.6 percentage points above the broad S&P 500 index. A dip in Apple's share price and the fund could fall more than the broad market. The fund managers declined to comment.

Fidelity's Contrafund, meanwhile, focuses on growth stocks. It holds 427 stocks, but 8.6 percent of its portfolio, or a total of $6.6 billion, was concentrated in Apple at the end of January. That stake is more than even Apple's weighting of 7.6 percent in the narrower Russell 1000 Growth index, which many growth fund managers use as an internal benchmark.

The Contrafund is up 13.7 percent since the start of 2012. Fidelity declined to comment.

Some reluctance on the part of portfolio managers to sell Apple shares is understandable. Trimming exposure could lead to underperformance for a fund.

"We hear about this a lot from portfolio managers. I have no doubt that they'd like to sell it and take their profits, but you have to be in it to win it and right now Apple's momentum is going up," said Howard Silverblatt, senior index analyst at S&P.

These fund managers usually realize that they are taking on additional risk, Silverblatt said. "What helped you on the way up kills you on the way down."

CUTTING RISK

Some fund managers are taking steps to lower the weighting of Apple in their portfolios.

"We got to the point where it was an inordinate part of our portfolio, and in order to control risk it was only prudent to trim it back," said Robert S. Bacarella, a Wheaton, Illinois fund manager who runs the $49 million Monetta fund with his son.

Bacarella first bought 10,000 shares of Apple in early 2005 when it traded at around $40 per share. In September 2005, those 10,000 shares were worth $536,100 and accounted for 0.9 percent of his portfolio, according to Morningstar data.

Fast forward to December 2011, and Bacarella again had 10,000 shares of Apple. This time, however, their value was nearly $4.1 million, which accounted for 9.3 percent of his fund's weight. He trimmed his shares by 5,000 earlier this year. Apple now makes up 5 percent of his assets.

"This is about risk control. You never know what is going to happen," he said. The sizeable positions built up by other funds would only exacerbate an Apple fall , he added.

"If everyone sees deceleration of earnings growth, what will you do?" Bacarella asks. "I would think that you're going to bail and that will compound to the downside."

(Reporting By David Randall; Editing by Walden Siew, Jennifer Merritt and Tim Dobbyn)

Article from Reuters