Mutual Fund Industry Feeling The Shift

The market shakeup has resulted in a number of changes to the mutual fund and exchange traded fund (ETF) industry, with even more waiting in the wings. One of them is how managers are perceived in today’s markets.

Do the elite managers of yesterday’s market still have the same pull they once did? Managers who find ways to make money and contain losses are considered successful, and even the definition of “success” is creating new stars. For example, a manager who keeps returns above water could be considered one, reports Jason Szep for Reuters.

And now just a handful of managers are battling it out for star status.

One star remains Pimco’s Bill Gross, whose bond fund (the world’s largest) is above water with a 0.5% rise since Jan. 1. In the last 12 months, the fund has added 3.77% to outperform the 3.65% increase of the benchmark Lehman Brothers U.S. Aggregate Index.

Gross warned in the summer of 2007 about the possibility of a subprime-mortgage implosion and shepherded the fund to outsize gains by cutting back on mortgage and corporate debt. This so-called star power may not be enough to keep investors satisfied, so there is a growing trend of multiple managers for certain funds.

Another change in the industry is the heavy outflow of assets, leaving some firms to scale back. At Fidelity, 1,300 employees,  or 2.9% of the workforce, will be handed a pink slip this month, with more to follow in the first quarter, reports Joe Morris for Ignites.

Fidelity’s global workforce totals 44,400, and it cut about 1,000 positions over the past year. None of those cuts have come in its core asset-management business.

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