Wells Fargo stable fund is restricted

Jan 6, 2013 @ 12:01 am

By Robert Steyer

The Wells Fargo Stable Return Fund last week began limiting investments, the latest such fund restricting inflows over concerns that new money in a continuing low-interest-rate environment will lower yields for existing investors.

Only plans that have a record-keeping and trustee relationship with Wells Fargo can enter the $29.9 billion fund as new investors, said David Ferry, senior director at Galliard Capital Management Inc., the fund's adviser.

“If the fund had accepted an unrestricted amount of new money in this low-interest-rate environment, we had concerns that there could be a dilutive effect on the [actual earning rate posted to investors' account balances],” Mr. Ferry said.

Wells Fargo's decision, known as a soft close, “makes sense (for some funds) so they don't have to do a hard close later,” said Christopher Lyon, a partner at Rocaton Investment Advisors LLC. “Letting in a lot of new money [when interest rates are low] is dilutive in terms of future returns.”

Low interest rates and concerns about wrap capacity — the availability of affordable insurance products that guarantee the book value of the underlying bond investments — were the reasons for the liquidation of several funds in 2012, including ones at The Charles Schwab Corp., SEI Investments Co. and Union Bank NA.

Invesco Ltd. closed its $6.31 billion fund in April 2011. “The sole reason we entered limited-offering status was due to the industrywide constraints in the wrap contracts,” Bill Hensel, director of media relations, wrote in an e-mail.

The Bank of New York Mellon Corp. initiated a soft close last January for its $1.2 billion fund, and Putnam Investments enacted a soft close in November 2011 for its $6 billion fund. The Vanguard Group Inc. has had a soft-close policy for its $19 billion stable value fund since late 2008 or early 2009, spokeswoman Linda Wolohan said.

Robert Steyer is a reporter at sister publication Pensions & Investments.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Pershing's Dolly: Lessons in leadership

Women are holding top leadership roles as CEOs of some of the industry’s top firms, but it’s still the exception rather than the norm. Lisa Dolly of Pershing talks about how to balance it all.

Latest news & opinion

Take 5: Vanguard's new CIO Greg Davis talks bonds, stocks and costs

Having just stepped into the role, this veteran of the firm now oversees $3.8 trillion in assets in more than 300 mutual funds and exchange-traded funds.

Tech companies deploy behavioral finance tools for advisers

They seek to turn knowing more about clients into growing more revenue.

Retirement planning for women

Longer lifespans and lower savings require creative income strategies.

Sean Spicer resigns as press secretary after Anthony Scaramucci is appointed communications director

Scaramucci is known as an ardent foe of the DOL fiduciary rule, having said during the campaign that Trump would repeal it .

Redoing the math on a 4% retirement withdrawal rate

Given the current interest-rate environment and other factors, advisers disagree about whether the number is too conservative or not conservative enough.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print