Firm principal Jon Chambers was quoted extensively in an article that appeared in the Bureau of National Affairs (“BNA”) Daily Report for Executives on Monday February 11, 2008. The article, “Labor Effort to Enhance Plan Fees Disclosure Draws Mixed Response” describes a series of Department of Labor (“DOL”) initiatives to improve the quality of fee disclosure in the 401(k) marketplace. Mr. Chambers describes how the DOL initiatives will help improve existing practices, but argues that Congressional action is still required to address problems relating bundled fees and intra-company revenue transfers.

During the last several weeks, world equity markets have coupled and, in general, have moved downwards. Although the magnitude of decline is well within the expected probability distribution of stock prices, nevertheless, some investors may become disconcerted because of a natural human tendency to extrapolate current events into an indefinite future.

One of the basic principles of investing is that the future return on a portfolio of risky assets is a random variable – i.e., not knowable. Over many long planning horizons, under some simplifying assumptions, actual portfolio return converges towards a number that is greater than the risk-free rate available through U.S. Treasuries or bank CDs. Likewise, over a single life’s long-term planning horizon, it is also reasonable to expect that a portfolio of risky assets will outperform a risk-free investment.

Employers not liable for 401(k) losses in target account by Kathleen Pender, San Francisco Chronicle, Sunday, October 28, 2007.

The U.S. Labor Department last week issued final rules designed to get more employees participating and investing more aggressively in their 401(k) plans.

The new rules say that employers can’t be held liable for losses in a 401(k) account if they enroll employees who don’t sign up themselves and direct their contributions into one of three qualified default options: target-date funds, balanced funds and managed accounts.

Jon Chambers, principal at Schultz Collins Lawson Chambers, Inc., testified at a U.S. House of Representatives Committee on Education and Labor hearing concerning 401(k) fees on October 4, 2007. You can also download the text of his testimony.

The main article from the Q2 2007 Investment Quarterly (on optimal size for actively managed funds) was adapted from this much longer and more comprehensive paper by Patrick Collins. It addresses many other issues relating to investment prudence for fund managers.

Without More

Does Size Matter?

The only reason to invest in actively managed funds is to earn alpha: returns greater than those of the market. As active funds accumulate a history of such returns, they naturally attract more and more money. But for various reasons, it turns out that as an active fund grows, it becomes harder and harder to earn alpha. In this quarter’s main article, we explore why that is so, and whether there is such a thing as optimal size for actively managed funds.

The article is adapted from a much longer paper addressing many issues of investment prudence for fiduciaries, written by our own Patrick Collins, and available here.

Our main article this quarter reviews the venerable subject of portfolio diversification. Why is it important to diversify? You’ll know exactly why, by the time you finish reading.

Investment Quarterly Download

We are often asked, what objective criteria have been established to evaluate the many different types of representatives and advisers that provide financial services. The supervisory bodies of the securities industry have created a comprehensive set of regulations aimed at protecting investors from wrongful conduct on the behalf of agents, brokers, and investment advisers. Once you read the lead article in the current edition of INVESTMENT QUARTERLY you will be able to answer these questions:

• What is the evolving regulatory framework governing the activities of Investment Advisers?
• What sorts of person or organization can claim the title Investment Adviser?

Historically, investors viewed investment in commodities as a highly speculative venture advocated by salespeople using questionable—if not fraudulent—methods of promotion. Recently, however, not only individuals but also institutional investors have turned their attention towards commodities. Here’s our take on commodity-related investments.

For more on the Investing in Commodities

Jon Chambers is quoted in an article on how to plan your Year-end income tax strategies by Kathleen Pender, San Francisco Chronicle, November 28, 2006.

As the end of 2006 approaches, here are some tax- and money-saving moves to consider before Dec. 31.

• Pump up your 401(k).

• Think twice before buying a stock fund in a taxable account.

• Think twice before buying a stock fund in a taxable account.

• Maximize tax losses.

• Give a gift.