Detroit's Financial Advisors Have Been Bracing Retirees For The Bankruptcy, But Their Actions Might Not Be Enough

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Detroit’s Bankruptcy Has Retirees Concerned About Their Benefits (Investment News)

Detroit filed for Chapter 9 bankruptcy protection on Thursday. Now the fate of retiree benefits for Detroit’s municipal workers is uncertain. Retirees in the city’s biggest pension funds, The General Retirement System and the Police and Fire Retirement System, are worried the city could use this filing as a pretext to change retirement benefits, according to Investment News. Detroit has a statute in place to prevent any such changes but how this plays out has yet to be seen. 

“…Advisers in the area have been bracing clients for Detroit’s bankruptcy filing.'”We’ve seen this coming, so I’ve been preparing them to save money and shore up for health care expenses,’ said Leon LaBrecque, managing partner at LJPR LLC in Troy, Mich.

“The biggest fear is that retiree health care arrangements are up for grabs and can be negotiated away, requiring retirees to pay more out of pocket for their care. Many municipal workers in Detroit didn’t pay into Social Security and aren’t covered by Medicare, according to Mr. LaBrecque. ‘Those poor people could end up with dramatic increases in health care expenses.'”

BlackRock Thinks There Are A Few Things Investors Should Know (Advisor Perspectives)

In a new Q&A BlackRock’s Russ Koesterich answers some questions that investors have half-way through the year. Here’s an excerpt.

“Q: What are the opportunities now in fixed income?
A: In light of potential Fed tapering, I continue to prefer credit sectors over those more sensitive to interest rates (like Treasuries and TIPS). I also continue to like municipal bonds and believe that high yield still provides a better yield-to-risk payoff than many other fixed income alternatives.

“Q: What is the outlook for gold?
A: While I still believe that investor portfolios should contain a strategic allocation to gold, changing monetary conditions provide for a less accommodating environment. All else being equal, gold returns are likely to be lower and more volatile than has been the case over the past four or five years.”

Hedge Funds Just Had Their Worst Month In A Year (Preqin)

Hedge funds had a monthly net return of -1.52% in June, according to Prequin’s latest report. “”Following on from the strong Q1 performance, when hedge funds were up 3.35% and funds of funds not far behind with Q1 returns of 3.16%, Q2 performance was looking to be equally buoyant until this disappointing June brought the quarter’s performance down to 0.14% and -0.61% for hedge funds and funds of hedge funds respectively.”

Preqin June hedge fund performance data

Wirehouses Now Think FA Productivity Is More Important Than Headcount (The Wall Street Journal)

Wirehouses have a new way of gauging success. Revenue per financial advisor or FA productivity has come to be the new measure, replacing advisor headcount, according to the Wall Street Journal. 

During the most recent quarterly earnings call Morgan Stanley’s CEO James Gorman said the headcount will “bounce around” quarter to quarter that productivity is more important.

SEC Sues Steve Cohen For Failing To Supervise Portfolio Managers, Seeks To Bar Cohen From Overseeing Investor Funds (Business Insider)

SEC is suing SAC Capital’s Steve Cohen for failing to supervise portfolio managers and prevent them from and “prevent them from insider trading under his watch,” according to a press release. The SEC is also trying to bar him from overseeing investor funds. 

Meanwhile the SAC released a statement saying, “The S.E.C.’s administrative proceeding has no merit. Steve Cohen acted appropriately at all times and will fight this charge vigorously. The S.E.C. ignores SAC’s exceptional supervisory structure, its extensive compliance policies and procedures, and Steve Cohen’s strong support for SAC’s compliance program.”

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