Products February 4, 2008

OppenheimerFunds Portfolio Series Gets 'Fixed'

OppenheimerFunds, Inc. (OFI) has expanded its Oppenheimer Portfolio Series with the addition of the Oppenheimer Portfolio Series Fixed Income Active Allocation Fund.
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According to a press release, the newest addition to Oppenheimer Portfolio Series employs a multi-manager approach, taking advantage of several of Oppenheimer managers’ sector expertise and employs active asset allocation for a portion of the fund. The result, according to the firm, is a diversified portfolio comprised of fixed income sectors that, when combined, can serve as a complete fixed income allocation within an investor’s portfolio.
Oppenheimer Portfolio Series, introduced in 2005, is a set of asset allocation mutual funds that invest in a diversified portfolio of mutual funds and are designed to meet the appropriate risk/return profiles of different investors. The other four funds are:
  • Oppenheimer Conservative Investor Fund,
  • Oppenheimer Moderate Investor Fund,
  • Oppenheimer Active Allocation Fund and
  • Oppenheimer Equity Investor Fund
The new fund is managed by Oppenheimer’s Core Plus and International Fixed- Income teams. It will typically invest 80% of its assets in a “core allocation” of Oppenheimer taxable fixed income funds and 20% in an “active component.” The core allocation is 44% Oppenheimer Core Bond Fund, 12% Oppenheimer International Bond Fund, 12% Oppenheimer Master Loan Fund LLC (investing primarily in bank loans), and 12% Oppenheimer Champion Income Fund. The core allocation will be rebalanced at least annually, while the active allocation component allows the management team to adjust the Fund’s risk exposure as changes in the market conditions warrant, according to the firm.
The announcement notes that the Oppenheimer Portfolio Series Fixed Income Asset Allocation Fund is different from other multi-sector bond funds in that it provides an allocation to high-quality fixed income in quantities sufficient enough to help offset equity risk due to the negative correlation between stocks and high quality bonds.
The new fund requires a minimum initial investment of $1,000 ($500 for a retirement account) and is available across all OppenheimerFunds retirement products including rollovers.
Compliance February 4, 2008

SSgA Hit with Two More Subprime Suits

Lawsuits against State Street Global Advisors (SSgA) over its money management decisions to put client funds in subprime mortgage-related vehicles continue to pile up.
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The latest suits come from a Texas health care system and a public employee pension fund alleging that SSgA made unauthorized subprime investments that resulted in client losses, according to the Houston Chronicle. Filing two separate suits were Memorial Hermann, the state’s largest not-for-profit health care system, and the $3 billion Houston Police Officers’ Pension System.

The police pension suit estimated a $20 million loss while the Memorial Hermann case accuses the Boston-based firm of orchestrating investments that eventually lost $50 million, the Chronicle said. In both suits, SSgA was accused of fraud and not sticking to agreed-upon investment plans.

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“It was sold as a low-risk investment fund when in fact 94% of the fund was invested in the subprime market — and that’s just not something they told the police system,” pension fund lawyer Robert Burford, told the Chronicle. “To say that the system was shocked is an understatement.”

The police fund serves 2,400 retirees nearly 5,000 active officers making contributions.

Charles R. Parker, who represents Memorial Hermann, told the newspaper that State Street misled the hospital system to get their business. The company managed about $100 million of hospital construction money, he said.

Memorial Hermann also sued its investment consultant, Cambridge Financial Services, which was supposed to work with State Street to “make low-risk investments” that would preserve the hospital system’s capital.

State Street spokeswoman Arlene Roberts told the newspaper the company intends to “vigorously defend ourselves against inappropriate claims” based on what SSgA insists were market forces beyond its control. “We are disappointed by the Houston Police Officers’ decision as well as Memorial Hermann to pursue the matter in court,” Roberts said.

State Street Global Advisors manages assets of more than $2 trillion.

Several pension funds across the country have sued State Street over the subprime issue. The Alaska Department of Revenue recently won a settlement for its state workers and retirees. At least four similar lawsuits are pending against the company in a New York federal court district (See State Street Faces Two More Lawsuits Over Bond Fund Losses).

Last month, the investment firm announced that it would set aside $618 million to cover the legal costs associated with its subprime investment strategy (See State Street Names New SSgA Chief, Takes $279M Reserve).

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