Investing April 20, 2005

BGI: ETFs End Q105 at $228B in Assets

April 20, 2005 (PLANSPONSOR.com) - Increasingly popular exchange-traded funds (ETF) took in $9 billion in net new investments in the January to March period, pushing asset totals to $228.3 billion, according to ETF provider Barclays Global Investors (BGI).
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In March, ETFs saw net new investments of $9.7 billion and ended the month after a $5 billion drop in market value of the underlying securities, Dow Jones reported. That compares with February’s $5.7 billion redemptions, when assets totaled $223.6 billion.

BGI said that, with many investors fearing the impact that rising inflation, record gasoline prices and higher interest rates could have on consumer spending, short interest in the iShares Dow Jones US Consumer Services Fund rose to 26% of shares outstanding in March, from 11% of shares outstanding in February.

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Rising rates also continued to take a toll on real-estate investment trusts, as assets in real-estate-sector ETFs fell 6% during the month, the announcement said.   The iShares Russell 2000 Index Fund was the most popular fund in March, attracting $1.7 billion in new investments.

Most international investments delivered negative returns in March, as the dollar improved and US rates rose, Barclays Global Investors noted. However, demand for international developed-market exposure remained constant, especially Pacific Rim markets (but excluding Hong Kong). The iShares MSCI EAFE Fund was the third most popular iShares fund in March and the most in demand during the first quarter, with new investments totaling $460 million and $1.9 billion, respectively, the company said,

BGI, which offers 98 domestic ETFs under the iShares moniker, had assets in its funds of $122.1 billion.

The increasingly popular funds, which trade all day on exchanges like stocks, saw explosive growth last year, climbing nearly 50% to a record $226.1 billion in assets at the end of 2004.

Compliance April 19, 2005

No Application for Benefits, No Exhaustion of Administrative Remedies, Court Rules

April 19, 2005 (PLANSPONSOR.com) - A participant in a severance plan who only learned about his ineligibility for benefits through an informal conversation with a human resources executive but did not apply for those benefits failed to exhaust his administrative remedies, according to a federal court.
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US District Judge William Skretny of the US District Court for the Western District of New York granted summary judgment to the participant’s employer, Dunlop Tire Corp. in the ruling, stating that the participant, by not applying for benefits, failed to exhaust administrative remedies in the matter, according to BNA.

Kenneth McNinch, the participant, was an employee at the company for over 30 years, and eventually was manager of one of Dunlop’s tire stores. After Goodyear took control of the company in 1999, he became an employee of Goodyear-Dunlop Tire North America. At this point, he was informed via letter that Goodyear-Dunlop would assume all obligations of Dunlop Tire’s severance plan.

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Two years later McNinch attended a meeting with Goodyear-Dunlop’s manager for human resources to talk about transferring the store to Goodyear Tire and Rubber Co. At the meeting, the manager supposedly noted that under the severance plan, McNinch would be entitled to two weeks severance pay for every year he had worked at the company.

However, after the meeting, McNinch claimed he heard that he would be entitled to only a quarter of the severance pay, and further claimed he called the human resources manager and was told by her that he would receive only that 25%.

In 2002, McNinch retired after staying on as a store manager for Goodyear, having never requested anything in writing in regards to the severance plan, and had not made a formal request for plan benefits. He then brought suit against the company in state court on allegations of breach of contract; Goodyear eventually removed the case to federal court under the Employee Retirement Income Security Act (ERISA).

Skretny noted in his opinion that McNinch’s claim for severance benefits never became appropriate for legal review because his employment was never terminated from Goodyear-Dunlop but instead had retired.

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