Post by Tim Collins on Jun 1, 2009 14:55:48 GMT -7
www.reuters.com/article/marketsNews/idUSN0146540220090601
Investors wary of ride in new General Motors
Mon Jun 1, 2009 3:25pm EDT
By Svea Herbst-Bayliss
BOSTON, June 1 (Reuters) - When carmaker General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) rolls off the lot as a retooled company, U.S. pension and mutual funds may not be there for the ride.
The Obama administration's bankruptcy plans include splitting General Motors, an icon of American capitalism, into an "Old GM," where liabilities would be eliminated and debt restructured, and a "New GM." It would inject another $30 billion in return for a 60 percent stake in the company, which filed for bankruptcy protection earlier in the day.
But bad memories run deep for portfolio managers whose funds lost billions of dollars when GM's share price collapsed from $90 nine years ago to below $1. The few who still own shares are about to see those stakes vanish altogether.
"It will be quite some time before GM has a portfolio presence that resembles anything like its proud past," said Jeff Tjornehoj, research manager at Lipper Inc, a funds research firm owned by Thomson Reuters.
GM, known for its Cadillac, Chevrolet and Buick units, will lose its classification as a large, growing company -- which means that hundreds of fund managers who put about $294 billion into funds specializing in large-capitalized growth companies will skip GM when it eventually sells new shares.
The company will also be dropped from all U.S. stock indices, including the benchmark Standard & Poor's 500 Index, making it off limits to "index funds" that mimic market benchmarks by buying companies included in a specific index.
Investors ranging from the California Public Employees Retirement System, the country's biggest pension fund, to giant mutual fund firm Vanguard Group, may want to avoid a replay of recent decades, when GM lost market share while costs rose.
Thirty years ago, GM controlled roughly half of the U.S. auto market. Now it has about 13 percent.
"This has been an extremely painful process as fund managers were continually forced to write their holdings down," said Geoff Bobroff, head of a fund consulting firm in East Greenwich, Rhode Island. "People will not forget this."
GM once held the same dominant role in portfolios as it did in the economy. But in recent months, as the prospect of bankruptcy loomed, fund managers made a speedy exit.
At the end of March, Invesco Ltd's PowerShares FTSE RAFI Consumer Goods portfolio was the only fund to own more than 1 percent of GM, having allocated 4.6 percent of its assets to the 100-year-old carmaker.
Other fund complexes, ranging from State Street Global Advisors to Vanguard to Barclays Global Investors, held such thin holdings that they did not register as a sizable stake in any single fund, research analysts at Lipper said.
"For fund managers the impact of GM's bankruptcy will be limited," Bobroff said. "They knew it was coming and so it is really more that an icon has vanished rather than something meaningful for their portfolios." (Reporting by Svea Herbst-Bayliss. Editing by Jason Szep and Gerald E. McCormick)
© Thomson Reuters 2009. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Investors wary of ride in new General Motors
Mon Jun 1, 2009 3:25pm EDT
By Svea Herbst-Bayliss
BOSTON, June 1 (Reuters) - When carmaker General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) rolls off the lot as a retooled company, U.S. pension and mutual funds may not be there for the ride.
The Obama administration's bankruptcy plans include splitting General Motors, an icon of American capitalism, into an "Old GM," where liabilities would be eliminated and debt restructured, and a "New GM." It would inject another $30 billion in return for a 60 percent stake in the company, which filed for bankruptcy protection earlier in the day.
But bad memories run deep for portfolio managers whose funds lost billions of dollars when GM's share price collapsed from $90 nine years ago to below $1. The few who still own shares are about to see those stakes vanish altogether.
"It will be quite some time before GM has a portfolio presence that resembles anything like its proud past," said Jeff Tjornehoj, research manager at Lipper Inc, a funds research firm owned by Thomson Reuters.
GM, known for its Cadillac, Chevrolet and Buick units, will lose its classification as a large, growing company -- which means that hundreds of fund managers who put about $294 billion into funds specializing in large-capitalized growth companies will skip GM when it eventually sells new shares.
The company will also be dropped from all U.S. stock indices, including the benchmark Standard & Poor's 500 Index, making it off limits to "index funds" that mimic market benchmarks by buying companies included in a specific index.
Investors ranging from the California Public Employees Retirement System, the country's biggest pension fund, to giant mutual fund firm Vanguard Group, may want to avoid a replay of recent decades, when GM lost market share while costs rose.
Thirty years ago, GM controlled roughly half of the U.S. auto market. Now it has about 13 percent.
"This has been an extremely painful process as fund managers were continually forced to write their holdings down," said Geoff Bobroff, head of a fund consulting firm in East Greenwich, Rhode Island. "People will not forget this."
GM once held the same dominant role in portfolios as it did in the economy. But in recent months, as the prospect of bankruptcy loomed, fund managers made a speedy exit.
At the end of March, Invesco Ltd's PowerShares FTSE RAFI Consumer Goods portfolio was the only fund to own more than 1 percent of GM, having allocated 4.6 percent of its assets to the 100-year-old carmaker.
Other fund complexes, ranging from State Street Global Advisors to Vanguard to Barclays Global Investors, held such thin holdings that they did not register as a sizable stake in any single fund, research analysts at Lipper said.
"For fund managers the impact of GM's bankruptcy will be limited," Bobroff said. "They knew it was coming and so it is really more that an icon has vanished rather than something meaningful for their portfolios." (Reporting by Svea Herbst-Bayliss. Editing by Jason Szep and Gerald E. McCormick)
© Thomson Reuters 2009. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.