Dutch parliament agrees to bring forward increase of retirement age

Those that were chasing high returns are now paying with increased retirement age. Aivars Lode 

EUROPE – The Dutch parliament has agreed to bring forward to the year 2019 an incremental increase of the official retirement age to 66, beginning with a one-month increase next year.

Subsequently, the pensionable age will be increased to 67 by the year 2024, when additional increases will be linked to life expectancy.

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According to the Pensions Agreement between the social partners and the government, the current retirement age of 65 was to increase to 66 in 2020 and 67 in 2025.

The new measures are part of a package of spending cuts aimed at lowering the budget deficit to 3%.

They were agreed by the coalition partners of the collapsed government – VVD and CDA – as well as left-of-centre party GroenLinks, liberal democrat party D66 and right-of-centre party ChristenUnie.

Together, the parties represent 77 of the 150 seats in parliament. During a parliamentary debate held on Thursday, however, the two-seat right-of-centre party SGP and independent MP Hero Brinkman also pledged support for the agreed spending cuts.

The new coalition also agreed to reduce tax-facilitated pension accrual in 2014, as well as the budget for employees who continue working after the official retirement age.

In addition, the budget for increasing the number of older workers in the workforce will be frozen.

Dutch labour unions have fiercely contested the bringing forward of retirement-age increases, which they see as a breach of the Pensions Agreement.

Corrie van Brenk, interim chairwoman at AbvaKabo, the largest civil service union, said: "Early retired workers in hard jobs, such as ambulance staff and firemen, are facing a shortfall of their state pension AOW of 6.5% or even 13%."

However, the employers organisations MKB, VNO-NCW and LTO have praised the package of cuts, noting that the measures secure the financial stability of the Netherlands and contribute to the recovery of its international image.

The agreement on spending cuts will stand at least until a new government takes the reins after the elections on 12 September, according to outgoing prime minister Mark Rutte.

Author: Leen Preesman

Baby boomers redefine the terms of retirement

This follows the same path as what happened in Australia in the 90’s a resetting of expectations for retirement. Aivars Lode

Bonnie and Carl Espinshade spend six months a year at the Sun-N-Fun Resort and Campground in Sarasota, packing their days with tennis, volleyball, workouts and running their businesses from the sunporch.

This makes the 65-year-olds typical of the first wave of baby boomer retirees just showing up in Florida: relentlessly athletic and healthy, and planning to do some kind of paying work for the rest of their lives. The significant numbers of boomers expected to follow the Espinshades to Southwest Florida are likely to stand out among other generations of retirees, and could make their mark in ways others have not.

Among boomers born before 1959, the top two concerns about aging involve being able to afford health care and staying productive and useful, according to recent studies by the MetLife Mature Market Institute.

By choosing communities with recreational and fitness facilities — what people in the housing industry call "active adult" enhancements — boomer retirees can tackle both of these fears. They are betting that staying in shape will help them spend more time working and playing, and less time in the hospital, than their parents.

The boomers' strategy of exercising their way through later life takes precedence over crown moldings and granite countertops, according to housing specialists.

"Health and well-being are of such vital importance to them," said Scott Mairn, vice president of sales in South Florida for Pulte Homes. "I think this generation of buyer focuses mostly on lifestyle; the floorplan is almost secondary."

This shift toward a more vigorous retirement lifestyle shows signs of continuing for the next 20 years or so. At 48, Paul Reihing is among the youngest of boomers. He and his fiancee, 52, shopped around Florida before buying a vacation condo in November at the Isles of Palmer Ranch — hoping to live there full time eventually. Both marathon runners, the Atlanta couple were interested in a place where they could train and ride bikes.

The Legacy Trail that passes through Palmer Ranch was "one of the things that drew us," Reihing said. "The neighborhood has all the amenities we were looking for."

Pulte's DiVosta division developed the Isles on Palmer Ranch, where recreational options include not only the standard pool and clubhouse, but a fitness center and lighted courts for tennis, basketball and bocce ball. Mairn said these days, prospective buyers often ask to see those features first, before even walking into a model home.

"From the folks at this age that we talk to, they feel that their mental attitude is younger," Mairn said. "They really feel like they've got a long time to live and enjoy this lifestyle. They say they're in better shape now than they were 10 years ago."

What boomers want

A recent survey of baby boomers for the Consumer Federation of the Southeast found that while the economy has delayed retirement for some, almost 60 percent of those between 57 and 65 said their plans are on track.

The five most important factors in their choice of a retirement destination differed little from those of older Americans: health care, housing costs, climate, taxes and recreational activities.

But look more closely at those broad categories, and a distinction emerges. While they like to have crack cardiologists and surgical teams nearby just in case, boomers also care about wellness centers and spa treatments, placing more emphasis on preventive health than their parents did.

When it comes to housing costs, they are more likely to sacrifice square footage inside — like formal dining rooms and guest suites — in favor of more outdoor recreational space.

The nature of that space is also changing.

The evolution in great American retiree pastimes from golf and shuffleboard to biking and basketball has been gradual in Florida, but is expected to gain momentum dramatically in the next five years.

In the 20 years they have been visiting Sarasota from Pennsylvania, the Espinshades have seen the difference. First lured to the Sun-N-Fun resort by its lighted tennis courts, they often found themselves short on people to play with in the early years. Now, they said, newer neighbors are less inclined to sit chatting over coffee or a drink at the resort's bar, and more likely to be seen in motion.

"In the last couple of years, it's really changing fast," said Carl Espinshade. "People are a lot more active than they were when we first came."

"And all these activities are volunteer-run," Bonnie Espinshade added. "Once you have a good nucleus of people, it really takes off. They just put in eight new pickleball courts" — a miniaturized version of tennis, easy on the knees — "and they're all full."

Sun-N-Fun, which draws some 1,500 snowbirds from the U.S., Europe and Canada each year, also recently opened a $5.5 million fitness center with an indoor pool. Its range of sports and entertainments — and lack of emphasis on fancy digs — mirrors the strategy of The Villages near Ocala, where aggressive marketing to active adults has resulted in a robust population increase even during Florida's lean years.

The buzzwords

"Active adult" has been a buzzword in the retirement housing industry for more than five years, but the recession put a damper on projects investing in the idea. In the 2010 U.S. census, Sumter County — home of the Villages — was the only Florida county to rank in the top five for growth in the 65-and-older population.

More active-lifestyle communities are coming online in Florida, said Peter Dennehy, vice president of John Burns Real Estate Consulting in California.

Dennehy mentioned a large Minto Group project to reposition Sun City for the boomer market.

Here in Lakewood Ranch, a just-opened new development — Esplanade — plans a 5,000- square-foot fitness and activity center to open this summer.

"The active adult projects in Florida are doing well," Dennehy said. "Obviously, the Villages is a standout. They're not all blowing the doors off, but they're doing better than the rest of the market because it's a somewhat more discretionary market."

Boomer buyers who put a premium on outdoor and fitness amenities are willing and able to spend more for them, he said. Others of their generation whose finances have taken a hit from the recession are not expected to make the traditional move to the Sunbelt.

"Our theory is that there will be a different type of retiree," Dennehy said. "Tastes have changed considerably and the amenities are different. There will be a little less focus on golf and more on active pursuits and socializing."

For retiree Bonnie Espinshade, the main benefit from all the sports she plays is the friendships that have built around them.

"The hard thing for people up North to understand is that when you have this circle of friends here, it's like family," she said. "When you have friends at home you may see them once a week or talk on the phone. Here, when you're out on your bike, you say hello to countless people by name every day.

"You can't explain that to people; you have to experience it," she said.

"People in Sarasota may look older, but they're out doing things all day long."

Why muni bondholders may take it in the teeth after all

Several munis are currently in bankruptcy mediation. If they come out in a lot better fiscal shape than before they went bust, watch out, says expert

So where do you go to get yield? Aivars Lode

April 12, 2012 3:56 pm ET

Meredith Whitney was a little off her game when it came to the municipal bond market. But she may yet be vindicated — perhaps not her prediction of mass defaults, but the red flag she raised about the financial state of cities and towns.

“She got the analysis of the situation right, in terms of budgets and the fiscal stress on local governments,” said Matt Fabian, managing director of research firm Municipal Market Advisors. “But bondholders are at the top of the pile [of stakeholders.] Local governments really have to be under duress before they hit bondholders.”

The outcome of several bankruptcy proceedings, however, could change the default landscape dramatically, said David Dubrow, a bankruptcy lawyer at Arent Fox LLP.

Jefferson County, the largest county in Alabama, filed for Chapter 9 bankruptcy protection in November and is currently arguing in court for the right to cut payments on more than $3 billion in bonds issued to fund its sewer system. Harrisburg, Pa., filed a month earlier because of massive debts from an incinerator project. Stockton, Calif., may soon become the largest city to declare bankruptcy in U.S. history. It currently is in a 60-day mediation period.

If these issuers come out of their situations in better condition, it could encourage other stressed municipalities to follow suit. “If some of these entities are successful in restructuring collective bargaining agreements and paring their debt, it may become more acceptable for others to try — and we'll see more bankruptcy filings,” Mr. Dubrow said.

Certainly, the stress on municipal issuers is getting worse.

Local governments' two major sources of revenue — income taxes and property taxes — have been hit by the weak economy and the collapse in real estate prices. And the liability side of the equation looks even worse, with huge obligations such as Medicaid, employee health care and pension costs becoming increasingly hard to meet. With post-crisis stimulus spending by the federal government petering out and austerity measures likely around the corner, the fiscal problems will get crammed down on local governments still further.

“Everything flows downhill to the local level,” said Naomi Richman, a managing director in public finance at Moody's Investors Service. “The trade-offs are getting tougher and the cuts are now really starting to hit.” Moody's has a negative credit outlook for U.S states and local governments as a group, with the weak U.S. economy presenting the biggest risk of further deterioration.

Admittedly, very few muni issuers have taken their troubles out on bondholders. The Rhode Island Legislature, in fact, passed a law last year preventing municipalities in the state from doing so. It gives holders of general-obligation municipal bonds first lien on the issuer's assets in the case of a Chapter 9 bankruptcy. Bondholders are effectively protected in Rhode Island.

In the case of Central Falls, R.I., which filed for Chapter 9 bankruptcy last July because of $80 million in unfunded pension and retiree health benefit obligations it couldn't cover, the town's pensioners got whacked — not the town's creditors. Their benefits were cut by 50%, while bondholders suffered no losses.

Few states are going as far as Rhode Island to shield lenders. But most municipal issuers are doing everything they can to avoid defaulting on their bonds. They are slashing budgets, cutting jobs and raising revenue. The wave of defaults anticipated by Ms. Whitney last year was more of a trickle, with 124 issuers defaulting on a total of $6.41 billion in debt, according to data from Municipal Market Advisors. Most of those borrowers were unrated issuers, and a high proportion of them were entities in the health care and housing development sectors.

According to Moody's research, only 71 rated issuers have defaulted in the U.S. since 1970 and just five of those defaults were on general obligation bonds. Fifty-one of them were in the housing and health service sectors.

The level of defaults in the muni market, while higher since the financial crisis, remains very low.

“[Ms. Whitney] was accurate identifying the fiscal trends, but her conclusion was wrong,” said John Loffredo, co-portfolio manager of two muni bond funds — one investment grade and one high yield, for Mackay Shields, a division of New York Life Investments. “She didn't take into account the ability of states and municipalities to rewrite contracts.”

While Mr. Loffredo expects the number of defaults to increase this year, he believes they will remain lower than in the taxable bond market. Strong demand and limited supply of muni issues this year will help the market. So would the potential raise in tax rates next year, which would make tax-exempt munis more attractive to investors. He favors the BBB market, where he expects spreads to narrow this year, while investment-grade bondholders will likely just get their interest coupons.

“We think it's going to be choppy for the next 12 months," said Mr. Loffredo. "But we'll end up about where we are now.”

Many unhappy returns: Billionaire sues UBS for $1.7B over tax advice

That is why transparent yield is important and knowing for certain that the tax is paid! Aivars Lode

  

Property magnate Olenicoff claims bank never told him he had to render unto IRS on offshore accounts; 'no one's fault but his own'

April 9, 2012 9:36 am ET

UBS AG and billionaire Igor Olenicoff are scheduled to clash in court today over his claim that the bank bears blame for his failure to declare $200 million in offshore accounts on U.S. tax returns.

Olenicoff, 69, a real-estate developer, pleaded guilty in 2007 to filing a false tax return, admitting he didn't tell the Internal Revenue Service about his offshore accounts for seven years. He was sentenced to two years' probation and ordered to pay $52 million in back taxes, fines and penalties.

In 2008, he sued Zurich-based UBS, the largest Swiss bank, claiming it traded excessively in his accounts, engaged in racketeering and committed fraud by not telling him he owed U.S. taxes. He seeks as much as $1.7 billion in damages. Arguments on the bank's motion to dismiss the case are set for today before U.S. District Judge Andrew Guilford in Santa Ana, California.

“UBS did not tell Olenicoff to lie on his tax returns about having an interest in foreign accounts,” the bank said in an April 2 court filing. “Olenicoff knowingly and willfully lied on his tax returns. Olenicoff's felony conviction for subscribing to a false tax return is no one's fault but his own.”

If Guilford lets the lawsuit go to trial on May 8 as scheduled, the case could offer new insights about Swiss bank secrecy and the complex finances of Olenicoff, who built his fortune as the chief executive officer of Newport Beach, California-based Olen Properties Corp.

Jailhouse Testimony

Jurors at a trial may hear videotaped jailhouse testimony from Olenicoff's former UBS banker, Bradley Birkenfeld, the only other defendant remaining of 39 originally sued, court records show. Birkenfeld is serving 40 months in a federal prison in Pennsylvania for helping Olenicoff and others evade taxes. At his sentencing, a prosecutor said Birkenfeld exposed a “massive tax scheme” at UBS while hiding his own dealings with Olenicoff.

UBS “aggressively solicited” Olenicoff and promised his offshore money “would be absolutely protected in safe, legal, effective investment structures, which would not result in tax liability or reporting requirements until the money was repatriated,” Olenicoff said in an April 2 filing. “Those assurances were untrue and UBS knew them to be untrue.”

Olenicoff claims UBS and Birkenfeld told him he didn't have to report his Swiss income to the IRS, which was reinforced by the bank's system of holding mail and not sending year-end tax information to him or the tax agency. Had UBS done so, Olenicoff “would have dealt with the situation before the matter rose to the level of a potential criminal liability,” according to his filing.

Important Question

Larry Campagna, a Houston tax attorney who isn't involved in the case, said Olenicoff's lawsuit raises an important question.

“Did UBS set out to make misrepresentations to U.S. taxpayers to attract their investment funds?” said Campagna, of Chamberlain, Hrdlicka, White, Williams & Aughtry. “If UBS misrepresented facts upon which Olenicoff reasonably relied, then he's got a case. But there's a lot packed into the words ‘misrepresentation and reasonable reliance.'”

Olenicoff pleaded guilty after a three-year criminal probe that included a search of his office and house by IRS agents in 2005. He admitted that from 1998 to 2004, he filed false returns that hid accounts in Switzerland, Liechtenstein, England and the Bahamas.

Criminal Charges

Birkenfeld's evidence helped lead to criminal charges against UBS in 2009. The bank avoided prosecution by paying $780 million, admitting it helped thousands of Americans evade taxes and turning over the names of 250 American clients to U.S. authorities. UBS later revealed another 4,450 accounts.

After that, a U.S. probe of offshore accounts mushroomed. Prosecutors charged almost 50 taxpayers and two dozen foreign bankers or advisers with tax crimes. Seven current or former bankers at Credit Suisse AG and Switzerland's oldest private lender, Wegelin & Co., were indicted. Some 33,000 more Americans avoided prosecution by declaring offshore accounts to the IRS.

Olenicoff sued UBS, Birkenfeld and others in 2008. The April 2 filing claimed they “grossly mismanaged and churned Olenicoff's assets to their own benefit,” while hiding from him millions in “secret profits they were making by placing his money at risk.”

He claimed UBS put his assets in risky investments known as Double Currency Units, or DOCUs. They combined a money market investment with a call option on one currency against a second currency.

‘Vast Bulk'

“Birkenfeld never should have allowed Olenicoff to place the vast bulk of his assets in DOCUs,” according to the plaintiff's April 2 filing.

Olenicoff claimed the bank engaged in racketeering by violating a 2001 agreement with the IRS to serve as a “qualified intermediary.” It was supposed to provide the IRS with tax reporting and withholding on accounts held by U.S. clients.

Olenicoff built an empire by buying land and building industrial and office parks and apartments in four U.S. states.

The developer, who began banking offshore in 1980, said in a 2009 interview that he opened an account in the Cayman Islands and eventually moved tens of millions of dollars to the Bahamas, where he began banking with Barclays Plc. (BARC) He said he got a call out of the blue in 2000 from Birkenfeld at the Geneva office of London-based Barclays, where he worked before joining UBS.

Olenicoff Befriended

Olenicoff said Birkenfeld set out to befriend him and asked to visit him in Newport Beach to discuss his Barclays holdings, which exceeded $90 million. Birkenfeld then left Barclays, was hired at UBS and became Olenicoff's private banker.

Olenicoff said Birkenfeld visited him in Miami, invited him to a regatta and encouraged him to come to Switzerland. In Geneva, he said, Birkenfeld and other bankers promised UBS would provide estate planning and meet IRS reporting requirements.

In its court filings, UBS said Olenicoff lied to the IRS “for at least three years before he met UBS.” After his guilty plea, he filed a Report of Foreign Bank and Financial Accounts for 1998 to 2004, disclosing an interest in 15 foreign accounts in 1998.

“Even Olenicoff cannot blame UBS for the tax fraud he committed years before he met anyone affiliated with UBS,” the bank said in its April 2 filing.

UBS said that while it admitted in its February 2009 deferred-prosecution agreement that it helped clients evade taxes, it “has never acknowledged, and it is not true, that UBS misled its own clients regarding the need to disclose accounts and pay taxes.”

‘Potentially Criminal'

The bank also said Olenicoff knew by November 2004 that his offshore accounts were “viewed as improper, indeed potentially criminal,” by the IRS. It cited a December 2004 e-mail he sent to Birkenfeld about his IRS audit.

UBS also denied in court papers that it mismanaged Olenicoff's DOCU investments, and asserted that it fully disclosed the risks. Olenicoff made more than $9 million, or 2.3 percent, in 128 separate transactions, the bank said.

--Bloomeberg News--

Another reason to root for dividends: GDP boost

More and more investors are looking for stable returns. Aivars Lode

By Nin-Hai Tseng, Writer April 5, 2012: 12:39 PM ET

If companies don't want to spend their cash hiring more workers, they ought to consider paying higher dividends. The impact on personal incomes and spending might be more than they realize.

Release your grip, corporate America

FORTUNE – For the past few years, a tepid economic recovery has caused America's biggest companies to hoard a growing stack of cash. It's a thorny issue. Not just to the millions of jobless who wonder why corporate America can't just use its plentiful cash reserves to hire more workers, but also to shareholders asking for higher returns on their investments.

But 2012 could turn out differently. Companies have slowly come around, with shareholders likely to see higher payouts this year. Even if firms only paid out a modest 10% of their liquid assets, it could raise annual disposable income by nearly 2%, according to a new report by Capital Economics. With more money in shareholders' pockets, even if they naturally save a bulk of it, such a payout could still raise annual consumption by 1%.

If you believe the estimates, then it's certainly a reminder that companies should really step up.

Last month, Apple (AAPL) announced it would pay its first dividend in 17 years, leading some to speculate if others in the tech world might think differently about their cash reserves. Though Cisco (CSCO), Oracle (ORCL) and Microsoft (MSFT) pay dividends, the companies are still among the nation's biggest cash hoarders.

MORE: Why dividends still beat buybacks

Apple, with about $97 billion in cash amassed from huge demands for iPhones and iPads, ranks at the top of the list of U.S. corporations with lofty reserves, according to Capital Economics. Microsoft follows with approximately $52 billion and Cisco with about $47 billion. Google (GOOG) ranks fourth, with $45 billion. And now that Apple is giving its shareholders a payout, that makes Google the only tech company with a market value exceeding $100 billion that doesn't offer a dividend.

Since the latest recession, executives uncertain about the economy have held onto their money. Cash levels at the end of 2011 rose to $672 billion from $42 billion at the end of the recession in mid-2009. If you include short-term investments, liquid assets nearly doubled to $2.2 trillion during the same period.

Indeed, that's a lot of cash to go around. Companies obviously aren't going to pay out all their cash reserves. If they did return that $2.2 trillion to shareholders, personal incomes would rise by nearly 20%.

It's true raising dividends might not work for every company, but it's hard to argue that it would exactly hurt executives. Even with Apple's plans to dole out dividends and provide stock buybacks, the move isn't expected to put a dent in Apple's coffers. The plan is expected to cost the company more than $10 billion a year over the next three years, while the company attracts a sizable sum of cash – about $1 billion a week in the last holiday season alone.

MORE: Apple's dividend and buyback: What the analysts are saying

This certainly helps build the case for changing the mentality of Silicon Valley, where leadership has historically been cautious with their cash. And like the late Apple CEO Steve Jobs, who resisted giving dividends, tech companies would rather save cash for possible acquisitions and other investments. In a way, raising dividends might actually signal companies aren't planning enough for future growth. Such arguments become less convincing during economic environments like today's, since cash reserves keep rising and aren't likely returning much for companies at a time when interest rates are at record lows.

To be fair, companies have started relaxing their purse strings. During the first three months this year, net dividend increased by 27.6% to $24.2 billion over the same period during the previous year, Standard & Poor's reported Tuesday. There were 677 dividend increases during the first quarter, a 32% rise compared with the 510 increases during the same period in 2011.

"Dividends had another great quarter, with actual cash payments increasing over 11% and the forward indicated dividend rate reaching a new all-time high, with or without Apple," said Howard Silverblatt, S&P Indices' senior index analyst in a statement.

To be sure, he adds, payout rates remain historically low. The percentage of net income paid out in dividends, which historically averages 52%, remains near its lows at under 30%.

It remains to be seen where dividends go this year, but thus far they're off to a good start. Perhaps a small boost in consumer spending will come next.

Oil Hedge Fund BlueGold to Liquidate

I love the words used in this story “took bold BETS” is investing in hedge funds and commodities about making bets or making a return? Aivars Lode

Thursday, April 05, 2012               

By Reuters

LONDON (Reuters)— BlueGold Capital, an oil-focused fund that made headlines in 2008 by calling the peak of the market, is liquidating after four years of trading—the last of which put it at the bottom of commodity hedge fund rankings.

BlueGold is conducting an "orderly closure" of its business and expects to return about 98 percent of investor capital before the end of the year, the London-based fund said in a letter to investors on Thursday, a copy of which was obtained by Reuters.

It did not give a reason for its closure. A person who answered the phone at BlueGold's London office declined comment.

BlueGold was one of the worst performers among commodity hedge funds last year, industry data gathered by Reuters shows. It lost 35 percent through 2011 and its asset base shrunk to about $1.2 billion from $2 billion a year as before.

The fund was co-founded by former Vitol oil trader Pierre Andurand, who made his mark with a more than 200 percent gain in 2008 as other rival funds suffered. However, it appeared to veer from its energy roots last year, irritating some investors by placing half its bets on equities and other assets, Reuters reported in December.

An investor who redeemed money from BlueGold in January said he still regarded the fund as "a pretty talented group" that may have given investors concern about the risk it was taking, its apparent change in tack and the rapid growth in assets until last year.

"Performance is always a symptom that something is going wrong, even when things may otherwise seem fine. For instance, if you're constantly hitting the sweet spot, you might be extremely skilled, but you could also either be taking too much risk or getting lucky," the investor said. "In BlueGold's case, they also took in a lot of money, which when fully invested, meant more risk being deployed. And as far as process and trading methodology is concerned, investors also don't like it when you say you're changing your stripes midway."

Mr. Andurand, a 35-year-old Frenchman, has made a name for himself in pursuits as divergent as sports, oil trading and movie-making. Mr. Andurand is an avid kickboxer and former member of the French junior national swimming team. He's also a director at Shangri La, a Chinese movie production company that has three films to its credit, with the latest, "Sin-Jin," due to be released in December this year.

In the oil market, he took bold bets that once paid handsomely for him and his investors. His meteoric rise in trading came after he moved to Singapore in 2000 after earning finance and engineering degrees from top French universities. He started as an oil trader at Goldman Sachs, then climbed the ranks at Bank of America and Swiss oil trading giant Vitol before launching BlueGold with Vitol colleague Dennis Crema in early 2008.

Several oil traders said Mr. Andurand had earned a $20 million bonus in one year at Vitol, after helping the company book a trading profit of $200 million. The bonus figure could not be confirmed, but in 2008 Mr. Andurand and Mr. Crema both made the ranks of the world's top 20 hedge fund earners, with payouts of $90 million apiece, according to research firm Hedgeable.

Mr. Andurand's near-perfect run in 2008 became the stuff of oil market lore. He accurately anticipated crude's rise to a record $147 a barrel in July of that year, then shifted positions to cash, ending BlueGold's exposure as prices fell to as little as $33 in December, people who tracked the fund said. The fund was up 209 percent that year.

BlueGold also made money in 2009, returning a commendable 55 percent.

Its winning streak ended last year as oil prices were locked in a range through most of the year, thanks to intermittent spikes in the dollar and a mixed global economic outlook, before breaking out in a late rally.

Even before BlueGold's fortunes turned, Mr. Andurand faced major losses. In 2003, he was a principal oil trader in the Bank of America team that suffered a loss of up to $89 million in the jet fuel market when the SARS virus led to a collapse in air travel worldwide.

In February 2010, BlueGold was briefly thrust into the spotlight when a sudden crash in oil markets brought the fund down as much as 14 percent. It, however, recovered to finish up nearly 13 percent that year.

By Joshua Schneyer and Barani Krishnan

Clients want alts in their IRAs — but advisers' hands are tied

As we have mentioned before individuals are looking for yield. Aivars Lode

Technical, regulatory issues a huge hurdle; demand on the rise

By Darla Mercado

April 3, 2012 3:22 pm ET

IRA alternative investments

Investors are asking their advisers for access to alternative assets, but advisers are leery of placing clients into these investments.

Both groups, however, are well aware of the benefits of investing into alternative assets, such as real estate, hedge funds and private notes as a means of diversifying a portfolio, according to data from Pensco Trust Co., a custodian for direct alternative investments in retirement accounts.

In February, the firm polled 1,000 people nationwide, along with 365 financial advisers with at least $10 million in assets under management.

Two out of three advisers polled said that investing in alternative assets can help build wealth for investors, and 80% them said that their clients have expressed interest in using alternative assets. Meanwhile, about three out of four Americans familiar with retirement accounts are interested in adding these investments to their individual retirement accounts.

But regulatory scrutiny, as well as tough broker-dealer compliance rules on the use of alts, have largely deterred advisers from adding them to clients' portfolios. Only one in 10 of the polled advisers said they have the capability to add alternatives.

“In recent months, the top five adviser networks in the country have begun to scrutinize the assets clients are holding, such as nontraded assets,” said Kelly Rodriques, chief executive of Pensco. “The adviser and the client may want these investments, but the institutions' administrative capabilities limit that.”

The Securities and Exchange Commission and the North American Securities Administrators Association have issued warnings about the pitfalls of self-directed IRAs, including lack of information surrounding alternative investments. Meanwhile, nontraded real estate investment trusts in IRAs can come with their share of problems.

Tougher regulations have made it clear to large broker-dealers that it won't be easy to administer these alternative assets, Mr. Rodriques said.

He added that clients working with his firm largely lean toward private stock, in which they invest in a growing company. At the same time, hedge fund holdings are also becoming more commonplace. Distressed real estate and the use of private notes have also captured investors' interest, he said.

Denmark's PKA sets up investment unit to focus on alternatives

Pension funds realigning themselves for yield and stable returns through investments in infrastructure and having transparency into returns. Aivars Lode 

DENMARK – Labour-market pensions group PKA is setting up a separate investment firm to focus on alternatives, targeting DKK12bn (€1.6bn) in investment over the next three years.

The new subsidiary – PKA AIP (Alternative Investment Partners) – will invest in private equity, woodland, agriculture and infrastructure, including wind energy, according to PKA.

Article continues below

Jens Henrik Staugaard Johansen, managing partner in PKA AIP, said: "In the last few years, PKA has gradually increased its level of investment in private equity, as well as infrastructure, agricultural and woodland, and the new company will be a natural extension of this strategy.

"We will become a close-knit little team that can concentrate on further strengthening the investment process to improve long-term profit," he said.

PKA said it was separating these activities from its investment department to increase the focus on this type of investment.

This would happen by cooperating more closely with other players in the market and by taking over some of the activities that have been managed externally up to now, it said.

Apart from Staugaard Johansen, partners in the new company are Anders Dalhoff and portfolio manager Christian Drews-Olesen.

PKA AIP officially started up on 1 April, and by the end of 2012, the team should consist of 5-6 staff, according to the plan.

Peter Damgaard Jensen, PKA's managing director, said: "PKA will continue to invest in so-called alternative investments, and we have created these opportunities by establishing PKA AIP, which will be able to use all its resources for just this.

"At the same time, the DKK12bn that the firm will invest shows we are taking this seriously."

The DKK160bn (€21.5bn) pensions group, which manages five healthcare-sector pension funds, said earlier this year it would step up investment in alternatives such as agriculture, commodities and infrastructure.

This would allow it to spread risk and achieve stable returns despite big swings on the financial markets, Damgaard Jensen said at the time.

Separately, PKA has recently taken the first steps in a major equities revamp, axing some traditional mandates to boost exposure to new sources of return such as low volatility, dividends and merger arbitrage.

The entire equities portfolio is being reengineered over the course of this year to take in a wide range of risk premia – or sources of return – to improve its risk-adjusted return and cut investment costs.