WEEK IN REVIEW

Chicago board can’t see Cantor

A worried Chicago Board of Trade is pulling out a lot of stops in its battle to keep New York bond house Cantor Fitzgerald LP from starting an electronic futures exchange (InvestmentNews, April 20).

Board president Thomas R. Donovan wrote a 48-page letter to the Commodity Futures Trading Commission in which he couldn’t find a good thing to say about the nation’s biggest dealer in government bonds. And board chairman Patrick H. Arbor said in a separate statement, “The deficiencies in the proposed Cantor exchange could lead to inevitable customer protection and market integrity issues that would hurt all exchanges and customers around the world.”

Mr. Donovan’s letter waves a laundry list of objections and questions Cantor’s fitness to run an exchange because it was fined $500,000 by the futures trading commission last year and ordered to pay $190,000 in 1994 by the Securities and Exchange Commission.

Oh yes: The widow of founder B. Gerald Cantor is suing and countersuing the company, too, in a complex tax case.

Howard W. Lutnick, Cantor’s chairman, is keeping his cool. Last month he told a group attending a business leaders luncheon given by the New York Financial Writers Association that there’s nothing wrong with the Chicago board’s open outcry trading; it’s just old-fashioned and expensive.

Fund growth slows

A skittish stock market and the need to pay taxes apparently kept investors from putting as much as expected into mutual funds last month. Estimates by Trim Tabs Financial Services Inc. in Santa Rosa, Calif., pegged the inflows at $21 billion, down about a third from the previous month.

The Investment Company Institute in Washington reported that in March stock funds took in a net $23.2 billion, bond funds $6.4 billion and $1.9 billion went into funds investing in both, for a rounded total of $31.6 billion.

The record was set in January 1996, at $32.7 billion.

An April slowdown is normal, partly because most of the 401(k) and other retirement plan action takes place in the first three months of the year, but better things had been expected.

Happy as a $100 bill

CoreStates Financial Corp. was officially swallowed by First Union Corp., creating the East Coast’s biggest moneychanger and knocking the Philadelphia bank off the Standard & Poor’s 500 stock index.

That gave Franklin Resources Inc. a chance to crow, glow and grow, since the biggest publicly traded mutual fund company in terms of assets was elevated to the select 500. It’s the first money manager there and all those index funds that track the S&P, led by Vanguard Group’s Index 500 Portfolio, had to buy Franklin. They did so Wednesday, to the tune of 15.6 million shares, more than 40 times the daily average. That sent the San Mateo, Calif., fund company’s stock up about $4.50 to $53.38 as of last Thursday. Vanguard alone bought more than 1.5 million shares.

No indexterity here

United Asset Management Corp., whose 45 affiliates look at index funds the way Dracula regards sunlight, started its first advertising campaign by trying to drive a stake through the heart of (however did you guess?) index funds.

The manager of $213 billion worth of managers is spending a million bucks in the Wall Street Journal in an effort to become more of an “operating company” and build a brand, said marketing head Charles Salisbury, executive vice president. Upcoming ads will focus on international investing and asset allocation.

None of the affiliates, all active managers, were asked to approve the ads, Mr. Salisbury said. Hope nobody plans an index fund.

Morningstar rising

Chicago’s Morningstar Inc., shining with the success of its mutual fund rating operation, is coming out this month with something called StockInvestor, aimed at do-it-yourselfers. The monthly publication will assign a symbol — a moon maybe? — to stocks it considers undervalued (InvestmentNews, March 9), “indicating the amount of confidence in each stock’s estimated intrinsic value.”

Pension dispute kicked upstairs

Employers who want to keep the stock market gains on money their employees invest in contributory retirement plans caught a break when the Supreme Court agreed to review a lower court ruling.

At issue is whether a much-amended retirement plan becomes in effect a new plan, subject to distribution of any surplus. At stake is the $1 billion surplus in the Hughes Aircraft Co. pension plan.

A decision is expected next year.

$3.2 million scam, six months at home

New York stockbroker Sheldon Kraft was sentenced to six months home detention and three years probation in a stock manipulation and money laundering conspiracy involving the now-bankrupt Systems of Excellence Inc. teleconferencing outfit.

According to court documents, he got $3.2 million in cash and stock from the company’s chairman, Charles O. Huttoe, in return for touting the stock along Wall Street. Mr. Huttoe is serving 46 months.

A federal judge in Alexandria, Va., citing Mr. Kraft’s cooperation, rejected prosecutors’ request to put him away for 16 months. He’s the fifth felon convicted in the case.

But do they listen?

Steven Roach, the perpetually bearish chief economist for Morgan Stanley Dean Witter & Co., is the most-read analyst on Wall Street, First Call Co. reported. Nobody, including Mr. Roach, who is on the road, can explain why. As Marshall Front, who runs a $1.2 billion money management firm in Chicago, said, “He’s thoughtful, he’s intelligent, but his comments have missed the mark.”

Meanwhile, a Greenwich Research Associates survey showed that Richard Strauss of Goldman Sachs & Co. is the guy to listen to if you’re trading brokerage and asset manager securities and Sallie Krawcheck of Sanford C. Bernstein & Co. makes the “most useful calls” in the same field. Putnam Lovell de Guardiola & Thornton Inc.’s new hire Dean Eberling (until recently one of Salomon Smith Barney Inc.’s hottest e-mailers) was voted to have the best understanding of the “factors” of the business.

By the way, the press release from the Greenwich, Conn., company says the survey is confidential. Be sure not to tell anybody.

Peace, at last

PaineWebber managing director Orhan Sadik-Kahn, 69, and noontime friend Inga Banasewycz, 28, a Russian-born former model, settled their differences privately and she withdrew her $3.5 million lawsuit in New York. . .National Australia Bank Ltd. is expected to bid for GE Capital’s $96 billion mortgage servicing portfolio. That would make it the biggest U.S.mortgage processor, waltzing like Matilda with more than $200 billion on the books. . .Green Tree Financial Corp. chairman Lawrence M. Coss is in line to haul in $30 million if he quits within two years of Conseco Inc.’s $6.5 billion takeover. . .Bank mergers haven’t hurt consumers, Federal Reserve Board Governor Laurence Meyer told the House Banking Committee.

Bloomberg News contributed to this report