General Motors will shift large cash reserves out of blue-chip stocks and into junk bonds and hedge funds to try to ensure a high rate of return for its pension-fund investments, the Financial Times reported. The latter two instruments carry with them an increased element of risk, but the Financial Times quoted a senior GM executive as saying the $83 billion pension fund would cancel that because of its breadth. For the past two years, GM has carried a $19.3 billion pension-fund deficit, a drag on earnings, but it said late last week that is close to being reimbursed.
A $250 million penalty, apparently the first of its type against a mutual-fund company, was agreed to by Alliance Capital Management, sources close to the matter said Friday. Alliance had warned last month that it probably would incur a significant penalty for its alleged link to the market-timing scandal being investigated by New York Attorney General Eliot Spitzer. Reportedly, it already had agreed in principle to lower its fees for managing investment portfolios as part of a settlement with Spitzer's office, so the large cash settlement is both precedent-setting and implies serious wrongdoing, analysts said. The cash would be set aside to reimburse Alliance investors who were hurt by trading abuses, reports said.
In a move seen as easing investor worries of a new buying spree, electric utility giant E.On AG said it will invest just under $17 billion over the next three years to integrate and consolidate its operations. The company is based in Düsseldorf, Germany, and is the nation's largest supplier of energy. In a multibillion-dollar deal earlier this year, E.On acquired Ruhrgas, the largest German company in that sector, and suggested it still had enough financial flexibility to carry out further strategic acquisitions.
H&R Block Inc., the largest preparer of tax returns in the US, acknowledged Friday that it is being investigated by the Securities and Exchange Commission in connection with its policy of offering loans to customers in anticipation of their refunds. The probe is expected to cover the period up to and including November 2002. Block, which is based in Kansas City, has settled some class-action lawsuits alleging that it misled customers by not disclosing the full cost to them of the short-term loans.