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CNN Live At Daybreak

Mutual Funds and Employee Investors Hardest Hit By Enron Slide

Aired November 30, 2001 - 05:25   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DARYN KAGAN, CNN ANCHOR: Twenty-five minutes past the hour. Let's go ahead and check out business news. Analysts saying that all is left for energy trading giant Enron is bankruptcy. It was once a world leader but now it's revealed that it has engaged in murky business deals and over stated profits, and that's causing investors to flee and the stock prices to plummet.

More now from Deborah Marchini.

(BEGIN VIDEOTAPE)

DEBORAH MARCHINI, CNN CORRESPONDENT (voice-over): Investors who think they're watching the Enron drama from afar might want to think again.

RICHARD PETERSON, THOMSON FINANCIAL: I think, you know, Enron is probably held indirectly by millions of individuals, both in terms of mutual funds, public employee pension plans and even those in 401Ks. So the exposure is widespread.

MARCHINI: Anybody with money in an index fund owned Enron, until now. Fund managers had to sell after Standard and Poor's kicked the company out of the S&P 500 on Wednesday. Other stock funds held Enron, too. The biggest included Alliance Capital, Janus, Putnam, Barclays and Fidelity. Sources close to Janus say it sold everything before the downgrade. And with the stock in a steady slide, it's likely others lightened their positions as, well.

Caught with less warning were the bond funds. Many held on to the bitter end, sharing the faith of the rating agencies that a merger with Dynegy would bail them out.

JAY DIAMOND, GRANT'S FINANCIAL PUBLISHING: Well, if you own a taxable bond mutual fund that, as its charter has to own investment grade bonds you probably, your fund probably owned Enron. In September, those bonds may have been valued on the books at 95 cents on the dollar. Well, if they're marked accurately in the December statement, those bonds are now going to be worth 25 cents.

MARCHINI: That hit will affect not only direct investors, but those who invested through retirement plans as well.

(on camera): For most individuals, the impact of the Enron implosion will be small. Though Enron was huge, it does not appear that any one fund had that much of it, enough to do real harm.

(voice-over): Regrettably, the investors most affected worked for Enron. Much of their retirement money was invested in Enron stock. And for a month, they were prevented from selling that stock while the plan changed managers and the stock price slid.

Deborah Marchini, CNN Financial News, New York.

(END VIDEOTAPE)

KAGAN: And you can find more details on the story and other business news at CNNMoney -- at the CNN "Money" magazine Web site. That's money.CNN.com. Real easy to find there. You can also find it by clicking through our CNN.com Web site, as well.

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