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Q: What technologies are having the greatest impact on sales and distribution?
A: Given the magnitude that technology continues to play within the financial services industry, FUSE fielded a survey earlier this year to specifically determine the technological impact on the sales process of investment products. Survey respondents rated how certain technologies will impact sales and distribution over the next three years. On average, survey respondents stated that tablets would have the most impact on sales over the next few years. In fact, nearly 30% said they will change the face of sales forever. More than half (57%) of survey respondents provide tablets to sales/distribution personnel. Also, larger firms have adopted the use of tablets at a faster pace than smaller firms, in addition to firms with a retail focus compared to firms with an institutional focus. Cloud computing was ranked second for having the greatest impact on sales and distribution over the next three years. Cloud computing has become an emerging theme that is gaining investor attention. Forrester Research projected total public cloud revenues to rise 27% annually to nearly $160 billion in 2020, up from $15 billion in 2010. IDC also predicted that while global IT spending increased by 6% in 2011, spending on public cloud computing services will grow five times faster.

Q: Will the ETF industry maintain its momentum moving forward?
A: We do see ample opportunities for the industry to expand; however, the pace at which ETFs are bringing in new assets is no longer growing at the clip that we’ve seen in past years. In fact, AllianceBernstein recently forecasted that the $1.1 trillion U.S. ETF market will grow by a compounded annual rate of 13%, hitting $6 trillion by 2025, far below expectations of a $10 trillion industry by 2025. In terms of actively managed ETFs, the industry hit a recent roadblock with the SEC’s rejection of Huntington’s request to convert an open-end fund to an ETF. Had Huntington received the green light, we expected other firms to follow its lead. As noted in Barron’s, Citigroup reported that it is getting more difficult for new fund companies to stand out. The ETF industry remains highly concentrated—the top 10 ETF providers account for 95% of AUM. Also, the article highlights that new products account for 2% of industry ETF growth so far this year, down from 6.4% last year. 

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Total estimated outflows from long-term mutual funds were $3.20 billion for the week ended Wednesday, August 19, according to the Investment Company Institute (ICI). Investors poured $4.7 billion into World Equity while Domestic Equity witnessed $5.2 billion in redemptions. For the fourth consecutive week, Taxable Bond remained in the red with $2.3 billion in net outflows. Meanwhile, Municipal Bond managed to gather a mere $50 million after being in negative territory for the prior three weeks. Hybrid funds remained in redemption mode with $361 million in net outflows.

Source: Investment Company Institute

Total estimated outflows from long-term mutual funds were $1.54 billion for the week ended Wednesday, August 12, according to the Investment Company Institute (ICI). Despite redemptions, this was a dramatic improvement from the $8.87 billion in outflows during the prior week. World Equity was the only broad asset class to gather sales with $3.8 billion in net inflows. Investors pulled $2.3 billion from Domestic Equity after yanking $7.3 billion during the prior week. Fixed income funds suffered $2.7 billion in net outflows from Taxable Bond and $10 million from Municipal Bond. Hybrid funds shed $394 million in net outflows on the heels of a 2015 record $608 million in net outflows during the previous week.

Source: Investment Company Institute

Don't Miss This (8/18/15)
1) Social Security Turns 80, Loved by Americans of All Ages
    AARP | 8/13/2015

Because… The 80th anniversary of Social Security is drawing our attention to this retirement income source again. The survey result that shows Americans of all ages, including the younger generation, consider it “a core part of retirement security” suggests financial services firms need to work harder to reduce public reliance on Social Security. A recent Heritage Foundation report pointed out that Social Security ran a $39 billion deficit in 2014 and could run dry in 2035. In addition to investor education, financial firms should work with policy makers to identify areas for improvement and minimize the shortfall.

2) Goldman Sachs to Reorganize an Emerging Market Fund
    SEC Filings | 8/14/2015

Because… Goldman Sachs, the firm associated with coining the term “BRIC,” is now merging away its BRIC Fund. This suggests the concept of focusing on a few of the largest emerging markets has lost its luster. Exposure to broader emerging markets allows greater flexibility in stock selection, and limiting portfolio managers’ country choices may prevent them from discovering the best investment ideas. Some individual markets may post outsized returns in certain years, but fund managers may have a better chance of maximizing diversification and optimizing risk-adjusted performance by augmenting the investable universe.

3) Nuveen and TIAA-CREF to Host Responsible Investment Webinar on Asset TV
    Business Wire | 8/17/2015

Because… While we believe the webinar is held to support the launch of new TIAA-CREF socially responsible investment (SRI) funds, we think the discussion will benefit all who are interested in this investment theme. The introduction of socially responsible strategies from a growing number of firms -- such as AssetMark’s expansion of its investment solutions to include a faith-based strategy and BlackRock’s filing for the Impact U.S. Equity Fund, as well as Morningstar’s planned debut of the industry’s first environmental, social, and governance (ESG) scores for global mutual and ETFs later this year -- points to increasing demand for SRI products.

Total estimated outflows from long-term mutual funds were $8.85 billion for the week ended Wednesday, August 5, according to the Investment Company Institute (ICI). Following a similar pattern to last week, growing anticipation regarding an interest rate hike prompted investors to pull $4.3 billion from Taxable Bond funds and $106 million from Municipal Bond. Once again, World Equity was the only broad asset class in positive territory with nearly $3.5 billion in net inflows. Domestic Equity remained in the red with $7.3 billion in redemptions after shedding $5.2 billion during the prior week. Hybrid funds experienced $608 million in net outflows—its largest redemptions since the first week of January.

Source: Investment Company Institute

Total estimated outflows from long-term mutual funds were $6.93 billion for the week ended Wednesday, July 29, according to the Investment Company Institute (ICI). In anticipation that the Federal Reserve will hike interest rates, which have not been raised since June 2006, investors pulled $4.6 billion from Taxable Bond funds and $88 million from Municipal Bond. World Equity was the only broad asset class in positive territory with nearly $3.8 billion in net inflows. Meanwhile, Domestic Equity shed $5.2 billion during the week. Hybrid funds fell back in redemption mode with $790 million in net outflows.

Source: Investment Company Institute

Total estimated inflows to long-term mutual funds were $3.69 billion for the week ended Wednesday, July 22, according to the Investment Company Institute (ICI). All broad asset classes gathered sales with the exception of Domestic Equity’s $3.2 billion in redemptions. Investors poured $5.1 billion into World Equity—its largest intake in three months. After three consecutive weeks of outflows, bond funds gathered $1.6 billion in net inflows, with the majority coming from Taxable Bond’s $1.3 billion. Hybrid funds rebounded from $211 million in net outflows during the prior week and managed to capture $233 million.

Source: Investment Company Institute

Don't Miss This (7/21/15)
1) Wells Fargo Survey: Affluent Investors Feeling Good on Financial Health; Yet More than Half Worry about Losing Money in the Market
    Wells Fargo | 7/15/2015

Because… While it is natural for affluent investors to be concerned about losing money, financial firms need to help them boost confidence in the market. Often the worry is caused by ignorance. A lot of investors still remember the severity of the financial crisis without realizing that the S&P 500 Index, which generally represents the broad stock market, produced double-digit gains in five of the past six years since 2009. Asset management firms should also introduce what risk control mechanisms are put in place and how they mitigate market volatility to alleviate investor concerns.

2) Ivy to Introduce Two Sub-Advised Funds     
    SEC Filings | 7/17/2015

Because… Partnerships between traditional and alternative asset managers have become increasingly common. TCW just launched its first alternative mutual fund a week ago sub-advised by Gargoyle Investment Advisor, an options-based hedged fund manager. Both sides should be able to reap benefits from such an alliance. Traditional asset managers can leverage alternative managers’ expertise and quickly establish a foothold in the alternative investment space without developing in-house capabilities. On the other hand, alternative asset managers can remain focusing on their core strength without worrying about operational, marketing, and distribution issues.

3) Multi-Manager TDFs: The Future or a Pipedream?
    NAPA | 7/20/2015

Because… The use of multiple managers makes a strong case because no investment firm can excel in all asset classes. Open architecture removes conflict of interest, as it takes financial incentives of underlying funds out of the asset allocation process and ensures that asset allocation decisions align with plan demographics. Engaging multiple external managers also fosters competition among investment firms, which should benefit plan sponsors and ultimately participants. However, the cost of hiring external managers may drive fund expense ratios higher.

Total estimated outflows from long-term mutual funds were $1.07 billion for the week ended Wednesday, July 8, according to the Investment Company Institute (ICI). World Equity was the only broad asset class to rake in sales, with $4.6 billion in net inflows. Investors pulled $2.4 billion from Domestic Equity, but this was an improvement from the $5.5 billion in net outflows during the prior week. Taxable Bond suffered $2.9 billion in redemptions while its Municipal counterpart witnessed $287 million in net outflows. Hybrid funds remained in negative territory with $10 million in net outflows, somewhat of a recovery from the $523 million in redemptions from the prior week.

Source: Investment Company Institute

fuse survey
Currently, passive strategies account for 23.8% of mutual fund and ETFs assets under management. What will that number be in five years? 25%
Greater than 40%

General Membership Meeting
- 5.01.13
Mutual Funds and Investment Mangement Conference
- 3.17.13

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