FUSE Blog

Don't Miss This (1/26/16)

1) OppenheimerFunds Enters Smart Beta Space
    OppenheimerFunds | 1/22/2016

Because… Unlike some other traditional asset managers that have built their ETF capability from scratch, OppenheimerFunds’ acquisition of VTL Associates’ RevenueShares ETFs gives the firm an immediate access to a group of ETFs with long-term track records. Since six of eight ETFs were launched in 2008 and 2009 (with another one hitting the 3-year mark by the end of September this year), the firm is able to provide historical data, such as trading volume, daily volatility, portfolio characteristics, risk statistics, and five-year returns, for investors to perform their own competitive analysis. The availability is extremely important in the smart beta ETF space where many products have not been in the marketplace long enough to show their mettle.

2) Smart beta continues to confound advisers
    Investment News | 1/25/2016

Because… The advisors’ confusion is legitimate. There has been no empirical evidence that rules-based smart beta strategies have consistently outperformed traditional market-cap indexed strategies under different market conditions, so investors may question whether different weighting schemes can add true value to their portfolio. In addition, the proliferation of smart beta products can easily overwhelm advisors, making it hard for them to determine which one to gain exposure to. Therefore, fund firms should ensure investors have a thorough understanding of benefits and risks of their particular strategy, circumstances in which the strategy works well, and certain applications from an investor’s perspective.

3) Vanguard CEO Urges Industry to Slow Down on ETF Rollouts
    ThinkAdvisor | 1/25/2016

Because… While we encourage innovation, we second the Vanguard CEO’s suggestion to slow the pace of ETF introductions. We believe there is room for more products, but on the other hand, we have seen funds liquidated even before their one-year anniversary. As broad market-based ETFs are already offered by major players, ETF sponsors are increasingly looking to cover finer slices of capital markets. However, some niche strategies are vulnerable as they are unlikely to catch on with investors. ETF providers should work with their distribution partners to generate practical ideas, validate the concepts, and define the market positioning before the fund launch so that new products can better meet investors’ specific needs.




Don't Miss This (1/12/16)

1) SEC Announces 2016 Examination Priorities
    SEC | 1/11/2016

Because… The SEC’s planned scrutiny of ETFs and variable annuities will push product providers to move compliance into the forefront of risk management. Since any compliance failure could damage brand value, compliance officers need to ensure their compliance programs strictly adhere to regulatory requirements. Trading practices, sales recommendations, and information disclosure are among this year’s key areas of focus. Strong internal controls should be established and enforced to avoid potential legal entanglements. The management team and board of directors at these firms should also play a more proactive role in overseeing the compliance function as it is part of their oversight responsibilities and they are held accountable for any breach of fiduciary duties.

2) Morgan Stanley Names Operating Chief as Lead of 'Digital Offering'
    Investment News | 1/11/2016

Because… Morgan Stanley is another wirehouse after Merrill Lynch to develop a robo advice platform. The digital offering could attract more young investors to the firm, and the chance of turning to a full service advisor is increased when their portfolio assets grow over time. While Schwab’s success of amassing $5.3 billion in its first year indicates the demand is very strong, whether the Morgan Stanley platform can also be a hit will depend on its asset allocation algorithm, pricing structure, account minimum requirement, underlying investment options, account management capability, ease of use, and availability of live support.

3) Amidst the Market Carnage, Liquid Alt Funds Lived Up to Their Promise
    Investment News | 1/11/2016

Because… Unfavorable market conditions in 2015 and early this year are a perfect time to test the validity of alternative investments. If they can hold water as anticipated, they will be able to attract more investors. According to FUSE’s estimates, alternative strategies mutual funds had $211.8 billion in assets as of November 2015, down 0.1% from a year ago. These funds collected $6.1 billion in the first 11 months of 2015 after garnering $26.7 billion throughout 2014. The much slower pace of raising new assets suggests that investors are questioning their ability to weather the market storm.




Weekly Net Flows Report, 12/30 Data (1/8/16)

Total estimated outflows from long-term mutual funds were $12.40 billion for the eight-day period ended Wednesday, December 30, according to the Investment Company Institute (ICI). The year ended with all broad asset classes in negative territory with the exception of Municipal Bond, which experienced its 13th consecutive week in the black. Its $2.2 billion in net inflows represented its largest intake in more than six years. Meanwhile, investors yanked $6.8 billion from Taxable Bond, which once again, led redemptions. World and Domestic Equity suffered $3.1 billion and $2.9 billion in outflows, respectively. For the 11th straight week, Hybrid fund remained in the red, with nearly $1.8 billion in redemptions.

Source: Investment Company Institute





Money-Fund Yields Are Rising After the Fed Move (1/6/16)

Prior to the Federal Reserve’s interest rate hike in mid-December many firms had already converted their prime money market funds into government money market funds. Since the hike, not only has the number of firms that have decided to convert prime funds into government funds steadily increased but so has the spread between the yields. Although early in the cycle, we think this increase highlights the elevated pressure on money market funds as investors will continue to look to bank products that provide higher yields.

Source: Morningstar, Inc. and Crane Data LLC




Don't Miss This (1/5/16)

1) Global ETF Industry Grabs Record Cash in 2015: BlackRock
    Reuters | 1/3/2016

Because… The record high inflows of global ETFs manifest once again the popularity of this investment vehicle, which will draw attention of asset managers that have not stepped into the world of ETFs. In the U.S., although flows into ETFs did not surpass the record set in 2014, the sales of $228 billion were still remarkable. As of end November, YTD sales of ETFs were nearly six times of those of mutual funds. Meanwhile, the concentration in top ETF providers (i.e., iShares and Vanguard) and products with a particular investment theme (e.g., WisdomTree Europe Hedged Equity and the Deutsche X-trackers MSCI EAFE Hedged Equity ETF) indicates newcomers are facing daunting challenges in playing catch-up.

2) Year-end Investor Sentiment Flattens, Matching a Two-Year Low, According to John Hancock Survey
    PR Newswire | 1/4/2016

Because… With the DJIA posting the worst start of the year in eight years and the S&P 500 ending the first trading day with the biggest loss since 2001, the investor sentiment could stay low for a long while. The market outlook reports from Wall Street firms we have reviewed so far did not paint a rosy picture for the year either. Asset managers should therefore appease investor apprehension proactively by sharing approaches to navigate market volatility, stressing the need for staying the course without being affected by headline news, and offering investment solutions that can minimize risks and cope with the market precariousness.

3) Mutual Funds Run by Stockpickers Fall Short in 2015, Extend Losing Streak
    Reuters | 1/4/2016

Because… Active asset managers may be discouraged by the data that shows only 46% of the 3,232 actively managed equity funds tracked by Lipper outperformed their relative benchmark. Fund firms have been attempting to beat the market by making contrarian bets, placing a cap on the fund size to prevent the asset bloat, or trimming portfolio holdings to focus only on the best-of-the-best ideas. However, asset managers should keep in mind that no matter what creative strategies they have developed, distinguishing themselves for the sake of standing out should not be the goal. Demonstrating the viability of their strategies with solid track records can eventually win over investors.




Don't Miss This (12/22/15)

1) SSgA Files for SPDR SSGA Gender Diversity Index ETF
    SEC Filings | 12/18/2015

Because… Besides SSgA, Goldman Sachs and Hartford also filed for the S&P 500 Environmental & Socially Responsible ETF and Hartford Environmental Opportunities Fund, respectively, last week. The number of firms that incorporate environmental, social, and governance (ESG) factors into their strategies has apparently increased significantly. According to a recent HSBC report, ESG-based investing has grown from close to zero a decade ago to an estimated 30% of professionally-managed assets globally today. However, fund providers should keep in mind that while the ESG-themed investments may resonate with some investors’ values, not all have successfully gathered assets. Solid performance, reasonable fees, and proactive marketing are still needed for ESG-focused products.

2) Victory Capital to Acquire RS Investments
    Victory Capital | 12/18/2015

Because… Despite the lack of high-profile deals, we have witnessed quite a few acquisitions in the asset management arena this year, such as Delaware Investments’ takeover of Bennett Lawrence Management and Calamos’ acquisition of Phineus Partners. The competitive environment, the challenge from passively managed products, and the need for revenue diversification will continue to drive cash-rich firms to explore potential acquisition targets. On the other hand, small and mid-sized firms feeling pinched by rising operational costs and limited resources will look for opportunities to widen their distribution network.

3) Vanguard to Expand Active Fixed Income Offerings with Broadly Diversified Core Bond Funds
    Vanguard | 12/21/2015

Because… Vanguard only offers the Emerging Markets Government Bond Index Fund, so the filing of an actively managed Emerging Markets Bond Fund will fill a major product line gap. Industry-wide, 17 out of 99 Emerging Markets Bond mutual funds and 3 out of 22 Emerging Markets Bond ETFs had assets of more than $1 billion as of the end of September, indicating the competition in this asset group is less intense than in many other asset categories. While we expect Vanguard to continue its low-cost strategy for this new offering, we believe how the firm will make the case for investing in this market segment and explain its risk control approach are important at a time when investors pulled $8.4 billion from this category this year through November.




Weekly Net Flows Report, 12/9 Data (12/18/15)

Total estimated outflows from long-term mutual funds were $15.15 billion for the week ended Wednesday, December 9, according to the Investment Company Institute (ICI). Once again, all broad asset classes were in the red with the exception of the $825 million in net flows for Municipal Bond, which has remained in positive territory for 10 consecutive weeks. Taxable Bond led outflows with $7.3 billion in redemptions. Investors pulled $5.2 billion from Domestic Equity and a record $1.2 from World Equity. Hybrid funds witnessed $2.3 billion in outflows, nearly twice the amount from the prior week.

 

Source: Investment Company Institute

 




Don't Miss This (12/15/15)

1) Third Avenue to Liquidate Junk Bond Fund that Bet Big on Illiquid Assets
    Reuters | 12/11/2015

Because… The ramifications of halting investor redemptions could be profound. The SEC could contemplate new regulations to better protect innocent investors after proposing a rule in September that would require open-end funds to adopt liquidity risk management programs. Asset managers will have to examine their own exposure to illiquid assets, reassess their liquidity measures and disclosure policies, and address any concerns investors may have. Investors will learn first-hand the concept of liquidity and its role in the investment decision-making. Their demand for a higher level of transparency and caution against illiquid investments could slow down the growth of funds looking to tap into illiquid markets for enhanced returns.

2) JP Morgan to Launch the Diversified Alternative ETF
    SEC Filings | 12/14/2015

Because… According to Morningstar, Alternative ETFs had assets of $44.1 billion as of the end of November. The group raised $8.4 billion this year through November, more than doubling the 2014 flows of $3.7 billion. In comparison, Alternative mutual funds, with assets of $165.4 billion, collected $8.6 billion, declining 54% from the same period a year ago. However, the Alternative ETF category is dominated by leveraged and inverse funds, which accounted for 79% of the total Alternative ETF assets as of end September. The small asset size of Alternative ETFs with hedge fund strategies means it would be easier for the new JP Morgan ETF to stand out from the competition.

3) Retirees Can No Longer Afford to Live on Fixed-Income Investments, S&P Capital IQ and SNL Research Finds
    PR Newswire | 12/15/2015

Because… A recently published Prudential study discovered that 40% of millennials aren’t saving for retirement at all and those who are aren’t investing aggressively enough. Both reports point to the need to increase allocation to equities. Some target-date fund providers have already realized the problem of insufficient retirement savings and adjusted asset class weightings accordingly. More importantly, asset managers should make the investing public aware of the consequence of being too conservative and teach them how to use analytical tools to find the gap between their current assets and potential retirement income needs and how to refine their portfolios to respond to the changing market environment and adapt to new financial realities.




Weekly Net Flows Report, 12/2 Data (12/11/15)

Total estimated outflows from long-term mutual funds were $11.16 billion for the eight-day period ended Wednesday, December 2, according to the Investment Company Institute (ICI). Once again, all broad asset classes were in the red with the exception of Municipal Bond, which gathered $918 million in net inflows. Domestic Equity led redemptions with nearly $8.0 billion in net outflows followed in a distant second by Taxable Bond’s outflows of nearly $2.0 billion. Hybrid funds suffered $1.3 billion in redemptions while investors pulled $890 million from World Equity—its largest outflows since late August.

Source: Investment Company Institute




Don't Miss This (12/8/15)

1) Today’s Retirees Offer a Cautionary Tale With Insights for Future Generations
    Transamerica | 12/2/2015

Because… This Transamerica survey is both informative and insightful. Many people procrastinate saving for retirement because they believe they will eventually get by no matter what. The financial realities and advice shared by today’s retirees can alert them to change their mindset and take a more active attitude. The earlier-than-expected retirement and little retirement transition assistance from employers suggest that people have to take the initiative in building a larger nest egg for their retirement. If financial firms can draw people’s attention to the importance of saving early and consistently, acquiring financial knowledge, and obtaining professional help, they are doing the investing public a huge favor.

2) Study: Americans Lag In Financial Literacy
    Financial Advisor | 12/3/2015

Because… The inability to grasp basic financial concepts displayed by some Americans is very concerning. While financial firms should continue to emphasize investor education, certain groups of investors that have shown the least financial knowledge should be given a higher priority. Firms could leverage results of various investor surveys conducted by other financial organizations, define their own target markets, and customize marketing materials to facilitate their understanding. The focus on specific demographic groups can make it easier to get messages across and maximize the effectiveness of education programs.

3) BlackRock's Kapito Says ETFs Will Double in Three to Four Years
    Bloomberg | 12/8/2015

Because… With assets of $2.1 trillion as of end October, the projection seems aggressive, but it is not impossible. From 2009 to 2014, the rolling three-year sales growth averaged at 80%, culminating in net flows of $238.8 billion in 2014. While we are not sure if the year-end rush into ETFs could break the monthly record of $52.5 billion set in December 2014, it’s almost a sure bet that 2015 net flows will top $200 billion again. Investors’ increased comfort with ETFs, the participation of reputable asset managers, and the belief in passive investing will continue to propel the growth of the ETF industry.




Weekly Net Flows Report, 11/24 Data (12/4/15)

Total estimated outflows from long-term mutual funds were $8.35 billion for the six-day period ended Tuesday, November 24, according to the Investment Company Institute (ICI). With the exception of Municipal Bond which gathered $642 million in net inflows, all broad asset classes experienced redemptions for the second consecutive week. Investors pulled $3.5 billion from Domestic Equity and $3.3 billion from Taxable Bond. Hybrid funds suffered nearly $1.8 billion in net outflows while World Equity remained in the red with $369 million in redemptions.

Source: Investment Company Institute




Don't Miss This (12/1/15)

1) Wells Fargo Launching 'Completely Different' Target Date Funds that Take an Active Approach
    Investment News | 11/24/2015

Because… Wells Fargo is not the only firm that offers two target-date fund (TDF) series, and we expect more asset managers to follow suit. The launch of a new series with different glide path and investment strategies demonstrates that the TDF providers are increasingly responding to various investor needs. Even for people planning to retire in the same year, their risk tolerance, current savings balance, spending habits, anticipation of future retirement life, and confidence in investment markets are all different. Though the new Wells Fargo series has not built a track record, the incorporation of tactical allocation, volatility management, and hedging strategies could appeal to some plan sponsors and participants.

2) $25B Institutional Money Manager Takes a Leap into Retail
    Investment News | 11/30/2015

Because… Institutional money managers may leverage established performance records of existing institutional portfolios, but their expansion into the retail market will not be easy without challenges. They have to get their new funds onto different distribution platforms and seize marketing and PR opportunities to introduce their products. Their lack of retail market know-how and brand awareness among individual investors could be a hindrance to an immediate success. Pzena’s experience as a sub-advisor would help, but perseverance and dedication are still needed in the retail endeavor.

3) Managed Accounts Go High Tech
    Planadviser | 12/1/2015

Because… While the integration of technology into managed accounts represents a laudable trend, plan sponsors and service providers need to fathom why the take-up rate remains low despite the growing demand for advice and guidance. The reluctance to pay for the service out of their own pocket, the expectation for plan sponsors to cover all costs, the disbelief that the advisory service is worth the charge, and the unwillingness to share personal financial conditions and delegate the full control of asset allocation are among the reasons that many investors have not embraced the managed account program. If these concerns are not addressed, even the technological advance would not enhance the adoption rate.




Don't Miss This (11/24/15)

1) Confidence and Reality Often at Odds When Planning for Retirement
    LIMRA | 11/17/2015

Because… Uncertainties about life expectancy, future living expenses and medical costs, Social Security benefits, and evolving market conditions can all undermine an individual’s confidence in his/her retirement security. Many people do not have a formal savings plan because they either have not realized the importance of planning or do not feel motivated to save. Therefore, for financial firms, offering product solutions is not enough. It is more important to encourage and inspire people so they can change their attitude and develop a positive mindset to take actions.

2) BlackRock Targets ETF Investors with Flexible Currency Hedging
    Bloomberg | 11/19/2015

Because… The planned ETF launch is noteworthy because of the funds’ flexibility in terms of currency hedging. Investors with international market exposure all face the question of “to hedge or not to hedge.” Most of them do not possess sufficient investment acumen to make a sound decision. Besides, unpredictable currency swings make it difficult even for professionals to forecast the direction of the currency movement. While we do not know now how effectively the dynamic approach of the new funds will be in managing currency risks, the attempt to take some pressure away from investors is still commendable.

3) Survey Reveals Misconceptions about Investment Performance and Risk
    TIAA-CREF | 11/23/2015

Because… The misconceptions revealed by the latest TIAA-CREF survey calls for more education on the part of asset managers. Educational efforts should be geared toward both the investing public and financial journalists. While we credit reporters for democratizing investment knowledge for most of the time, their coverage of short-term performance and asset flows from time to time is partly to blame for investor myopia. With the year-end approaching, articles focusing on the race of short-term returns and flows will be ubiquitous. Investment firms need to take every possible opportunity to steer the press into taking a long-term perspective so as not to mislead indiscriminate investors.




Weekly Net Flows Report, 11/11 Data (11/20/15)

Total estimated outflows from long-term mutual funds were $2.42 billion for the week ended Wednesday, November 11, according to the Investment Company Institute (ICI). Domestic Equity led redemptions with $2.4 billion in net outflows, but this was a significant improvement from the $12.1 billion suffered during the prior week. World Equity rebounded from negative territory with $1.1 billion in net inflows. After leading sales with $2.1 billion last week, Taxable Bond fell into the red with $1.0 billion in redemptions while Municipal Bond collected $314 million. For the fourth consecutive week, Hybrid fund suffered outflows, with $477 million in weekly redemptions.

Source: Investment Company Institute




Don't Miss This (11/17/15)

1) Schwab Reduces Minimums on Mutual Fund OneSource and Improves Access to Investing
    Schwab | 11/16/2015

Because… While reduced minimums can benefit investors, Schwab’s move could put some fund firms participating in the program into a dilemma. If they maintain their initial investment requirement of more than $100, they may risk losing investors to the competition. If they also lower the threshold to the $100 investment minimum, servicing small accounts may not make economic sense. Fund firms need to conduct a thorough analysis of the pros and cons, including an evaluation of the business generated from the platform and all fees paid to Schwab, investor demographics and activities, and the potential for small accounts to grow over time.

2) Mutual Fund Adviser Advertised False Performance Claims
    SEC | 11/16/2015

Because… The $16.5 million settlement is a blow to Virtus, which also sends a clear message to other fund sponsors that outsource portfolio management to a third-party. Creating an elaborate oversight structure is indispensable for investment advisors in a sub-advisory relationship, as a variety of compliance matters may result in regulatory discipline. In addition to monitoring their sub-advisor’s performance calculation and reporting, fund sponsors also need to ensure the sub-advisor does not deviate from the stated investment mandate, discloses all changes made to their security selection model and risk control system, and addresses any compliance issues in a timely manner.

3) Heads in the Sand, Gen Xers Failing to Secure their Financial Future
    Allianz Life | 11/16/2015

Because… Despite being in their peak earning years, Gen Xers have more financial obligations than other generations. They are better educated than their parents’ generation, but they are often characterized by a high level of skepticism. The responsibility of raising children and taking care of older family members at the same time, the lack of job security, and the memory of the market collapses have given them excuses to put off retirement saving. Financial firms that target this generation should bear its unique traits in mind, develop educational programs that provide unbiased guidance and practical advice, and encourage them to use advisory services to achieve long-term goals.




Weekly Net Flows Report, 11/4 Data (11/13/15)

Total estimated outflows from long-term mutual funds were $10.69 billion for the week ended Wednesday, November 4, according to the Investment Company Institute (ICI). Investors pulled $12.5 billion from stock funds, marking the largest redemptions since August 2011. Domestic Equity was responsible for the lion’s share with $12.1 billion in net outflows while World Equity suffered $461 million in redemptions. Bond funds, on the other hand, remained in positive territory with Taxable Bond and Municipal Bond gathering $2.1 billion and $496 million, respectively. For the third consecutive week, Hybrid funds remained in the red with $776 million in net outflows.

Source: Investment Company Institute




Don't Miss This (11/10/15)

1) New York Life Hires Brian Jacobs to Head U.S. Retail Distribution for MainStay Investments
    New York Life | 10/28/2015

Because… The former president of Direxion will have his work cut out for him. MainStay has been bleeding assets every quarter since 3Q14. After raising $14.9 billion in 2013, the firm was hit by net outflows of $6.6 billion in 2014 and $7.8 billion throughout this year. Marketfield Fund, which collected $13.4 billion in 2013, parted with $7.8 billion in 2014 and $5.2 billion this year. With sales of all asset categories except Municipal Bond landing in negative territory in 3Q15, the picture is not looking rosy for the firm. Although the newly acquired IndexIQ could help MainStay ease into the ETF space, stemming redemptions from its mutual funds should still be a priority.

2) A Money-Managing Robot Is About to Join BofA's Thundering Herd
    Bloomberg | 11/6/2015

Because… As the proverb goes, “If you can't beat them, join them.” Just like the everlasting debate over passive vs. active investing, there does not have to be one winner, as two can co-exist peacefully inside an investor’s portfolio. For traditional advisory firms, it is not wise to ignore the growth of robo-advisors or worry about their threat. Developing their own digital technology platform and providing integrated solutions across market segments that fill evolving investor needs will be a winning strategy to prosper in this increasingly competitive industry. The recent acquisition of The Mutual Fund Store by Financial Engines, on the other hand, is also a testimony to the mutual dependence between robo-advisors and human advisors.

3) BlackRock Announces Changes to iShares Core for Buy-and-Hold Investors
    BlackRock | 11/10/2015

Because… With the latest fee cuts of its already low-cost Core Series, the largest ETF sponsor has ratcheted up the price war again. BlackRock is the best-selling ETF sponsor this year through September with a net $53.155 billion, followed closely by Vanguard with net inflows of $53.144 billion. Last year, iShares ETFs raked in $81.1 billion, while Vanguard garnered $75.8 billion. Although BlackRock seems to have edged out Vanguard, BlackRock had 306 ETFs with $753.2 billion of assets, compared with 68 Vanguard ETFs with assets of $445.7 billion. The comparisons of both time periods show that, on average, flows into a Vanguard ETF more than quadrupled the sales of an iShares ETF.




Weekly Net Flows Report, 10/21 Data (10/30/15)

Total estimated inflows to long-term mutual funds were $4.57 billion for the week ended Wednesday, October 21, according to the Investment Company Institute (ICI). Bond funds continued in positive territory with Taxable Bond attracting $2.7 billion and Municipal Bond gathering $405 million. World Equity reversed outflows from the prior week with nearly $1.6 billion in net inflows. Domestic Equity, however, remained in the red with $70 million in net outflows, but this was a significant tapering from the $1.4 billion shed during the previous week. Hybrid funds slipped back into redemption mode with $60 million in net outflows.

Source: Investment Company Institute




Weekly Net Flows Report, 10/14 Data (10/23/15)

Total estimated inflow to long-term mutual funds were $1.00 billion for the week ended Wednesday, October 14, according to the Investment Company Institute (ICI). For the first time since July 22, bond funds attracted sales given that the Federal Reserve is not expected to increase rates until 2016. Taxable Bond collected $1.8 billion, and Municipal Bond attracted $617 million. Equity funds, on the other hand, fell back into the red with Domestic Equity shedding $1.4 billion and World Equity posting $28 million in net outflows. Hybrid funds managed to reverse its outflows since July 22 with $34 million in net inflows.

Source: Investment Company Institute




Don't Miss This (10/20/15)

1) Bond ETFs Cross $500 Bln Mark for the First Time –BlackRock
    Reuters | 10/16/2015

Because… A comparison of sales data between U.S.-listed bond mutual funds and bond ETFs can reveal how impressive the growth of bond ETFs is. During the 12-month period ending September, bond mutual funds (including both taxable and municipal funds) experienced net redemptions of $5.5 billion, whereas bond ETFs raked in $71.1 billion. Bond ETFs garnered $45.9 billion this year through September, compared with net flows of $2.3 billion into bond mutual funds. The gap is even more dramatic if we take assets into consideration as bond mutual funds held $3.2 trillion of assets as of end September, much larger than the $343.5 billion of assets in bond ETFs.

2) TDFs Start to Go Global
    Planadviser | 10/20/2015

Because… While the shift to a larger international stock and bond exposure is a logical step to take advantage of pricing inefficiency in foreign markets and enhance portfolio diversification, TDF providers should take the initiative to advise the potential impact on their funds. Investors would want to know if the change of the weighting would take on additional costs and risks, how TDF managers guard against risks without significantly raising expense ratios, and whether they could be overweight international markets if they have other international investments outside of the target-date solutions. Fund firms should address these concerns to maintain the comfort level of plan sponsors and participants.

3) Hedge Fund Assets Decline by Biggest Amount Since Financial Crisis
    The New York Times | 10/20/2015

Because… The disappointing performance is one of the reasons for the largest outflows since the 2008 financial crisis. According to Preqin’s latest Hedge Fund Manager Outlook survey, 22% of 150 hedge fund managers admitted poor performance is the biggest challenge now. With sophisticated investment techniques, significantly higher minimum investments, and provisions such as lock-ups and gates to slow down investor withdrawals, hedge funds are expected to fare much better than traditional mutual funds in general. Their high expense ratios add another layer of dissatisfaction to shareholders. Hedge funds’ vulnerability could lead some investors to search liquid alternative mutual funds instead.




Weekly Net Flows Report, 10/7 Data (10/16/15)

Total estimated outflows from long-term mutual funds were $5.75 billion for the week ended Wednesday, October 7, according to the Investment Company Institute (ICI). For the 11th consecutive week, bond fund remained in negative territory with investors pulling $6.3 billion from Taxable Bond while Municipal Bond managed to gather $558 in net inflows. Thanks to World Equity’s $1.6 billion in net inflows, equity funds managed to accumulate $326 million in net inflows after shedding $6.3 billion during the prior week. Domestic Equity remained in the red with $1.3 billion in redemptions. Hybrid funds shed $301 million in net outflows, which was an improvement from the $1.9 billion in redemptions suffered during the prior week.

Source: Investment Company Institute




Don't Miss This (10/13/15)
1) Guggenheim Investments Expands Its Increasingly Popular Defined Maturity Product Suite with Two New BulletShares ETFs
    Guggenheim Investments | 10/7/2015

Because… The expansion of the BulletShares series suggests the continued success of defined maturity bond ETFs at Guggenheim. Funds with target maturities are designed to have declining interest-rate sensitivity, therefore, they are specifically appropriate for investors who look to match their investments with future liabilities. The Guggenheim BulletShares product suite, as mentioned in the press release, already held more than $6 billion of assets since its launch in 2010, reflecting investors’ growing comfort and familiarity with the bond laddering technique. Guggenheim’s educational efforts, despite its leadership position in this space, will help more investors understand how this type of fund works and what benefits they can get.

2) Proposed Sale of Frank Russell Company's Asset Management Business
    Russell | 10/8/2015

Because… We’ve been following the sale of Russell Investments from the beginning. Although the final price of $1.15 billion is lower than London Stock Exchange’s asking price of $1.5~2 billion and the bidding price of $1.8 billion CITIC reportedly offered, the takeover by experienced private equity firms may turn out to benefit Russell in the long run. Both TA Associates and Reverence Capital have been actively working with asset management firms and developed extensive expertise in providing strategic guidance, improving business profitability, and enhancing corporate value. Russell can now maintain its independence and focus on gaining market share without worrying about priorities of a foreign parent.

3) Record Number of ETF Providers Enter US Market in 2015
    ETF Strategy | 10/8/2015

Because… The record number of new entrants bespeaks a flourishing ETF industry and increasingly intense competition among ETF sponsors. While it will not be plain sailing for large firms, small ETF issuers generally face more challenges than their larger counterparts. Smaller firms typically lack the scale to charge lower fees. A brand unknown to the investing public is another obstacle to asset-gathering, unless the ETF manager offers an innovative product that can satisfy particular market demand. Scarce marketing and sales resources also add to the difficulty in terms of fund distribution. Small ETF players will have to collaborate with third-party distributors that are already equipped with effective market penetration strategies.



Active Equity Funds (10/7/15)

Source: Morningstar

While active management has seen an upswing in recent months, fund performance compared to their benchmarks have been lacking. Overall, most of the style box categories have seen a fall in overperforming their benchmark, going from an average of around 47% to an average closer in mid-2010 to around 38% in mid-2015.  However, all categories have seen a pick up since the second quarter,especially small-cap categories.

 

For style alone, the Growth categories for all capitalizations have been the strongest in terms of funds beating the benchmark, with Small Growth in particular performing well, with an 11 month period where at least 50% of funds beat their benchmark over three years. In terms of size, the small cap funds performed the best, where from 2011 to 2013 at least 40% of funds in all small categories were beating the benchmark.





Don't Miss This (10/6/15)
1) ETF Investors Exit Emerging-Market Stock Bets as China Falters
    Bloomberg | 9/30/2015

Because… Morningstar data shows that investors pulled $6.4 billion out of Diversified Emerging Markets ETFs this year through September. Meanwhile, a few asset managers, such as Goldman Sachs, ProShares, T. Rowe Price, Morgan Stanley, and Schroders, have recently unveiled or filed for emerging markets products. Launching funds when their category posts lagging performance is a double-edged sword. On the one hand, risk-averse investors would avoid them with the fear of taking a loss. On the other hand, value investors who believe in the sector will consider a market pullback a good entry point. One benefit of rolling out funds in a falling market is that it helps the funds build a better track record when the market rallies.

2) Advisers Pouring More Money into Smart Beta Funds
    Investment News | 9/30/2015

Because… Although smart beta funds have scored a stamp of approval from advisors, the knowledge about this group of product is still lacking. Asset managers that have introduced or are preparing to introduce smart beta products need to ensure investors are not just following the herd. Smart beta strategies with different approaches, such as equal weighted, risk weighted, or fundamental weighted, represent different underlying philosophies. Fund providers therefore should focus on educating investors about the features and risks of their strategy, the rationale of using such strategies in a changing market environment, the impact of factor exposures on performance, and the implementation of these alternative index strategies in portfolio construction.

3) Calamos Completes Acquisition of Global Long/Short Manager
    Calamos | 10/1/2015

Because… The market demand for alternatives, the need for revenue diversification, and the challenges from passively managed products have driven fund firms to acquire alternative investment boutiques as a viable option for business growth. Calamos has been mired in net redemptions over the past several years. Investors yanked $1.4 billion in 2011, $3.3 billion in 2012, $4 billion in 2013, $1.7 billion in 2014, and $1.8 billion this year through August. With YTD sales of its five largest funds in negative territory and this year’s top seller only raising $28 million, it will take more than the expansion of alternative investment capabilities to turn sales around.



Weekly Net Flows Report, 9/23 Data (10/2/15)
Total estimated inflows to long-term mutual funds were $396 million for the week ended Wednesday, September 23, according to the Investment Company Institute (ICI). After two consecutive weeks in the red, stocks gathered $2.3 billion in net inflows—its largest intake in five months. The overwhelming majority of inflows came from $2.2 billion in World Equity. On the other hand, bonds posted withdrawals for the ninth straight week, with $1.8 billion in net outflows. Taxable Bond suffered $2.4 billion in redemptions while Municipal Bond gathered $628 million—its largest intake in nearly five months. Hybrid funds shed $189 million in outflows to mark their ninth straight week of outflows.


Source: Investment Company Institute


Don't Miss This (9/29/15)
1) 30 Million Recently Tapped Retirement Savings for Emergency     
    Planadviser | 9/23/2015

Because… The survey result that shows 30 million tapped retirement savings for emergency in the past year makes us wonder whether those who have withdrawn money are aware of the damage they have done to their retirement savings, such as a 10% penalty if they are younger than 59 1/2. Besides the tax penalty associated with premature withdrawals, more education may need to be provided to help people understand the power of compounding for wealth accumulation, as well as opportunity costs of leaving an institutionally-priced plan or a tax-advantaged retirement account.

2) Financial Engines Expands Access to Its Investment Advisors
    Financial Engines | 9/23/2015

Because… The expanded access to its advisors at no additional charge should be welcome news to Financial Engines’ customers. Some people who are unsure about the advisory services now have an opportunity to test the water, and they are more likely to enroll in the managed account program if they feel the advice is truly unbiased and practical. Another group of investors may have avoided talking with professionals due to the fear of high fees. With this concern becoming a non-issue, the odds of these individuals seeking professional help should be improved.

3) TD Ameritrade Weighs Charging Fund Companies on Its Commission-free ETF Platform
    Investment News | 9/25/2015

Because… TD Ameritrade offered the largest selection of commission-free ETFs five years ago, but the program has not added new funds since. Now that Schwab has quickly expanded its OneSource to include 211 ETFs and E*Trade provides access to 116 no-commission ETFs, TD Ameritrade has dropped to the third place in terms of the number of commission-free ETFs. While TD Ameritrade still has its advantages in average ETF assets, average expense ratio, and 3-month average daily trading volume over other no-trading-fee programs, the charge, depending on how competitive it will be, will prompt ETF issuers to reconsider the value and desirability of the platform.



Weekly Net Flows Report, 9/16 Data (9/26/15)
Total estimated outflows from long-term mutual funds were $6.36 billion for the week ended Wednesday, September 16, according to the Investment Company Institute (ICI).With the exception of World Equity which gathered nearly $2.0 billion in net inflows, all broad asset classes remained in negative territory. Taxable Bond led redemptions with $3.9 billion while Municipal Bond witnesses modest outflows of $589 million. Investors pulled $3.1 billion from Domestic Equity after yanking $3.0 billion during the prior week. Finally, Hybrid funds shed $722 million during the week.


Source: Investment Company Institute


Don't Miss This (9/22/15)
1) Unique 401(k) Modeling App Ups BlackRock's Value-add for Advisers
    Investment News | 9/18/2015

Because… Defined contribution investment-only (DCIO) providers often focus on rejiggering the pricing structure of their products, revamping the sales force to better penetrate the DC market, or providing thought leadership to capture more participant attention. In fact, developing innovative analytical tools is also an effective way to differentiate a firm from its competitors. American Century introduced a tool nearly two years ago that assesses plan health. Now the BlackRock’s app can simulate different scenarios and project the potential impact of plan changes. Tools like these can help improve the plan design and ultimately boost overall participation.

2) LSE's Sale of Russell Investments to Citic May Collapse
    Bloomberg | 9/22/2015

Because… The news that the sale may fail is not completely out of the blue. There are multiple factors that can break a deal. Besides the unstable market environment and investigations into corporate executives in this case, enterprise goals, management philosophies, business principles, leadership styles, and cultural integration should all be considered. For a cross-border deal that involves a buyer with vastly different political, economic, and social backgrounds, the highest bidding price should not become the determining parameter.

3) Schwab Finds Equities Dominate SDBAs in Retirement Plans
    Planadviser | 9/22/2015

Because… The Schwab report found that equities dominate self-directed brokerage accounts in retirement plans. Similarly, the latest EBRI study revealed that IRA owners increased their equity allocations in 2013. The positive market conditions that brought about strong equity performance may have contributed to the higher exposure to stocks. On the other hand, bond yields are too low to make them appealing. The Fed has instilled more uncertainty by keeping interest rates unchanged. However, asset managers, while helping investors evaluate elevated risks resulted from the greater equity allocation, should remind investors that fixed income is still a key component in a well-diversified portfolio.



Don't Miss This (9/15/15)
1) First Trust to Add Dorsey Wright Dynamic Focus 5 ETF
    SEC Filings | 9/4/2015

Because… The filing makes us wonder if the fund can replicate the success of its sibling, First Trust Dorsey Wright Focus 5 ETF (FV). FV, since its inception on 3/5/14, amassed $4.3 billion as of 9/14/15. Using the DWA Relative Strength Ranking System, the fund generated an YTD return of 6.08% as of the end of August, compared with the S&P 500 Index’s loss of 2.88%. Its one-year return of 12.59% also handily beat the S&P 500’s 0.48%. Despite its high expense ratio of 0.94%, FV garnered $2.8 billion this year through July after raising $1.2 billion in 2014. First Trust may also benefit from Dorsey Wright’s enhanced brand recognition as a result of Nasdaq’s acquisition at the beginning of the year.


2) Top Global Pension Fund Assets Exceed $15 Trillion
    Towers Watson | 9/7/2015

Because… The research of the world’s top 300 pension funds sheds light on the areas asset managers should give their strategic priorities to. Public-sector pension funds accounted for the most (39%) of the total assets, followed by sovereign funds with 28%. In terms of geographic regions, North America continued to hold the largest assets, with the highest five-year annualized growth rate of nearly 8%. While global retirement assets will undoubtedly continue to grow steadily, asset management firms need to identify target markets and develop focused strategies for those tightly-defined market segments instead of trying to satisfy all.


3) Federated Investors’ Money Market Funds to Acquire Approximately $1.1 Billion in Assets from Huntington Money Market Funds
    Federated | 9/9/2015

Because… This is Federated’s third acquisition of money market funds this year. On the one hand, the firm is working feverishly on revamping its money market product line in order to comply with the SEC rule. On the other hand, it is actively seeking takeover possibilities from those that look for an exit. The SEC’s new requirements are putting an additional burden on smaller money market fund providers, which would rather give up the low-margin business entirely. Their departure from the space is giving larger players such as Federated a golden opportunity to build scale.



Weekly Net Flows Report, 9/2 Data (9/11/15)
Total estimated outflows from long-term mutual funds were $5.21 billion for the week ended Wednesday, September 2, according to the Investment Company Institute (ICI). For the first time since February, Domestic Equity gathered sales with $1.8 billion in net inflows. World Equity, which has been driving sales for most of the year, only managed to gather $191 million after posting withdrawals of $1.2 billion during the prior week. Bond funds remained in negative territory with investors pulling $5.8 billion from Taxable Bond and $510 million from Municipal Bond. On the heels of suffering $4.2 billion in net outflows, Hybrid funds remained in the red with $857 million in redemptions.


Source: Investment Company Institute


Don't Miss This (9/8/15)
1) Vanguard Launches Tax-Exempt Bond Index Fund
     Vanguard | 8/25/2015

Because… The first municipal bond index fund from Vanguard could be another blockbuster in the marketplace. Its ETF version (VTEB) will compete head to head with iShares National AMT-Free Muni Bond ETF (MUB), which tracks the same index as VTEB. MUB, incepted on 9/7/2007, has clearly enjoyed the first-mover advantage with larger assets ($5.2 billion as of 9/4/2015) and higher trading volume. However, MUB charges 0.25%, more than double VTEB’s expense ratio of 0.12%. With the potential rate hikes and investors’ tendency to seek tax shelter and safety, VTEB will have a good chance of catching up with MUB.

2) Reenrollment into TDFs a Worthy Investment
    NAPA | 8/27/2015

Because… While re-enrollment can help employees who lack investment knowledge or do not change asset allocation due to inertia, plan sponsors should also consider whether shifting retirement assets from their own investment selection to a TDF is appropriate for others who are capable of making investment decisions. This group of investors may not like the paternalism that takes away their choices. They prefer to have more control of their retirement assets. Therefore, plan sponsors should ensure re-enrollment into TDFs is consistent with plan participants’ needs, their personal circumstances, and financial situations.

3) Van Eck Announces Changes to Market Vectors ETF Product Line
    Van Eck | 9/4/2015

Because… Just as other asset managers are jumping on the smart beta bandwagon, Van Eck is putting four of its own to rest. With combined assets of $16.6 million as of 9/4/15, these funds have not benefited from the smart beta rage, although they have tracked their respective indexes closely. The fund closure reminds fund firms that a rising tide does not lift all boats. Fund providers need to make a greater effort to explain how their approach is distinctive from the competition and how the selected criteria help funds capture market beta in a more efficient way.



Weekly Net Flows Report, 8/26 Data (9/4/15)
Total estimated outflows from long-term mutual funds were $27.33 billion for the week ended Wednesday, August 26, according to the Investment Company Institute (ICI). Amid investor concerns over slowing growth in China and a potential interest rate hike, all broad asset classes suffered redemptions. Equity funds shed nearly $11.0 billion—its largest outflows since October 2012. Investors pulled $9.8 billion from Domestic Equity and $1.2 billion from World Equity, representing the first time this year World Equity fell into negative territory. Taxable Bond experienced $11.4 billion in net outflows, representing its largest outtake since October 2014. Meanwhile Municipal Bond funds shed $715 million during the week. Hybrid funds experienced its largest redemptions since November 2011 with $4.3 billion in net outflows.


Source: Investment Company Institute


Don't Miss This (9/1/15)
1) Are DB Plans More Cost-Effective Than DC Plans?
    NAPA | 8/17/2015

Because… While the paper found that DB plans are not structurally more cost-effective than DC plans and performance differences between DB and DC have narrowed since 2000, we think DC plans can still borrow a page from DB plans in some aspects. Nearly two-thirds of plan assets are invested in mutual funds according to the ICI, whereas DB assets are primarily held in other lower-cost vehicles. In addition, the ability of DC plan participants to assess portfolio risks is limited, unlike DB plan sponsors who use experienced professionals to analyze risks in the changing market environment. This requires DC product providers to focus more on risk management strategies.

2) RS Investments on the Block, Five Firms in the Running
    Investment News | 8/19/2015

Because… After Northwestern Mutual’s sale of Russell Investments, another insurer, Guardian Life, is selling its investment management business. RS Investments had $13.6 billion of assets in its retail mutual funds as of the end of July with 78% in equity funds. By comparison, DoubleLine had a mere $701 million of equity assets out of its total assets of $56.8 billion, whereas Victory already held $16.2 billion of equity assets out of a total of $17.4 billion. How a seller’s products fit into a buyer’s business structure will affect the deal value. The cultural compatibility is also a critical factor to consider for any M&A transaction.

3) Liquid Alts Launches on Pace to Decline in 2015
    DailyAlts | 8/25/2015

Because… The slower pace of liquid alts launches should not be construed as a negative trend. On the contrary, this suggests asset managers are taking a more cautious and prudent approach in product development and introductions. They need to take into consideration not only investor demand, but also their own investment capabilities and the potential of producing robust and repeatable results. Meanwhile, many alts fund providers have realized that bringing new funds to the market without improving investor knowledge would just be a futile effort in the end.



Weekly Net Flows Report, 8/19 Data (8/28/15)
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


Weekly Net Flows Report, 8/12 Data (8/21/15)
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.





Weekly Net Flows Report, 8/5 Data (8/14/15)
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


Weekly Net Flows Report, 7/29 Data (8/7/15)
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


Weekly Net Flows Report, 7/22 Data (7/31/15)
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.



Weekly Net Flows Report, 7/8 Data (7/17/15)
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


Don't Miss This (7/14/15)
1) Wealthfront Sparks Robo Price War, Drops Account Minimum to $500
    Investment News | 7/8/2015

Because… While the drop of the account minimum from $5,000 to $500 may appeal to mom-and-pop investors, it may not benefit the firm in the long run. Morningstar research shows that digital investment platforms with human advisors bring in account balances 10 times higher on average than regular robo-advisors. The lower fees than those charged by human advisors, along with lower account minimums, indicate robo-advisors would need more time to be economically viable. An initiative like this may bring attention to the competition, but robo-advisors could gradually lose financial backing from venture capitalists if they fail to generate profitability as expected.


2) John Hancock Investments Selects Dimensional Fund Advisors to Manage Suite of Multifactor ETFs
    PR Newswire | 7/13/2015

Because…The partnership represents both firms’ first foray into the ETF space. John Hancock ranked #17 for net sales in 2014 among all long-term mutual fund and ETF managers. Moving up the ranks is not impossible as John Hancock is not far behind some of those with a better ranking. We expect the launch of ETFs to attract substantial investor attention because of DFA’s reputation as an enhanced index provider and its solid relationships with loyal advisors. John Hancock’s own powerful distribution network will also help bring the new funds to a wide range of audiences.

3) Mobius to Step Down as Lead Manager of Templeton Emerging Trust
    Bloomberg | 7/13/2015

Because… The resignation of Mark Mobius is worth mentioning because of his influence as a pioneer in emerging market investing. Star managers are currently few and far between, and the investment industry has become accustomed to the team approach instead of betting on the star clout. For fund firms, keeping the manager succession process transparent, ensuring investors understand the reason for the change, and providing adequate product support may alleviate investor concerns and retain existing shareholders. Since Mark Mobius still carries a strong social media following, having him continue sharing his insights and perspectives may help the firm maintain visibility during the transition period.



Weekly Net Flows Report, 7/1 Data (7/10/15)
Total estimated outflows from long-term mutual funds were $6.37 billion for the week ended Wednesday, July 1, according to the Investment Company Institute (ICI). Amid concerns of a Greek exit from the euro zone, all broad asset classes experienced redemptions with the exception of World Equity. With nearly $2.1 billion in net inflows, World Equity has remained in positive territory throughout every week of 2015. On the other hand, investors pulled $5.5 billion from Domestic Equity—marking their largest outflows in nine weeks. Taxable Bond suffered $1.5 billion in net outflows after raking in $16.8 billion during the prior week. However, this record inflow was primarily the result of fund companies converting non-1940 Act products into mutual funds. Municipal Bond fell into the red with $861 million in net outflows during the week. Finally, Hybrid funds bled $525 million in redemptions, representing its largest outflows since the first week of January.


Source: Investment Company Institute


Don't Miss This (7/7/15)
1) Alternative Asset Management 2020: Fast Forward to Center Stage
    PwC | 6/29/2015

Because… Fund firms need to take notice that alternative investments in the PwC report refer primarily to private equity, real assets, hedge funds, and funds of hedge funds. For liquid alternative mutual funds, PwC estimates the demand to surge from $260 billion at the end of 2013 to around $664 billion by 2020. Since many liquid alternative funds have not proved their ability to deliver upside potential in a bull market and downside protection in a bear market, alternative fund managers should focus on strategies with more robust risk control and alpha-capture methodologies in order to satisfy the increasing market demand.

2) Midyear ETF Flows Set New Record Of $101B
    ETF.com | 7/1/2015

Because… The net flows of $101 billion into ETFs represent an increase of 37% from the first half of 2014. Morningstar data also shows 132 ETFs were launched in the first six months, 45% more than the 91 funds introduced last year through June. The strong sales and accelerated product development indicate that while the industry is still riding on a high growth trajectory, differentiating products to stand out from the competition will become much more difficult than ever before. ETF sponsors should expand their lineups at a measured pace without being swayed by short-term investor sentiment.

3) iShares Launches 11 Currency Hedged Funds
    iShares | 7/1/2015

Because… Currency hedging has generated substantial investor interest lately. Two top-selling ETFs in the first half of the year both employ currency-hedged strategies. WisdomTree Europe Hedged Equity ETF and Deutsche X-trackers MSCI EAFE Hedged Equity ETF garnered $14 billion and $10.5 billion, respectively, this year through June, accounting for a combined 24% of the total ETF flows. Fund firms with currency-hedged products need to explain the potential benefits of hedging, the hedging mechanism put in place, and factors that drive portfolio managers to hedge the exposure of underlying currencies.



Don't Miss This (6/30/15)
1) Retirement Assets Total $24.9 Trillion in First Quarter 2015
    ICI | 6/24/2015

Because… IRAs accounted for 30.6% of total retirement assets, remaining the plan type with the most assets. Although DC plans’ market share stood at 27.4% at the end of the first quarter, its market share grew 0.6% from a year ago. In comparison, IRAs witnessed a market share increase of 0.4% during the same 12-month period. IRA assets rose 7.3% over the past year, also slower than the asset growth of 8.3% in DC plans. If DC plan assets continue to expand at a faster pace, the current 3.2% market share gap could be closed in the not-too-distant future.

2) OneAmerica to Acquire BMO's U.S. Retirement Services Business
    BMO | 6/26/2015

Because… The deal, which is OneAmerica’s largest acquisition, will be a boon to the firm as BMO Retirement Services received the top ranking in PLANSPONSOR’s 401(k) DC Survey for the eighth year in a row. Meanwhile, the sale shows BMO’s determination to focus on asset management. BMO garnered $1 billion of retail mutual fund assets in 2014, a significant improvement from a mere $167 million of inflows in 2013. The 20% asset growth within a year and strong flows indicate BMO’s efforts of establishing a greater presence in the U.S. fund market are starting to take shape.

3) Closing Greece’s Exchange Puts Focus on ETFs Without Prices
    Bloomberg | 6/28/2015

Because… With the DJIA down 350 points amid Greek tumult yesterday, ETF shareholders are not the only ones concerned about their investments. Russell’s investment strategists noted in their global outlook for the third quarter published today that the Greek bailout is one of the two key looming events. To alleviate investor worry, fund firms should reach out to shareholders and inform them of their actual exposure to Greece. Portfolio management teams should make their assessment of the potential impact known to the public. Having fund managers and in-house economists available online for questions would also help investors gain confidence in their ability to navigate difficult times.



Weekly Net Flows Report, 6/17 Data (6/26/15)
Total estimated outflows from long-term mutual funds were $3.91 billion for the week ended Wednesday, June 17, according to the Investment Company Institute (ICI). All broad asset classes experienced redemptions with the exception of World Equity, which collected nearly $3.7 billion in net inflows. For the 16th consecutive week, Domestic Equity remained in the red as investors pulled $3.5 billion from these funds. With $4.1 billion in net outflows, bond funds suffered its largest redemptions since mid-December with $3.6 billion flowing out of Taxable Bond and $536 million from Municipal Bond. Hybrid funds slipped into the red with $55 million in net outflows.


Source: Investment Company Institute


Don't Miss This (6/23/15)
1) Pensionmark Introduces Custom TDFs
    Plansponsor | 6/16/2015

Because… The trend towards custom strategies is inevitable, especially for large DC plans, and it will eventually benefit both plan participants and investment management firms that are not recordkeepers. With customized offerings, plan sponsors can blend active and passive investments, add alternative asset classes that are not commonly available in target-date mutual funds, and adjust risk parameters if a pension plan is also offered. Plan sponsors also have the flexibility of selecting top investment managers for different asset classes. However, plan sponsors have to take addition fees into consideration, such as consulting fees, recordkeeping fees, trustee fees, legal fees, and costs associated with developing and continuously monitoring the portfolio.

2) Most Investors Likely to Use Robo-advice: Survey
    Investment News | 6/18/2015

Because… The projection that “the percentage of total investable assets that robo-advisory services manage will jump to 5.6% in 2020 from 0.5% today” seems optimistic if only robo startups were included. While robo-advisors may change the wealth management landscape, we do not expect them to overtake traditional wealth managers in the near future. First, the awareness of robo-advisory services is still low among the general public. Second, investors still need personalized guidance that cannot be provided by online platforms. Third, robo-like offerings from financial giants such as Schwab and Vanguard may slow down the rapid growth of robo-advisors.

3) Goldman Sachs Hires iShares Veteran Tony Kelly for ETF Business
    Bloomberg | 6/19/2015

Because… The hire of an iShares veteran, after shifting Michael Crinieri’s responsibility from trading to ETF product development and distribution last July, is another personnel move that shows the firm’s commitment to the ETF effort. Goldman Sachs Strategic Income Fund, the top seller in 2014 and 2013 which garnered 76% and 78% of the firm’s total sales, respectively, lost its momentum with net redemptions of $3 billion this year through May. With the filing of 11 ETFs last December that included 6 ActiveBeta equity ETFs and 5 hedge fund trackers, Goldman Sachs expects to build its ETF business to help retain existing clients and attract new investors.



Weekly Net Flows Report, 6/10 Data (6/20/15)
Total estimated outflows long-term mutual funds were $3.0 billion for the week ended Wednesday, June 10, according to the Investment Company Institute (ICI). Investors pulled $2.9 billion from bond funds—its second largest withdrawals in 2015—due to the Labor Department’s announced surge in jobs, which suggests the Federal Reserve would likely hike interest rates sooner than expected. Domestic Equity suffered $3.9 billion in net outflows while World Equity gathered $3.6 billion. Hybrid funds managed to gather $185 million during the week.


Source: Investment Company Institute


Don't Miss This (6/16/15)
1) All 10 WBI Active ETFs Reach $100 Million in Under a Year
    Business Wire | 6/12/2015

Because… With assets topping $1.5 billion at the end of May and all 10 ETFs having assets of more than $100 million, WBI’s achievement in less than a year in the ETF business is significant. What is more noteworthy is all funds take a tactical risk management approach, making it one of the fastest growing active ETF managers. WBI employs a proprietary, computer-driven process, yet it is not afraid of disclosing fund holdings on a daily basis. Its quant-based models built around low-volatility risk-mitigation strategies, as well as complete transparency, may have resonated well with investors.

2) Are Managed Accounts a Better QDIA?
    Towers Watson | 6/12/2015

Because… The Towers Watson research shows that the usage has remained low though the number of plan sponsors offering managed accounts has increased. With more plan participants looking for guidance in preparing for retirement, the demand for managed account solutions should rise as they offer personalization that fits the needs and financial situation of individual investors. Besides making fees more competitive, managed account providers need to demonstrate the added value of their service. If they can show how professional management incorporates all income sources into retirement planning to help reach savings goals, plan participants will more likely be convinced and willing to delegate their investment decision to these professionals.

3) MassMutual Research: Survey Shows Concerning Knowledge Deficiency about Social Security Retirement Benefits
    MassMutual | 6/15/2015

Because… The MassMutual survey shows only 28% of respondents received a passing grade when asked basic questions about Social Security benefits, and 8% considered themselves very knowledgeable with only one out of 1,513 survey participants answering all questions correctly. While these findings are concerning, they are not completely surprising as many people would wait until they approach the retirement age to learn more about Social Security. The assumption of Social Security availability may delay their retirement planning and savings. Financial firms need to provide guidance on the impact of funding shortages on retirement income, strategies to maximize Social Security benefits, and consequences of an early withdrawal of the benefits.



Weekly Net Flows Report, 6/3 Data (6/12/15)
Total estimated inflows into long-term mutual funds were $1.3 billion for the week ended Wednesday, June 3, according to the Investment Company Institute (ICI). Despite World Equity’s intake of $3.3 billion, stock funds remained in the red for the fourth consecutive week with $882 million in net outflows due to investors pulling $4.2 billion from Domestic Equity. Taxable Bond collected $2.0 billion, a large uptick from the $605 million gathered during the prior week. Municipal Bond suffered $2 million in net outflows, marking its fifth straight week of redemptions—its longest run of outflows since a streak of withdrawals that lasted about six months in the second half of 2013. Hybrid Funds garnered $189 million during the week, down from $328 million during the prior week.


Source: Investment Company Institute (ICI)


Don't Miss This (6/9/15)
1) Alternative Investments Diversify Portfolios but Some Advisors Still Wary Pershing Study Finds
    Pershing | 6/4/2015

Because… The significant asset drop of the MainStay Marketfield Fund indicates many advisors still base their decision on performance. For asset managers with alternative fund offerings, it is apparent that educating advisors and deepening the relationship with the advisor community should take precedence over launching more new funds. As a growing number of firms are introducing alternative funds, some advisors are having a hard time keeping up with products on the market. Asset managers need to explain how their funds are different from others, what objectives these funds can achieve in terms of meeting investor demand, and how the funds can be used in portfolio construction.

2) Bill Seeks More Digital Retirement Plan Communication
    Planadviser | 6/8/2015

Because… We support the legislation that would allow the electronic delivery of plan information, which will reduce costs and enable plan providers and sponsors to communicate with plan participants in a timelier manner. However, product and service providers need to contemplate how to make the dissemination of digital communication more effective. Messages should be not only creative to capture plan participants’ attention and inspire them to take actions, but also personalized to satisfy needs of different generation groups. The development of digital communication strategies should be a concerted effort by various departments to ensure they are consistent, targeted, and fully compliant with relevant regulations.

3) Stifel to Acquire Barclays’ Wealth and Investment Management, Americas
    Stifel | 6/8/2015

Because… Stifel is building its arsenal with another acquisition after nabbing Sterne Agee earlier this year and Legg Mason Investment Counsel a year ago. The addition of Barclays’ business will help Stifel expand from a regional brokerage firm to a national player with operations in New York and other metropolitan areas. In addition, Barclays’ focus on high-touch services for wealthy investors will diversify the publicly-traded firm’s revenue sources. An imperative mission for Stifel now is to attract and retain as many advisors as possible, a task that does not seem too formidable for an experienced acquirer.



Weekly Net Flows Report, 5/27 Data (6/5/15)
Total estimated inflows into long-term mutual funds were $734 million for the week ended Wednesday, May 27, according to the Investment Company Institute (ICI). World Equity continued to drive sales with $2.6 billion in net inflows, down from $4.3 billion during the prior week. Domestic Equity, on the other hand, remained in negative territory for the 13th consecutive week with $2.9 billion in net outflows; however, this represents an improvement from the more than $5.0 billion in redemptions suffered in each of the prior two weeks. Taxable Bond only managed to gather $797 million due to investor concern regarding potential interest rate hikes. Municipal Bond remained in the red for the fourth consecutive week with $170 million in net outflows. Hybrid funds managed to gather $331 million during the week.


Source: Investment Company Institute (ICI)


Don't Miss This (6/2/15)
1) Franklin Templeton Investments Launches Franklin Retirement Payout Fund Series
    Marketwired | 6/1/2015

Because… Retirement income funds have not made a splash in the marketplace. The Franklin Retirement Payout Fund series is another attempt by asset managers to help pre-retirees and retirees address cash flow needs. As millions of baby boomers are shifting from asset accumulation to decumulation, investment firms are grappling with solutions that can accommodate investors’ income demand. Unlike existing managed payout funds, Franklin’s new funds do not have payment targets. Fund providers therefore need to ensure plan sponsors and participants understand what they get into so that they do not set unrealistic expectations on what this type of funds can achieve.

2) 50 South Capital Launched by Northern Trust
    Northern Trust | 6/1/2015

Because… Just as some asset managers are searching for potential takeover targets, Northern Trust is spinning off its Alternatives group. Last year, Delaware’s Focus Growth team broke away to operate under the name of Jackson Square. The autonomy resulting from the spinoff will enable investment teams to run their own business in a more focused, efficient manner, which may help win investment advisory/sub-advisory mandates. In the case of 50 South Capital, the newly formed investment boutique can continue to receive support from its parent, which is valuable at the initial stage in terms of operational effectiveness, business risk mitigation, and resource management.

3) Revolutionary HedgeCoVest Platform Goes Live, Democratizing Alternative Investments for Advisors and Retail Investors
    Business Wire | 6/1/2015

Because… If robo-advisors are believed to disrupt wealth management, the new hedge fund replication platform is challenging the traditional hedge fund business model. For investors, the platform provides increased transparency, liquidity, a flat fee structure, and easier access to hedge strategy managers. For hedge fund managers, the partnership with HedgeCoVest opens up a new distribution channel that allows them to reach more investors without additional investment in human capital or technology infrastructure.



Weekly Net Flows Report, 5/20 Data (5/29/15)
Total estimated inflows into long-term mutual funds were $1.46 billion for the week ended Wednesday, May 20, according to the Investment Company Institute (ICI). World Equity led sales with $4.3 billion, its largest intake in four weeks. For the 12th consecutive week, Domestic Equity suffered redemptions with nearly $5.4 billion in net outflows. Taxable Bond gathered $2.1 billion while Municipal Bond’s outflows of $138 million kept the broad objective in negative territory for the third consecutive week. Hybrid funds reversed outflows from the prior week by garnering $536 million in net inflows.


Source: Investment Company Institute (ICI)


Gross Sales/AUM Ratio (5/29/15)


Among the publicly traded asset management firms, the quarterly average sales/asset ratio was solid over the last year staring from 1Q14, hovering around 5.6%. Standouts for this period were Hennessy, which showed an average quarterly sales/asset ratio of 10.1%, and Eaton Vance, which showed an average 9.6% sales/asset ratio.




Don't Miss This (5/26/15)
1) Vanguard's Funds Might Get Even Cheaper
    Bloomberg | 5/15/2015

Because… Vanguard’s message is loud and clear – fund expense ratios can be lower. The firm has been a beneficiary of its low-cost strategy. This year through the end of April, it raked in $105.3 billion with average monthly inflows of $26.3 billion. By comparison, it garnered $64.2 billion during the same time last year with an average monthly intake of $16 billion. Vanguard’s net sales in the first four months nearly tripled the flows into the industry’s second best-selling fund provider. The firm’s market share increased to 19.8% from 18.5% a year ago, whereas market share for American Funds and Fidelity both declined 0.2% over the same 12-month period.

2) New TIAA-CREF Institute Report Examines Personal Finances of Hispanic Population
    TIAA-CREF | 5/18/2015

Because… The TIAA-CREF report reveals how financially vulnerable and illiterate college-educated Hispanics are, with 59% finding it difficult to cover monthly expenses, 39% unable to come up with $2,000 for an emergency, and only 32% having basic financial knowledge. For financial firms looking for opportunities in the Hispanic market, having a dedicated team in place is just the first step. It is essential for team members to gain a deep understanding of cultural nuances so that they can communicate more effectively with Hispanic investors.

3) PIMCO Launches RealPath Blend, a Semi-Active Target Date Solution
    Marketwired | 5/21/2015

Because… A combination of active and passive strategies is increasingly considered a better solution for plan participants as neither all-active nor all-passive strategies can offer optimal benefits. A blend approach can lower the costs of target-date funds, which should appeal to plan sponsors that are sensitive to fee considerations and transparency. Target-date fund providers with a mixed strategy tend to use index-based funds for more efficient equity markets, where it is challenging for active managers to consistently beat their benchmark. For an asset manager best known for its bond expertise, it is no surprise that PIMCO will combine “active management for fixed-income and passive indexing for equity allocations.”



Weekly Net Flows Report, 5/13 Data (5/22/15)
Total estimated outflows from long-term mutual funds were $670 million for the week ended Wednesday, May 13, according to the Investment Company Institute (ICI). With $2.34 billion in net inflows, Taxable Bond surpassed World Equity and led sales. World Equity gathered $2.25 billion, marking the first time in six weeks that sales fell below the $3 billion mark, primarily due to concerns regarding Greece’s financial woes. For the 11th straight week Domestic Equity posted in the red with nearly $5.1 billion in weekly redemptions. Investors also pulled $169 million from Municipal Bond. Hybrid funds slipped back into negative territory with $30 million in net outflows. 


Source: Investment Company Institute (ICI)


Don't Miss This (5/19/15)
1) Northern Trust Finds Employees Favor Companies Playing More Active Role in Their Retirement Plans
    Northern Trust | 5/11/2015

Because… The Northern Trust study highlighted the gap between plan participants’ preference and plan sponsors’ reservations. Employees generally welcome the paternalistic role because they trust that their employers have the fiduciary responsibility to assist them with retirement planning. With the lack of sufficient knowledge to make sound investment decisions, they also believe plan sponsors have more experience of selecting and monitoring investment options. In addition, plan design features such as auto-enrollment and auto-escalation can help them overcome inertia and cultivate good savings habits.

2) Virtus to Use Dorsey Wright's Relative Strength Capabilities for the Former AlphaSector Funds
    Virtus | 5/11/2015

Because… Virtus’ move to sever ties with F-Squared suggests challenges in a sub-advisory relationship. The charge against F-Squared for overstating historical performance has greatly undermined the trust of both investors and asset managers that hire the firm as a sub-advisor. As quantitative techniques are usually the core of an investment process for model portfolio providers, any misleading statement may break investor faith in a firm’s investment approach. Investment firms conducting due diligence need to ensure sub-advisors they work with maintain the highest ethical standards and have compliance policies and procedures in place.

3) Eaton Vance to Help Cover Broker Costs on New ETFs
    Reuters | 5/14/2015

Because… After Eaton Vance cleared a major regulatory hurdle for exchange-traded managed funds, establishing distribution infrastructure has become a priority. Several asset managers have signed a licensing agreement with Eaton Vance’s NextShares subsidiary, but if the firm cannot build alliances with leading brokerages, it would be hard for the new product to gain traction in the marketplace. The fact that Eaton Vance is willing to help brokerages pay their technology costs and share revenues indicates fund sales could encounter a fairly strong headwind initially before brokerages get a handle on the structure’s complexity and see the true demand from investors.



Weekly Net Flows Report, 5/6 Data (5/15/15)
Total estimated inflows into long-term mutual funds were $3.44 billion for the week ended Wednesday, May 6, according to the Investment Company Institute (ICI). Stocks posted $556 million in net inflows due to the ongoing demand for World Equity, which gathered $2.8 billion. Although Domestic Equity remained it in the red, its outflows of $2.2 billion represented less than one-third of its redemptions during the prior week. Taxable Bond collected $2.4 billion but Municipal Bond slipped into negative territory with $36 million in net outflows. Hybrid funds rebounded from outflows during the prior week by garnering $492 million in net inflows.


Source: Investment Company Institute (ICI)


Don't Miss This (5/12/15)
1) ETFs Outgrew Mutual Funds in Retail Channels for the First Time in Q1, According to Broadridge
    PR Newswire | 5/4/2015

Because… The faster growth of ETFs should not come as a surprise. Low costs, daily disclosure of portfolio holdings, tax efficiency, and easier access than before have made ETFs a popular choice among investors. The increased product development focus on smart beta strategies, currency-hedged approaches, exposure to hard-to-reach markets and niche industry segments, and asset allocation-based model portfolios will continue to drive ETF asset growth. With ETF sponsors ramping up educational efforts, more retail investors will gain familiarity with ETFs’ features and usages, which will further accelerate the industry’s expansion.

2) Robo-adviser Jumps into College Savings Market
    Investment News | 5/5/2015

Because… While FutureAdvisor’s offering of free college savings plans may entice some investors, whether it can significantly expand the robo-advisor’s business remains to be seen. Since states work with different service providers and offer different incentives, individual investors face a wide range of choices. They would want to discuss with financial advisors about the available options, tax implications, and the impact on estate planning. Although the web-based platform can simplify the decision-making process, the complexity of college savings plans may deter investors’ use of the online advice.

3) ‘Climate Right’ for Expanding Use of Multiple Employer Plans
    Prudential | 5/6/2015

Because… For small employers who do not want to set up their own plans, financial services firms should advocate multiple employer plans (MEPs) as a solution to help their employees save for retirement. Financial firms should make small employers aware of the benefits of joining a MEP, including the administrative ease due to the delivery of all plan services in a package, transfer of fiduciary responsibilities and liabilities from a plan sponsor to a MEP, greater negotiating power resulting from forming a larger plan to achieve economies of scale and cost efficiency, and savings from a plan audit only performed at the MEP level.


Weekly Net Flows Report, 4/29 Data (5/8/15)
Total estimated outflows from long-term mutual funds were $398 million for the week ended Wednesday, April 29, according to the Investment Company Institute (ICI). For the ninth consecutive week, investors pulled money out of Domestic Equity—$7.2 billion, its largest redemptions since July 2014. On the other hand, World Equity collected nearly $4.1 billion, continuing the trend of investor preference for European stocks. Taxable Bond garnered nearly $2.1 billion while Municipal Bond gathered $1.0 billion, marking its largest intake since late January. Hybrid funds fell into negative territory with $357 million in net outflows. 


Source: Investment Company Institute (ICI)


Don't Miss This (4/28/15)
1) Morningstar Study Shows Fund Expense Ratios Declined in 2014, Investors Increasingly Seek Low-Cost Funds
    Press Release | 4/23/2015

Because… While the trend towards low-cost funds is no news, the study points out that the overall industry fee revenue increased from $50 billion to $88 billion during the 10-year period as of 2014 due to increased assets under management. This indicates that cost reduction is actually a win-win for both investors and asset managers. With the competition from ETFs and strategic beta strategies, we expect expense ratios of actively managed funds to continue to decline down the road.

2) Deutsche X-trackers Announces Closure of Target-Date ETFs
    Business Wire | 4/24/2015

Because… Deutsche became the sole provider with target date ETFs on the market after similar products from iShares were dissolved last October, so the closure of these Deutsche offerings is disheartening to say the least. Although workarounds have been found to overcome operational and technical barriers that used to prevent retirement plans from adding ETFs to their investment menu, the adoption rate of ETFs in general is still low because plan sponsors have reservations about the investment vehicle they lack sufficient knowledge about and ETFs’ tax efficiency becomes largely irrelevant within a 401(k) framework.

3) Study Finds Investors Turned Off By Foreign Mutual Fund Manager Names
    Financial Advisor | 4/28/2015

Because… This academic study may have its own merit, but fund firms should not be swayed by its findings. The use of fund managers should be determined by multiple factors, including their investment knowledge, real-world experience, investment philosophy, research capabilities, and educational background. Driving away skilled investment professionals because of their foreign-sounding names would be imprudent in the talent acquisition/development process. Meanwhile, fund firms should guide investors on how to make sound investment decisions.



Weekly Net Flows Report, 4/15 Data (4/24/15)
Total estimated outflows from long-term mutual funds were $2.92 billion for the week ended Wednesday, April 15, according to the Investment Company Institute (ICI). For the seventh consecutive week, Domestic Equity suffered $5.7 billion—its largest redemptions since early July 14. Outflows reportedly stem from the tax deadline and reallocations due to the European market outperforming the U.S. Municipal Bond also witnessed outflows of $943 million, marking the largest redemptions since the last week of 2013. On the other hand, World Equity amassed $2.9 billion in net inflows, marking its 15th week in positive territory. Taxable Bond gathered $627 million, and Hybrid funds pulled in $162 million.


Source: Investment Company Institute


Don't Miss This (4/21/15)
1) Q1 Hits Record High For ETF Assets
    ETF.com | 4/9/2015

Because… The news that worldwide ETP assets are close to $3 trillion is exciting. BlackRock also reported that global ETP inflows in the first quarter nearly tripled the total from first quarter 2014. In particular, the projection that European product assets could rise to $1 trillion within five years from the current $494 billion may draw the attention of ETP sponsors. iShares accounted for 46% of Europe-listed ETP assets at the end of March, with the other 44 ETP managers controlling 54% of assets. While iShares may continue its dominance in the foreseeable future, the strong YTD sales shows the European market holds considerable potential for other ETP sponsors as well.

2) Social Media Influences Institutional Investment Decisions
    Planadviser | 4/16/2015

Because… The influence of social media exerts on institutional investors indicates asset managers need to make better use of social media tools. Firms should tap social media as a communication channel to increase transparency and establish themselves as a thought leader. They should also encourage investors to interact with them through social media so that they can get feedback on their products and services. In addition, the originality within legal boundaries is needed in order to drive traffic and develop a larger circle of followers.

3) Carlyle to Shutter Its Two Mutual Funds
    Reuters | 4/18/2015

Because… KKR liquidated its alternative mutual funds a year ago. Now Carlyle is following suit to shutter its own funds. The fund termination suggests these private equity leaders have substantial obstacles to overcome in the retail market. Retail funds, even when they employ the same investment strategies, are different from their institutional counterparts in many ways in terms of their fee structures, regulatory requirements, distribution infrastructure, and development of educational resources. Therefore, alternative asset managers should identify the best approach to leverage their expertise if they are trying to expand their retail footprints.



Weekly Net Flows Report, 4/8 Data (4/17/15)
Total estimated inflows into long-term mutual funds were $3.89 billion for the week ended Wednesday, April 8, according to the Investment Company Institute (ICI). World Equity drove sales with $3.2 billion, but its Domestic counterpart remained in the red with $1.3 billion in net outflows. Taxable Bond rebounded from negative territory during the prior week and collected $1.7 billion. However, Municipal Bond suffered $187 million in redemptions. Hybrid funds only collected $251 million, down from $720 million during the prior week.


Source: Investment Company Institute


Don't Miss This (4/14/15)
1) LIMRA Research Finds Majority of Companies Helping Financial Professionals with Social Media
    LIMRA | 4/7/2015

Because… The LIMRA study pointed out key factors that can determine social media success and challenges financial services companies face when using the social media tool. Financial companies should realize that many professionals in the industry have not fully grasped features and benefits of social media, despite its prevalence nowadays. Making sure they become conversant with social media usage is a prerequisite to advisor support. In addition, firms should, instead of presenting the similar content across various platforms, be more creative in tailoring strategies for different applications as they are all distinct from each other in terms of users and functions.

2) Invesco PowerShares Announces Launch of S&P 500 ex-Rate Sensitive Low Volatility Portfolio
    PR Newswire | 4/9/2015

Because… This ETF offering caught our attention as it aims to kill two birds with one stone – providing low volatility equity exposure while protecting against rising interest rates. The surging market volatility and potential interest rate rises are two major concerns among investors. Invesco PowerShares is one of the leading ETF providers in the smart beta arena. PowerShares S&P 500 Low Volatility Portfolio (SPLV) has more than $5.2 billion in assets since its inception on 5/5/11. By adding an extra layer of protection to mitigate interest rate risks, the new ETF could be appealing to investors who are sensitive to interest rate changes.

3) Americans Define Financial Success as Being Able to Retire Comfortably
    Planadviser | 4/9/2015

Because… The ability to retire comfortably has replaced home ownership to become the earmark of financial success, according to the AICPA survey. This change is positive as it can drive people to reconsider their goals and savings behaviors. With a clear vision in mind, individuals would be more motivated to set detailed and meaningful objectives, establish financial priorities, and put financial planning into perspective. Meanwhile, financial firms could use this change as a starting point for investor education. A few firms have developed interactive tools that enable people to visualize their dreams for the future and encourage them to turn dreams into executable actions.



Weekly Net Flows Report, 4/1 Data (4/10/15)
Total estimated outflows from long-term mutual funds were $2.12 billion for the week ended Wednesday, April 1, according to the Investment Company Institute (ICI). For the first time since early January, bond funds fell into negative territory with investors pulling nearly $1.4 billion from Taxable Bond while Municipal Bond managed to gather $96 million. Withdrawals are reportedly due to the April 15 tax filing deadline. For the second consecutive week, stocks posted in the red due to the $3.3 billion pulled from Domestic Equity, which could not compensate for the nearly $1.8 billion that World Equity collected. Hybrid funds garnered $720 million in net inflows.


Source: Investment Company Institute


Don't Miss This (4/7/15)
1) Merk to Liquidate the Hard Currency ETF
    SEC Filings | 4/6/2015

Because… We had high hopes when Merk, which has the slogan “The Authority on Currencies,” launched the Hard Currency ETF three years ago, so the fund liquidation came as a surprise. The strong U.S. dollar, market conditions, and investors’ lack of enthusiasm for hard currency funds may have contributed to the fund’s inability to survive. The management of currency funds requires expert assessment of global economies, and market inconsistency is adding difficulty to interpret currency movements. This fund closure shows that it can be hard to gather assets even for a firm that specializes in currencies.

2) BlackRock Shakes Up Money Market Offerings Ahead of Impending Regulatory Changes
    Forbes | 4/7/2015

Because… Fund firms take different approaches to comply with new SEC regulations. No matter how fund providers plan to adjust its money market fund lineup -- be it fund conversions and mergers or the institution of redemption gates and liquidity fees -- they need to explain product changes and potential cash management options to shareholders who are unaware of the rules, ensure they understand the impact on their investments, and help them make informed decisions that satisfy their needs for liquidity, stability, or higher yields.

3) Target-Date Mutual Funds Have Better Investor Returns Compared with Broad Range of Investment Categories, According to Morningstar Research
    Morningstar | 4/7/2015

Because… The latest Morningstar report has some notable findings. On one hand, index-based target-date series outpaced actively managed peers in 2014. On the other hand, more alternative investments have been incorporated into target-date funds. To the benefit of investors, the addition of alternatives, which have higher expense ratios, did not seem to increase the overall expense ratio as “the target-date industry's asset-weighted expense ratio fell to 0.78% in 2014 from 0.84% in 2013.” We expect the adoption of index funds and alternatives to continue for target-date funds.



Don't Miss This (4/1/15)
1) Retirement Assets Total $24.7 Trillion in Fourth Quarter 2014
    ICI | 3/25/2015

Because… The ICI’s year-end 2014 data shows that 55% of DC assets was invested in mutual funds and 48% of IRA assets was held in mutual funds, indicating that there is still room for fund firms to penetrate the DC market. In 2014, $34 billion of new cash was absorbed by long-term funds in DC plans, down from $63 billion in 2013. Another $30 billion was taken in by long-term funds in IRAs, declining from $74 billion in the prior year.

2) Morgan Stanley Plans to Sell Adviser Data to Fund Companies
    Investment News | 3/30/2015

Because… Data from a distributor could enable ETF sponsors to develop more targeted marketing strategies. By dissecting data in different ways, ETF managers would be able to perform analyses on advisors’ trading habits, gain a better understanding of products that appeal to them, and identify advisors that are heavy and loyal users of ETFs. Armed with such information, ETF providers could craft more effective messages for client communication, create personalized educational programs, and tailor marketing campaigns to better suit advisor needs.

3) The Coalition of Collective Investment Trusts (CCIT) Announces Awareness Week Plans
    PR Newswire | 3/30/2015

Because… We hope the introduction of the first-ever Collective Investment Trust Awareness Week will serve its purpose – “promote education on and awareness of collective investment trusts (CITs)." CITs have much lower management fees. The fact that their fees can be negotiated and their holdings can be customized add to the benefits of using them. Asset managers should make plan sponsors aware of the availability of this investment structure. Meanwhile, fund firms need to disclose differences between CITs and mutual funds in terms of regulatory oversight, transparency concerns, and liquidity issues.



Weekly Net Flows Report, 3/18 Data (3/27/15)
Total estimated inflows into long-term mutual funds were $3.31 billion for the week ended Wednesday, March 18, according to the Investment Company Institute (ICI). This cumulative total represents approximately half of the prior week’s intake. With $3.7 billion in net inflows, World Equity drove sales while Domestic Equity was the only broad asset class to fall into redemption mode with nearly $1.8 billion in net outflows. Taxable Bond gathered $259 million, a large drop from the $998 million collected during the previous week. Municipal Bond’s inflows of $190 million were a 45% decline from the prior week. On the other hand, Hybrid funds experienced in 6.5% uptick in sales with $913 million in net inflows.


Source: Investment Company Institute 


Don't Miss This (3/24/15)
1) Investors Shun Stock Pickers, Favor Vanguard, BlackRock, State Street
    Investment News | 3/16/2015

Because… While it’s not news that retail investors are shunning stock pickers, another survey of retirement plan consultants just released by PIMCO shows that active management is still favored over index-tracking passive strategies for many asset classes. So active asset managers need to focus more on asset classes/strategies that can leverage their expertise, such as fixed income, international equities, asset allocation, and alternatives. For the U.S. equity market, firms still have a chance to stand out if they refine their methodologies to mitigate risks while enhancing performance.

2) State Street Global Advisors Retirement Survey Finds Most Employees Stressed and Distracted by Financial Worries
    State Street | 3/18/2015

Because… The survey of approximately 1,000 employees showed that nearly 60% are emotionally stressed and distracted by their financial situations with 37% acknowledging financial stress has caused their productivity at work to suffer. The fact that so many workers are burdened by financial stress indicates that it has become imperative for financial firms to help them alleviate concerns and improve financial well-being. Identifying causes of the stress, prioritizing financial obligations, and creating a realistic action plan that can effectively tackle financial issues would be a good start to inspire confidence and ease anxiety.

3) New Research From Fidelity and BlackRock Reveals a Key to Growth for ETF Adoption is Educating Investing on ETF Basics
    Fidelity | 3/19/2015

Because… While the study discovered that two-thirds of individual investors do not currently own ETFs, it revealed the vast untapped potential of ETF adoption, including increased ETF exposure from existing shareholders, anticipated purchase of their first ETF from non-owners, planned ETF investments from young investors, and additional allocation to ETFs by financial advisors. Despite the rapid growth of the ETF industry, the number of ETF sponsors is still far smaller than the number of mutual fund firms (71 vs. 796 at the end of 2014). Advisors’ lack of in-depth knowledge and ETFs’ absence from most retirement plans also affect the awareness level of individual investors.



Weekly Net Flows Report, 3/11 Data (3/20/15)
Total estimated inflows into long-term mutual funds were $6.38 billion for the week ended Wednesday, March 11, according to the Investment Company Institute (ICI). Investors poured $3.9 billion into World Equity as the European Central Bank began its bond-buying program. Although Domestic Equity only gathered $326 million, it was a marked improvement from redemptions of $1.9 billion during the prior week. Fixed income saw its ninth consecutive week of inflows with $1.0 billion and $278 million flowing into Taxable Bond and Municipal Bond, respectively. Hybrid funds gathered $836 million, up from $528 million during the prior week.


Source: Investment Company Institute


Social Media (3/20/15)

Several articles have pointed out recently that despite the understanding that social media plays an important part in today's business world, few have been willing to completely embrace it. The graphs above show a quick look at the size (not quality) of our industries largest participants' social media presence. In general, LinkedIn has the highest average followers, with 113,000, followed by Twitter with 110,000, and then Facebook with 63,000. Fidelity had the most amount of followers on Facebook, with 159,446 followers, compared to the average of 63,000; JPMorgan had the most LinkedIn followers with 477,920, far above the average of 113,000 followers; and BlackRock had the strongest Twitter following with 227,000, which when combined with iShares' 180,000 followers gave it 407,000 followers, also high above the average of 110,430 followers. Overall, Fidelity and Vanguard have the largest overall social media presence, while American Funds and Dimensional Fund Advisors have the lowest; this is in line with expectations considering each of those firm's overall focus on front-end presence.

Sources: Facebook, Twitter, LinkedIn 



Don't Miss This (3/17/15)
1) iShares Makes 80% Cut to FTSE 100 ETF Charge
    Investment Week | 3/10/2015

Because… The distributing iShares FTSE 100 UCITS ETF is the oldest ETF on the London Stock Exchange and the largest equity ETF in the U.K. The substantial fee cut from 0.4% to 0.07% for this widely-held ETF suggests the price war is heating up in Europe. Europe-listed ETPs raised $26 billion in the first two months of 2015, compared with net flows of $31.2 billion into U.S.-listed ETPs. European ETPs’ YTD sales were very strong considering their assets were less than a quarter of assets in U.S. ETPs. With a market share of 46.4% already quadrupling its closest competitor’s market share of 11.6%, iShares will be able to maintain its leadership position with the fee reduction.

2) Retirement Income Gap Projected at $7.7T
    Planadviser | 3/12/2015

Because… The projection of the aggregate retirement income deficit at $7.7 trillion is alarming. Another analysis published this month by the National Institute on Retirement Security shows that nearly 40 million working-age households (about 45% of all working-age U.S. households) do not own any retirement account assets. These research findings should serve as a wake-up call for retirement product and service providers. The industry has a long way to go to help Americans boost their retirement savings and income. Directing their attention to the consequences of inadequate savings and income, encouraging them to take more control of their own financial future, and providing practical guidance on retirement planning may motivate people to get started.

3) WisdomTree Files for the Global ex-U.S. Hedged Dividend Fund
    SEC Filings | 3/12/2015

Because… In addition to WisdomTree Global ex-U.S. Hedged Dividend Fund, the firm filed for the DEFA Hedged Equity Fund and the International Hedged SmallCap Dividend Fund this week. The new fund introductions signify the firm’s goal of expanding its dividend-weighted product line. With net inflows of $2.9 billion in February and YTD sales of $6.9 billion, WisdomTree became the 5th best-selling firm for both the month and the year among all mutual fund and ETF managers. Its asset growth of 25% in just two months and 44% for the past 12-month attests the benefit of a unique focused strategy.



Weekly Net Flows Report, 3/4 Data (3/13/15)
Total estimated inflows into long-term mutual funds were $6.51 billion for the week ended Wednesday, March 4, according to the Investment Company Institute (ICI). All broad asset classes gathered inflows with the exception of Domestic Equity’s $1.9 billion in redemptions, marking its first withdrawals in seven weeks. Investors poured $2.9 billion into World Equity—its highest intake since June 2014. Taxable Bond led sales with $4.3 billion while Municipal Bond only garnered $675 million. Hybrid funds collected $528 million, a significant drop from the $1.1 billion intake during the prior week.


Source: Investment Company Institute


Don't Miss This (3/10/15)
1) Deutsche Bank Releases Annual Alternative Investment Survey Highlighting Hedge Fund Sentiment and Allocation Trends for 2015
    Deutsche Bank | 3/3/2015

Because… By monitoring trends in the hedge fund industry, mutual fund firms can gauge shifts in investor sentiment, determine strategies to cope with the hedge fund growth, and identify opportunities to collaborate with hedge fund managers. The concentration among the largest hedge managers suggests that some small and mid-sized hedge fund managers may find it difficult to raise assets and instead choose to target the retail market. Since firms courting retail investors face challenges in areas of marketing, distribution, operations, and regulatory compliance, partnerships with these firms could benefit mutual fund managers that are looking to develop hedge products.

2) Charles Schwab Launches Schwab Intelligent Portfolios
    Schwab | 3/9/2015

Because… Schwab’s response to robo-advisory finally arrived with fanfare. The absence of advisory fees, commissions, or account services fees, as well as the use of the lowest-cost ETFs, open-architecture with third-party providers, and the minimum investment requirement of as low as $5,000 should resonate with the investing public, especially young investors who do not have large account balances and would like some investment guidance. However, some investors may question its relatively high cash allocation. Assets invested in this program could accelerate after the advisor version is available in the second quarter, which offers RIAs a white-label option.

3) Alternatives Make Push for Retirement Accounts
    Investment News | 3/10/2015

Because… Despite the increased allocation to alternative investments among retirement plans, the adoption of alternatives is slow in general. In addition to the pricing pressure, the lack of a solid understanding of their investment risks and structural complexities is another obstacle. To encourage more plan sponsors to consider non-traditional investment options, alternative fund providers need to show plan sponsors how their products actually lower volatility, improve risk-adjusted returns, and provide portfolio diversification. The enhanced transparency can help plan sponsors build their confidence in alternatives.



Alternative Category Funds (3/3/15)

Source: Fuse Research

Many recent financial articles have been written on how hot alternatives have been for the past year, but few have covered the changes within the alternative market. For example, as shown above, most alternative categories showed a net growth in the number of funds, except for Market Neutral which stayed the same. This is not surprising as AUM continued to rise to its highest level yet and ended 2014 at $207.2 billion. However, full year 2014 net flows ($27 billion) were down sharply from 2013 ($58 billion),  the drop mainly driven by a $21 billion difference in net sales from Mainstay Marketfield from 2013 to 2014.  The categories that show the most growth tended to be equity-focused, like Equity Long/Short, reflecting the bond-wariness that was felt throughout the market in 2014. 



Don't Miss This (3/3/15)
1) Vanguard to Diversify Managed Payout Offering with Liquid Alternative Investments
     Vanguard | 2/27/2015

Because… The merge of the Managed Payout Distribution Focus Fund and the Managed Payout Growth Focus Fund into the Managed Payout Growth and Distribution Fund in January 2014 and the surviving fund’s slower asset growth than some other Vanguard funds suggest retirement income funds are still facing headwinds in the retail market. The Managed Payout Fund currently has 10% of assets in the market neutral strategy and 5% in commodities. The effectiveness of providing further diversification and reducing portfolio volatility and the increase in the Managed Payout Fund’s expense ratio from 0.34% to 0.42% could be investors’ main concerns about the new addition.

2) Lincoln Financial Network Appoints Nicole Spinelli Director of the WISE Group
    Lincoln Financial | 2/27/2015

Because… Lincoln Financial’s new initiative to support women advisors is laudable because the gap between the growing demand for female advisors and the shrinking supply will likely have a negative impact on the wealth management industry. Financial firms that are not addressing the issue and bridging the gap will lose a critical competitive advantage in asset-gathering. Firms should not only make a greater effort of recruiting women advisors but also develop a formal, extensive mentoring program to teach new hires best practices and business development techniques.

3) Nuveen Investments Rethinks ETFs After Pioneering, Then Abandoning, Them
    Investment News | 3/2/2015

Because… While it was unfortunate that Nuveen’s ETF attempt came to a halt 15 years ago, the market still holds potential for new entrants. If a firm can leverage its core strengths, identify the most appropriate market entry points, and target client segments that are most likely to embrace its products, making the second foray successful is not impossible. Northern Trust has set a powerful precedent on building a better ETF business the second time around. Nuveen has already partnered with SSgA on seven muni bond ETFs and planned to convert two closed-end commodity funds to an ETF structure, so it is not a complete stranger to the ETF world after all.



Don't Miss This (2/24/15)
1) PwC Survey Finds 88% of Asset Management CEOs Are Confident of Revenue Growth in 2015
    PwC | 2/17/2015

Because… While the confidence from asset management company CEOs about revenue growth is encouraging, asset managers need to realize the revenue growth alone would not help them thrive in this highly competitive industry. Rising costs, the accelerated adoption of passively managed products, and the emergence of niche players trying to disrupt traditional business models may put pressure on profitability. Only firms that rigorously control costs, increase investments to boost brand awareness, and identify innovative product solutions that address specific market needs can be better positioned to achieve sustainable growth.

2) Paul McCulley Steps Down as Chief Economist
    PIMCO | 2/20/2015

Because…Paul McCulley’s departure after rejoining PIMCO for just 10 months is another high-profile exit after Mohamed El-Erian and Bill Gross. PIMCO hired Nobel Laureate Economist Michael Spence as a consultant on macroeconomic and global policy issues last October, Former White House Advisor Gene Sperling as consultant on U.S. economic policy issues in January, and most recently, Joachim Fels, former Chief Economist at Morgan Stanley, as Global Economic Advisor. With these appointments, the leave of McCulley may not put a dent in the management team’s pursuit of its strategic initiatives.

3) Pivotal 401(k) Fee Lawsuit in Front of Supreme Court Means Big Changes for Plan Advisers
    Investment News | 2/24/2015

Because… We have witnessed an increase of lawsuits related to 401(k) fees. Financial services providers should take on the responsibility of helping plan sponsors avoid such litigation. Best practices include informing plan sponsors of the availability of the least expensive investment options, keeping them abreast of any fee changes that occur to funds on a plan’s investment menu, fully disclosing plan fees to plan sponsors to ensure no surprise of hidden fees, and bringing them up to speed on the latest regulatory requirements.



Alternative Product Management & Development (2/23/15)
Alternative products are all the rage and firms are racing to launch products in the space. However, launching alternative funds is typically more complicated than traditional funds.

In our just released Product Management & Development BenchMark Study, we devote an entire chapter to alternatives.  One of the topics addressed is the time required to launch an alternative fund.

Click HERE to hear Patrick Newcomb, Director of BenchMark Research at FUSE and study author, discuss the timeframe and challenges associated with launching alternative funds.

Time to Launch an Alternative Fund

Source: FUSE Product Management & Development BenchMark Survey 2014





Don't Miss This (2/17/15)
1) TIAA-CREF Survey: Americans Want Monthly Retirement Paycheck But Don’t Know How to Get It
    TIAA-CREF | 2/3/2015

Because… The TIAA-CREF survey underlines a pressing need for more investor education about retirement income options. Plan sponsors’ reluctance to add in-plan retirement income options and fund firms’ inability to penetrate the market with effective retirement income products are part of the reasons for investors’ lack of adequate knowledge. It’s time for financial services firms, including asset managers, insurers, plan consultants, and financial advisors, to work together and share the responsibility of informing Americans of available choices in the marketplace, as well as the pros and cons of retirement income solutions.

2) American Funds to Get Approval to Offer ETFs
    Investment News | 2/4/2015

Because… American Funds is the only asset manager among the top three with no ETF exposure. Although we do not expect the firm to launch ETFs any time soon, the move is commendable because it shows the firm’s willingness to respond to evolving industry dynamics. Sales of American Funds turned to a positive $345 million in 2014, a significant improvement from net outflows of $19 billion in 2013. In comparison, Vanguard raked in $219 billion in 2014, with more than one-third of flows into its ETFs. By providing vehicle-agnostic solutions, American Funds would be in a better position to retain clients and maintain its leading position.

3) BlackRock’s Bonds ETFs Raked in Record Sums of Money
    Bloomberg | 2/17/2015

Because… iShares bond ETFs are not the only beneficiary of investors’ unprecedented exodus from PIMCO Total Return Fund. Four actively managed funds among the industry’s top 10 sellers in January were all bond funds. Metropolitan West Total Return Bond Fund (Intermediate-Term Bond), DoubleLine Total Return Bond Fund (Intermediate-Term Bond), BlackRock Strategic Income Opportunities Fund (Nontraditional Bond), and Dodge & Cox Income Fund (Intermediate-Term Bond) absorbed $5.2 billion, $2.6 billion, $2 billion, and $1.8 billion, respectively. Their combined inflows of $11.6 billion represented 41% of total long-term fund sales in the month. Asset managers without strong fixed-income offerings are missing an opportunity to capitalize on investor asset reallocation.



Weekly Net Flows Report, 2/4 Data (2/13/15)
Total estimated inflows into long-term mutual funds were $8.27 billion for the week ended Wednesday, February 4, according to the Investment Company Institute (ICI). For the fourth consecutive week, stocks stayed in positive territory with Domestic Equity garnering $3.5 billion and World Equity $704 million. Investors placed $2.3 billion in Taxable Bond and $963 million in Municipal Bond. Finally, Hybrid funds collected $792 million, representing its fourth straight week in the black.


Source: Investment Company Institute


Weekly Net Flows Report, 1/28 Data (2/6/15)
Total estimated inflows into long-term mutual funds were $12.17 billion for the week ended Wednesday, January 28, according to the Investment Company Institute (ICI). This is a dramatic uptick from the $3.3 billion gathered during the prior week. Bond funds collected $6.1 billion, its largest total since May 2013. Taxable Bond was responsible for $4.8 billion in net inflows while Municipal Bond gathered $1.3 billion. This is partly attributed to the European Central Bank’s bond-buying program announced on January 22, which will keep rates lower in Europe and also make U.S. Treasuries more appealing than European bonds. Investors poured $3.5 billion into Domestic Equity—its largest intake since October. For the fourth consecutive week, World Equity stayed in positive territory with $888 million in net inflows. Hybrid funds more than doubled its sales from the prior week with $1.7 billion in net inflows.


Source: Investment Company Institute


Liquidated ETF Assets (2/5/15)

Source: Morningstar

A recent article discussed how iShares had recently raised the bar for viability by liquidating several funds with higher net assets than 50% of ETFs on the market.* Digging into the data reveals a couple of key points that need to be highlighted. First, of the four funds liquidated in 2014 with AUM over $50 million, three were defined maturity products with required liquidations in 2014. Second, of the next eight liquidated funds with AUM between $25 and 50 million, six were part of iShares target-date ETF series and should likely be viewed as a single event in which the average AUM across the series was just north of $25 million. When these are taken into account, ETF liquidations are in line or even below asset levels associated with typical fund liquidations, with only a few products above $10 million being liquidated.

*ETF Daily News, "iShares Raises The Bar On ETF Survivability", October 14, 2014



Weekly Net Flows Report, 1/21 Data (1/30/15)
Total estimated inflows into long-term mutual funds were $3.05 billion for the week ended Wednesday, January 21, according to the Investment Company Institute (ICI). This represents the second consecutive week of cumulative inflows, yet a 45.3% decline from the prior week’s intake of $5.6 billion. After nine weeks of withdrawals, investors put $856 million into Domestic Equity funds. World Equity gathered $288 million, a sharp decrease from the $1.8 billion collected during the prior week. Municipal Bond led all broad asset classes with $1.0 billion in net inflows while Taxable Bond garnered $77 million. Hybrid funds posted its second consecutive week in positive territory with $790 million in net inflows.


Source: Investment Company Institute (ICI) 


Yearly Fund Inceptions (1/28/15)

Source: Morningstar Direct

2014 showed a continuing increase of the number of new funds being opened after the high in 2011 of 786 new funds, with 725 funds being brought to market. Open-End funds had 520 new funds added, and there were 205 new Exchange-Traded Funds over the year. The U.S. category with the most funds added for Open-End Funds in 2014 was Allocation with 117 new funds, while International Equity had the most funds added at 80 new funds for Exchange-Traded Funds. 




Don't Miss This (1/20/15)
1) Managed futures funds shine anew, but mystery remains
    Investment News | 1/14/2015

Because… Assets in managed futures mutual funds rose to $14.9 billion as of end November from $11.6 billion a year ago, representing a 12-month growth of 28%. Though it underperformed S&P 500 Index in 2014, the category collected $1.9 billion in the first eleven months, compared with net redemptions of $18 billion from U.S. Equity. The inflows indicate some investors still believe managed futures can be an effective diversifier due to their low correlation with the stock and bond markets. Portfolio managers’ expertise, competitive expense ratios, educational efforts, and brand awareness all play an important role in a managed futures fund’s success.

2) American Beacon Advisors Announces Initiative To Launch Nextshares Exchange-Traded Managed Funds
    American Beacon | 1/15/2015

Because… As the first outside licensee, American Beacon’s move will be closely monitored by other asset managers that are interested in non-transparent ETPs. It is too early to predict whether the first-mover status will give American Beacon any competitive advantage, but it is safe to say that the investors’ acceptance of an investment vehicle without the transparency they normally expect from an exchange-traded product will be put to the ultimate test. We do not expect many active managers to throw their hat in the ring right away. Evaluating how new products will be received in the marketplace can be the approach most of them will take.


3) Americans Overwhelmingly Oppose Changing Tax Incentives for Retirement Saving
    ICI | 1/20/2015

Because… Tax breaks are a major incentive for Americans to save for their retirement. Although the current defined contribution scheme is not perfect, any elimination or reduction of tax advantages would be a grave disservice for individuals who rely on DC plans to build their retirement nest eggs. While the financial industry is trying hard to encourage people to invest in retirement plans, the last thing lawmakers should do is to set up road blocks to curb plan contributions.



Don't Miss This (1/13/15)
1) Vanguard to Introduce Its First Municipal Bond Index Fund and ETF
     Vanguard  | 1/6/2015

Because… We expect the fund, especially the ETF shares, to generate substantial investor interest. Industry-wide, Municipal Bond mutual funds and ETFs garnered $32 billion in 2014, a significant improvement from net outflows of $57 billion in 2013. The new fund could cannibalize flows into the firm’s actively managed municipal bond offerings, such as the $41 billion Intermediate-Term Tax-Exempt Fund, and pose a threat to leading municipal bond ETFs, such as the $4.2 billion iShares National AMT-Free Muni Bond with the expense ratio of 0.25%.

2) Dodge & Cox to Soft Close the International Stock Fund
    SEC Filings | 1/6/2015

Because… The soft close of the Dodge & Cox International Stock Fund may benefit its rival funds in the same asset category. The fund, with $64 billion in assets, is the third largest in the Foreign Large Blend category. It outperformed its benchmark, the MSCI EAFE Index, for all 1-, 3-, 5-, and 10-year periods as of 12/31/14. Such a solid long-term track record has drawn investor attention, as the fund’s net inflows of $11 billion nearly quintupled its 2013 intake. While the firm’s top seller is now closed to new investors, its decision to restrict the fund size and maintain the investment flexibility may help Dodge & Cox win the trust of existing shareholders and prospects alike.

3) IRI Study: Retirement Plan Participants Want Lifetime Income Estimates
    The Insured Retirement Institute | 1/13/2015

Because… The IRI study that reveals the overwhelming majority of consumers want their retirement benefit statements to provide an estimate of lifetime income underscores the necessity of more effective investor education. Online calculators and other resources for income projection are widely available, but many individuals still have no idea of how to make use of these tools. Financial firms need to inform them of the impact of different inputs on the estimate of lifetime income, the availability of retirement income solutions that may suit their needs, and the income withdrawal rate adequate to cover retirement spending.



Strategic Beta ETFs (1/12/15)
Strategic Beta ETFs have gained prominence after Morningstar's recent article, which noted that they had 18% of assets for all ETPs in 2013.* While  Morningstar's categorization is useful, we believe it is overly inclusive for looking at the growth and demand for intelligent or smart beta strategies. A quick analysis using index weighting methodologies puts non-capitalization weighted products at about a 12% market share, with what we would classify as smart beta products controlling approximately 8% of total ETF market share by our analysis. Despite the small base, growth has been strong, increasing from about 2% of assets five years ago.


Sources: Morningstar Direct, FUSE Research analysis

* "What You Need to Know About Strategic Beta," September 18, 2014



Weekly Net Flows Report, 12/30 Data (1/9/15)
Total estimated outflows from long-term mutual funds were $1.13 billion for the eight-day period ended Tuesday, December 30, according to the Investment Company Institute (ICI). This represents the fifth consecutive week of cumulative outflows, though an improvement from the prior week’s redemptions of $6.2 billion. Once again, all broad asset classes fell into the red with the exception of Municipal Bond’s intake of nearly $1.4 billion. Domestic Equity led redemptions with $1.5 billion in net outflows while World Equity experienced $63 million in net outflows. Taxable Bond’s $367 million in redemptions was a significant improvement from the $3.3 billion and $10.3 billion in net outflows suffered during the prior two weeks. Hybrid funds remained in negative territory with $602 million in net outflows.


Source: Investment Company Institute (ICI)


Don't Miss This (1/6/15)
1) iShares Leads Global ETF Industry Flows with $102.8bn in 2014
    iShares | 1/5/2015

Because… The record flows into iShares U.S. ETFs more than doubled their inflows in 2013. The firm’s ability to maintain its dominance despite the fierce competition bespeaks the effectiveness of its product and distribution strategies. The reduction of its expense ratios, the expansion of its Core series, the integration of ETF and mutual fund sales forces to enhance cross-selling opportunities, the introduction of funds beyond the broad market-based product range, the thought leadership efforts to educate investors and advisors, and the penetration into wirehouse and RIA channels have all contributed to its success.

2) Morningstar Announces Nominees for 2014 U.S. Fund Manager of the Year Awards
    Morningstar | 1/5/2015

Because…. Besides recognizing portfolio managers, the Morningstar nominations could potentially draw investor attention and help these asset managers gather new assets. While the majority of fund managers work for large firms, a few nominees are from small boutiques. It is interesting to note that Vanguard teams show up in four out of five categories, although the firm is well-known for its passively managed products. The outperforming actively managed funds may have been overshadowed by their more popular index-based siblings, but they can still shine for believers of the active management approach.

3) Behind a Bad Year for Active Managers
    The Wall Street Journal | 1/5/2015

Because… The report that “only about 13% of actively managed, large-company stock funds posted returns above that of the S&P 500 for 2014” won’t bode well for actively managed funds. However, actively managed fund firms should not get too discouraged. FUSE research shows that passive funds had a 25.2% share of long-term fund assets through the end of September 2014. While they are stealing market share from active strategies, active asset managers can still find opportunities if they adopt an out-of-box investment approach, minimize operational costs, put limits on fund size to keep funds nimble, and make more investors aware of their risk control mechanisms.



Weekly Net Flows Report, 12/22 Data (1/2/15)
Total estimated outflows from long-term mutual funds were $6.26 billion for the five-day period ended Monday, December 22, according to the Investment Company Institute (ICI). This represents the fourth consecutive week of cumulative outflows, though an improvement from the prior week’s redemptions of $18.3 billion. All broad asset classes fell into the red with the exception of Municipal Bond’s intake of $329 million. On the other hand, Taxable Bond led outflows with $3.3 billion in net outflows. World Equity’s outflows of nearly $1.4 billion surpassed the $1.1 billion pulled from Domestic Equity. Hybrid funds suffered $826 million in net outflows.


Source: Investment Company Institute (ICI)


Don't Miss This (12/30/14)
1) US ETF Assets Cross $2 Trillion For First Time
    ETF.com | 12/23/2014

Because… The $2 trillion milestone is a testament to the rapid expansion of the ETF industry. The quest for low-cost transparent investment products, wider adoption of ETF-based portfolio construction approaches, easier access to commission-free ETFs, and increased involvement by traditional long-only asset managers will continue to drive the growth of the space. Meanwhile, the lack of representation in DC plans, the slower progress of actively-managed ETFs, and the need for more in-depth investor education have remained stumbling blocks on the road to the next trillion of assets.

2) ProShares Announces Changes to ETF Lineup
    ProShares | 12/23/2014

Because… The liquidation of 17 ETFs comes at a time when other asset managers are actively bringing new products to the market before the year end. The firm’s asset ranking among all ETF sponsors fell to #8 as of end September from #5 three years ago. WisdomTree, First Trust, and Guggenheim have all surpassed ProShares. Schwab, which garnered $5.3 billion this year through September after raising $6.1 billion in 2013, seems ready to overtake ProShares in the not-too-distant future. Despite the fund closures and the drop in the overall asset ranking, the firm should be able to maintain its leading position as the world’s largest provider of geared ETFs.

3) Manulife Announces Transaction with New York Life Which Significantly Expands John Hancock's Retirement Plan Services Business
    PR Newswire | 12/23/2014

Because… John Hancock's acquisition of New York Life's Retirement Plan Services business is another major deal after the Great-West’s purchase of JP Morgan’s recordkeeping business. The transaction will significantly expand John Hancock’s business in the mid- and large-plan market segments. With assets under administration growing by $50 billion to $135 billion, the consolidation of retirement plan service providers will apparently create scale, which will hopefully bring down service costs for their retirement plan clients.



Don't Miss This (12/23/14)
1) ALPS Sector Dividend Dogs ETF Surpasses Billion Dollar Mark
    ALPS | 12/18/2014

Because… The asset-gathering success is a perfect holiday gift for the fund sponsor. It also offers a couple of lessons to other ETF providers. First, dividend-paying products are still in high demand as investors have continued to pursue investments that can provide a relatively stable source of returns. Second, there are a variety of dividend ETFs with focuses ranging from current income, dividend growth, combination of the two, or dividend weighting. ETF managers should not only craft a powerful marketing message that resonates with investors, but also get them familiar with the strategy used for their product.

2) Retirement Wellness Planner from The Principal Helps Participants Visualize Goals
    Principal | 12/22/2014

Because… In a digital world, firms are increasingly incorporating interactive features into their financial tool design. The Principal clearly has a leg up on the competition when it integrates visualization into the planning and saving process. The newly released planner, which is provided for both plan participants and the public, uses adjustable inputs, real-time graph, and a quantitative scoring system to show the discrepancy between current savings and monthly retirement income. We believe only tools that are creative, visually stimulating, and highly intuitive can effectively engage individuals and stand out from their peers.

3) Comerica Helping Manage Treasury’s ‘MyRA’ Retirement Program
    Bloomberg | 12/22/2014

Because… While the MyRA program could be a boon for people without access to 401(k) plans, how many plan sponsors and participants would embrace it remains a question mark. Although the federal government will cover the administrative expenses and employers do not need to match employee contributions, allocating resources to educate workers, help them set up accounts, and maintain the small accounts will probably incur more costs than anticipated. From the employees’ perspective, investing solely in the government bond would provide insufficient savings and no benefit of diversification.




Don't Miss This (12/16/14)
1) Putnam Investments to Help Patriots Fans Show the World Their Game Face
    Putnam | 12/12/2014

Because… With the #1 ranking in the AFC East, the New England Patriots have a lot of loyal fans. Putnam’s use of innovative technology and integration with social media should be able to help the firm raise its profile and forge a stronger relationship with fans. More financial firms are using sports sponsorship as an effective marketing strategy. Putnam has set an exemplary example for other asset managers in terms of how to select sports team partners and how to form a long-lasting bond with fans and eventually turn fans into its advocates.

2) Goldman Plans Smart Beta
    ETF.com | 12/15/2014

Because… Smart beta strategies are apparently gathering steam. According to a BlackRock global ETP report released today, assets for smart beta equity ETPs have quadrupled since 2008. Morningstar data also show their popularity - smart beta ETFs accounted for 26.7% of ETF net flows this year through November. Goldman Sachs, which reportedly bid for alternative ETF sponsor IndexIQ, is now turning to its in-house teams and newly acquired Westpeak for fund management. The success of these funds will be determined by key factors selected to capture market beta, the funds’ expense ratios, and educational efforts provided to the investing public.

3) Prudential Retirement Creates Gibraltar Ventures
    Prudential | 12/15/2014

Because… Like Prudential, Wells Fargo launched Wells Fargo Investment Institute at the beginning of the month. Thought leadership has increasingly become a marketing tool for financial services firms to build credibility, enhance reputation, generate leads, and drive business. When developing thought leadership initiatives, a targeted and focused strategy that addresses distinct investor concerns can help a firm establish authority in certain topical areas. We believe Prudential Retirement, already one of the leading recordkeepers, will be able to provide more practical value through the creation of the new organization.





Weekly Net Flows Report, 12/3 Data (12/12/14)
Total estimated outflows from long-term mutual funds were $3.19 billion for the eight-day period ended Wednesday, December 3, according to the Investment Company Institute (ICI). Stocks suffered nearly $2.7 billion in redemptions, experiencing the worst three-week losses since July. Investors pulled approximately $3.0 billion from Domestic Equity while World Equity only managed to gather $271 million. Taxable Bond fell into the red with $667 million in net outflows, and Municipal Bond captured $841 million. Hybrid funds suffered its second consecutive week in negative territory with $681 million in net outflows.


Source: Investment Company Institute


Don't Miss This (12/9/14)
1) SEI Year-End Survey: Advisors Believe in The Bull Market for 2015
    SEI | 12/3/2014

Because… Knowing advisors’ views on the market movement and their business priorities helps asset management firms craft more effective strategies to serve their clients. While it’s the time of the year for asset managers to release their market outlook for the next year, firms need to place special emphasis on certain issues investors and their advisors care about most, such as sector allocation, major risks in different markets, and prospects of alternative investments.

2) Unconstrained Bond Funds Disappoint
    Investment News | 12/5/2014

Because… A growing number of asset managers have offered unconstrained bond funds in the past couple of years. Investors exposed to these funds would find their lagging performance discouraging. This year through the end of October, investors added more than $11 billion to each of the two biggest unconstrained bond funds (Goldman Sachs Strategic Income Fund and BlackRock Strategic Income Opportunities Fund), which suggests the popularity of this type of funds. However, if these funds do not live up to the investor expectations, they could lose their appeal gradually.

3) Morningstar Launches Family of More Than 60 New Global Equity Indexes, Providing Investors with Comprehensive View of Worldwide Markets
    Morningstar | 12/8/2014

Because… The Morningtar global equity index family covers 21 regional markets as well as 45 individual countries. On the one hand, these indexes will provide investors and asset managers with new benchmarking tools. On the other hand, they will have to compete with more established global equity indexes from MSCI, S&P, and FTSE if Morningstar wants to win more licensing business. The index provider has to demonstrate its comparative advantages in terms of the soundness of index construction rules, the coherence of country inclusion, and the reliability of the weighting methodology.




Weekly Net Flows Report, 11/25 Data (12/5/14)
Total estimated inflows to long-term mutual funds were $1.26 billion for the six-day period ending Tuesday, November 25, according to the Investment Company Institute (ICI). Investors continued to pull money from Domestic Equity funds, which suffered $2.0 billion in redemptions. Meanwhile, World Equity continued in positive territory with $869 million in net inflows, representing a 42% increase from its total during the prior week. Taxable Bond continued to drive sales with $1.8 billion in net inflows while Municipal Bond gathered $769 million in net inflows. After two weeks of inflows, Hybrid funds fell back into redemption mode with $157 million in net outflows.


Source: Investment Company Institute


Don't Miss This (12/2/14)
1) Mutual Funds to Face New Rules as SEC Outlines Oversight Plan
    Bloomberg | 11/24/2014

Because… Even though the mutual fund industry is already strictly regulated, the SEC is taking additional steps to strengthen its mutual fund oversight. With the prevalence of alternative investments, investor concerns about liquidity and leverage have grown correspondingly. The enhanced scrutiny is aimed at ensuring market stability and protecting investors from unnecessary risks. Asset managers, for their part, should have streamlined compliance procedures in place, examine their valuation approaches for hard-to-sell investments, and proactively increase the disclosure of portfolio holdings to gain investor trust.

2) Russell Sets Orderly Schedule to Close the Russell Equity ETF
    Russell | 11/25/2014

Because… The Equity ETF (ONEF) was the lone survivor when Russell shuttered its index ETFs two years ago. While the liquidation of the firm’s last U.S.-based ETF is disappointing, it is not unforeseen. We cast doubt upon the fund’s chance of success ever since it was brought to the market by its original sponsor, U.S. One. The fund, with assets of $7.4 million as of 12/1/14, underperformed its benchmark index for all YTD, 1-year, and 3-year periods. The subpar performance, the higher expense ratio resulted from its fund-of-funds structure, and the lack of an effective distribution platform put the fund into a disadvantageous position.

3) Catalyst Funds Converts Third Hedge Fund to Mutual Fund
    DailyAlts | 11/25/2014

Because… The conversion of a hedge fund into a mutual fund is not common, but Catalyst is not the first firm that has done this. We suppose the strategy may exemplify a future trend that hedge fund and mutual fund industries cannot ignore. Some hedge managers with shrunken assets now realize they do not have to throw the baby out with the bath water. They can keep the investment strategy intact and wrap it in a ’40 Act mutual fund. The conversion allows them not only to survive in a more competitive industry, but also to concentrate on portfolio management as a sub-advisor, as in this case, without worrying about fund distribution.



Don't Miss This (11/25/14)
1) Most U.S. Employers See Retirement Readiness as a Significant Issue for Employees, Towers Watson Survey Finds
    Towers Watson | 11/19/2014

Because… The Towers Watson survey reinforces the importance of helping employees prepare for retirement. In addition to developing educational programs that enhance investor knowledge and boost their confidence, financial services firms can also motivate people to save more aggressively by taking advantage of behavioral finance. Since an individual’s retirement savings behavior is often influenced by his/her peers, firms can mine the plan-specific data and share investors’ success stories with plan participants. Peer comparisons can usually drive people to take positive plan actions.

2) American Beacon Advisors Reaches Agreement to Be Acquired by Kelso & Company and Estancia Capital Management
    American Beacon | 11/20/2014

Because… The deal indicates the transfer of ownership from one pair of private equity firms to another, so we do not expect any operational disruption at American Beacon. Private equity-backed firms are not uncommon in the asset management industry. On the one hand, this ownership structure can support business growth and relieve short-term pressures from public shareholders. On the other hand, private equity firms’ strong emphasis on financial results could result in job elimination, and the use of leverage to finance buyouts means that their subsidiary’s access to human and financial resources could be limited.

3) John Hancock Advocates for Liquid Alts in DC Plans
    DailyAlts | 11/24/2014

Because… Both John Hancock and BNY Mellon have just published white papers to promote liquid alternatives in DC plans. From the offering of stock, bond, and balanced funds, to the addition of emerging markets, real estate, and inflation-protected funds, the DC market has evolved to include a wide range of investment products. The adoption of alternatives will be determined by plan sponsors’ shift in mindset from traditional to alternative investments; however, the need for more education, the lack of established track records, and regulatory concerns may prevent DC plans from significantly increasing the use of alternatives.




Weekly Net Flows Report, 11/12 Data (11/24/14)
Total estimated inflows to long-term mutual funds were $6.26 billion for the week ending Wednesday, November 12, according to the Investment Company Institute (ICI), marking the fourth consecutive week of overall inflows. All broad asset categories gathered sales with Taxable Bond leading the pack with $2.8 billion in net inflows. Municipal Bond collected $893 million in net inflows, representing a 41% increase from its intake during the prior week. World Equity garnered nearly $1.4 billion while its Domestic counterpart managed to collect $193 million, a significant turnabout from the $1.7 billion in redemptions during the prior week. Hybrid funds also rebounded from the prior week with $963 million in net inflows compared with $176 in net outflows.


Source: Investment Company Institute


Don't Miss This (11/18/14)
1) TCW's MetWest Unit Posts $9 Billion Inflows Since Exit of Pimco's Gross: Morningstar
    Reuters | 11/06/2014

Because… Metropolitan West Total Return Bond Fund was the industry’s top seller in October (including all long-term mutual funds and ETFs) with a net intake of $6.7 billion. Vanguard Total Bond Market Index Fund, Dodge & Cox Income Fund, BlackRock Strategic Income Opportunities Fund, iShares Core US Aggregate Bond ETF, and DoubleLine Total Return Bond were the other bond funds that garnered more than $2 billion in the month. These funds, either actively managed with solid consistent performance or passively managed, should be well-positioned to continue to reap the benefit from Gross’ departure in the rest of the year.

2) AQR to Unveil Four Tax-Managed Multi-Style Funds
    SEC Filings | 11/14/2014

Because… Many people do not realize the direct impact of tax management until they see the amount they have to pay the government. Investors have been wooing dividend-paying funds in the current low rate environment, but any potential tax rate hikes will take a big bite out of the dividend income and make dividends less appealing. When bringing new tax-managed funds to the marketplace, fund firms should educate investors by illustrating the tax impact on portfolio returns and demonstrating how their portfolio managers incorporate taxes into their investment process.

3) PIMCO’s Enhanced Short Maturity Active ETF Reaches Five Year Anniversary
    PIMCO | 11/17/2014

Because… The 5-year-old ETF, better known as MINT, is the largest actively managed ETF. Following its launch, five other ETF sponsors (iShares, SSgA, Northern Funds, First Trust, and AdvisorShares) introduced MINT-like, ultra-short bond ETFs, but none of them has gathered assets close to those poured into MINT. However, the fund was hit by net redemptions of $163.6 million this year through September after absorbing $1.7 billion in 2013. We expect more asset managers looking to break into the actively managed ETF space to seek opportunities in this arena, but the MINT’s dominance will not fade away in the near future.




Weekly Net Flows Report, 11/5 Data (11/14/14)
Total estimated inflows to long-term mutual funds were $4.96 billion for the week ending Wednesday, November 5, according to the Investment Company Institute (ICI). Investors poured $5.4 billion into bond funds, its largest intake since early May. Taxable Bond was responsible for the lion’s share of sales with $5.0 billion while Municipal Bond gathered $399 million. After two weeks of sales, Domestic Equity fell back into the red with $1.7 billion in net outflows. World Equity’s $1.4 billion intake was approximately $300 million shy of putting stock funds into positive territory. Hybrid funds also suffered redemptions with $186 million in net outflows.


Source: Investment Company Institute





Weekly Net Flows Report, 10/29 Data (11/7/14)
Total estimated inflows to long-term mutual funds were $2.70 billion for the week ending Wednesday, October 29, according to the Investment Company Institute (ICI). All broad assets classes experienced inflows with the exception of Taxable Bond’s outflows of $295 million. Despite remaining in redemption mode, this was a vast improvement from the outflows experienced during the month, dropping to a low of $21.0 billion during the week ending October 1. World Equity led sales with $1.2 billion, presenting a 9.5% dip from sales gathered during the prior week. For the second consecutive week, Domestic Equity remained in the black with $1.1 billion in net flows. With $229 million in net flows, Municipal Bond’s intake was a 78% increase from sales gathered during the prior week. Finally, Hybrid funds managed to turn the redemption tides over the past three weeks by collecting $418 million in net inflows.


Source: Investment Company Institute


Weekly Net Flows Report, 10/15 Data (10/24/14)
Total estimated outflows from long-term mutual funds were $11.51 billion for the week ending Wednesday, October 15, according to the Investment Company Institute (ICI). Amid fears about a slowdown in global economic growth, all broad categories experienced redemptions with the exception of Municipal Bond’s intake of $621 million. Domestic Equity and World Equity suffered $5.0 billion and $775 million in net outflows, respectively—the largest redemptions from stock funds since early July. For the third consecutive week, Taxable Bond remained in negative territory with $4.5 billion in net outflows. Investors pulled nearly $1.2 billion from Hybrid funds, representing its largest outflows since November 2012.


Source: Investment Company Institute


Weekly Net Flows Report, 10/8 Data (10/17/14)
Total estimated outflows from long-term mutual funds were $2.70 billion for the week ending Wednesday, October 8, according to the Investment Company Institute (ICI). Taxable Bond continued in the red with $4.6 billion in net outflows. Investors pulled $21.0 billion during the prior week—the biggest outflows since late June 2013, with $28.1 billion amid fears that a pullback in the Fed’s bond-buying program would trigger higher interest rates. The most recent outflows are attributed to the surprise resignation of Bill Gross. PIMCO Total Return Fund suffered withdrawals of $23.5 billion in September. Meanwhile, World Equity led sales with $1.6 billion while Domestic Equity continued in negative territory with $533 million in net outflows. After eight consecutive weeks of inflows, Hybrid funds slipped into redemption mode with $40 million in net outflows.


Source: Investment Company Institute


Don't Miss This (10/14/14)
1) Investor Use of Advisors Inches Up in 2014, Survey Says
    Financial Advisor | 10/9/2014

Because… The increased use of advisors is positive news, but the disconnect between advisors and clients still exists in many different areas. If advisors can close the gap and obtain a better understanding of what’s on their clients’ minds, we believe more individuals will turn to advisors for financial advice. Sometimes advisors do not realize their clients’ views are different from theirs, so it is important for advisors to listen to investors’ needs and top concerns, provide specific guidance and feasible options, explain and justify recommendations, and ask for feedback.

2) Janus Capital Group Inc. Announces Agreement to Acquire Exchange Traded Product Provider VelocityShares
    Janus | 10/13/2014

Because… The acquisition is putting Janus, which has not had any ETFs in its product line, into the ETF game right away. As we have learned from past ETF deals, not all result in a success. Since VelocityShares teams up with white-label service providers such as ALPS and Exchange Traded Concepts, the value of exemptive relief is obviously not a consideration for the purchase. VelocityShares’ platform for innovative product solutions, its focus on institutional clients and other more sophisticated investors, and the expertise of its management team may be key factors behind the deal.

3) Fidelity's Abigail Johnson Gains CEO Title from Her Father
    Reuters | 10/13/2014

Because… The dust has finally settled as Fidelity put to rest the speculation about its leadership succession plan. While her experience of working in different divisions within the organization should ease her into the new role, Abby Johnson will still have a lot of work cut out for her. The investor shift to passively managed products, lagging performance of its actively managed mutual funds, substantial redemptions from retail investors, competition from other RIA custodians, and the consolidation of retirement plan recordkeepers are among the challenges she will face.



Don't Miss This (10/7/14)
1) Vanguard Blocks 'Hot Money' into Bond Funds amid Pimco Outflows
    Reuters | 10/1/2014

Because… Several other firms, such as DoubleLine, TCW, BlackRock, and Western Asset, are capitalizing on the investor exodus from PIMCO, but Vanguard is the only firm we have heard that is tightening controls for cash inflows. The surge of hot money could hurt a fund’s trading flexibility and liquidity. Vanguard has already been the industry’s top selling firm for the past few years. Bringing in short-term money is of less importance than protecting existing shareholders’ interest, an endeavor that can attract more serious long-term investors down the road.

2) Great Recession Flips the Script for Boomers and Millennials
    Business Wire | 10/2/2014

Because… The latest MFS survey that discovered baby boomers consider growth maximization their primary goal whereas millennials focus on income generation is both interesting and thought-provoking. It reminds financial firms to reevaluate the effectiveness of their financial education programs. Individual investors apparently need help with assessing their risk tolerance level, time horizon, and financial situation, and making sure their asset allocation strategies are consistent with their investment objectives and priorities.

3) How Google Is Poised to Become a Dominant Investment Manager
    Forbes | 10/6/2014

Because… While the tech giant will not pose an immediate threat to asset management firms, the idea of Google to enter the fund industry is not impossible after all. It has the advanced technology to analyze economic trends and examine the customer database to reach out to loyal clients. Stringent regulations and investors’ reliance on traditional asset managers to provide insights and perspectives may hinder the firm from establishing a footprint now, but asset managers need to monitor the movement and think about ways of coping with the potential competition.



Don't Miss This (9/30/14)
1) Hispanics Optimistic About Their Futures, Financially Motivated to Protect Their Families
    PR Newswire | 9/18/2014

Because… Financial firms are starting to target the Hispanic market because of their growing population and economic importance. Hispanics in general have a lower level of savings than non-Hispanics, as they are less likely to have access to employer-sponsored retirement plans and to receive financial education from their employers. Financial firms need to evaluate market opportunities and determine the most effective approaches to enlighten, engage, and empower this ethnic group.

2) Eaton Vance Announces Filing of Fourth Amended Exemptive Application for Exchange-Traded Managed Funds
    PR Newswire | 9/25/2014

Because… Eaton Vance’s fourth amended application may signal the eventual approval of exchange-traded managed funds (ETMF) by the SEC. While we still cannot predict whether or when the SEC could give the green light for non-transparent ETFs, investor education would be essential for their acceptance of ETMFs if the investment vehicle is brought to the market. The inner workings of non-transparent ETFs are more complicated than transparent ETFs or mutual funds. As investors are taught to put their hard-earned money into products they feel comfortable with, they may not be able to embrace the new offerings right away until ETMF mangers provide more education.

3) PIMCO CIO William H. Gross to leave the firm
    PIMCO | 9/26/2014

Because… You simply cannot miss the news that has shocked almost everyone in the industry. Although the firm quickly announced the appointment of Daniel Ivascyn as the new CIO and put together a crisis control campaign, Bill Gross’ abrupt departure will inevitably have a significant impact on PIMCO’s business. The client confusion about management rift, the SEC investigation of the Total Return ETF’s pricing, accelerated redemptions from its flagship fund, and the lowered employee morale are among the challenges the new management team has to cope with.



Weekly Net Flows Report, 9/17 Data (9/26/14)
Total estimated outflows from long-term mutual funds were $419 million for the week ending Wednesday, September 17, according to the Investment Company Institute (ICI). Amid concerns that the Federal Reserve may raise interest rates, investors pulled nearly $1.3 billion from Taxable Bond funds. Municipal Bond managed to gather $517 million during the week, but the total for bond funds remained in negative territory with $755 million in net outflows. On the other hand, investors poured $2.1 billion into World Equity while Domestic Equity suffered nearly $2.0 billion in net outflows. Hybrid funds only collected $179 million, a significant drop from the $1.1 billion in net inflows during the prior week.


Source: Investment Company Institute


Don't Miss This (9/23/14)
1) Morgan Stanley Adds 'Impact' Portfolios in Brokerage
    Investment News | 9/17/2014

Because… Institutional investors, such as pension plans, endowments, and foundations, have appeared to be more committed to sustainable and impact investing as they consider social responsibility a part of their fiduciary duty. In the retail space, investors are leaning toward the generation of competitive returns in a low-rate environment and the lagging performance of some sustainable investing products may have curbed investors’ enthusiasm. With wirehouses like Morgan Stanley pushing into the sustainable investing, advisors and their clients who are concerned about making a positive social impact may reconsider their portfolio construction principles.

2) Largest Commission-Free ETF Program Now Offers Even More: Schwab ETF OneSource Deepens Bench of Providers and Expands to 180+ $0 Commission ETFs
    Schwab | 9/18/2014

Because… The expansion of the ETF OneSource program is different from last time as new ETF managers have been added to the roster. This indicates that the rapid growth of the platform, its asset-gathering capability, and its potential to attract more advisors, and individual investors have not gone unnoticed among ETF providers. The fact that even some large ETF sponsors, such as WisdomTree and PIMCO, are joining OneSource has demonstrated the distribution clout of this ETF supermarket.

3) SEC Finds Misrepresentations by Hedge Funds, Bowden Says
    Bloomberg | 9/18/2014

Because… Deceptive conducts, such as misrepresentations of performance in advertising and marketing materials and changes of valuation methodologies to present only the most favorable results, can mislead investors, hurt hedge fund firms’ reputations, and diminish their credibility. To win the investor trust, hedge fund managers need to have disclosure and valuation policies in place and strictly adhere to the stated policies. While the SEC’s scrutiny helps reduce fraudulent behaviors, hedge fund managers themselves should be fully aware of the harm and risks posed by illegal practices.



Weekly Net Flows Report, 9/10 Data (9/19/14)
Total estimated inflows to long-term mutual funds were $3.79 billion for the week ending Wednesday, September 10, according to the Investment Company Institute (ICI). Redemptions from Domestic Equity tapered from $5.3 billion during the prior week to $1.3 billion in net outflows. As the European Central Bank announced new stimulus measures, World Equity drove sales with nearly $2.6 billion in net inflows—doubling its intake of $1.3 billion during the prior week and marking its largest intake in five weeks. Although Taxable Bond managed to stay in the black with $704 million, it marks a sharp decrease from the $1.8 billion gathered a week earlier. Municipal Bond gathered $841 million, a 27% increase from its total during the prior week. Hybrid funds nearly doubled its intake from the prior week, claiming $1.0 billion in net inflows.


Source: Investment Company Institute


Don't Miss This (9/16/14)
1) CalPERS Eliminates Hedge Fund Program in Effort to Reduce Complexity and Costs in Investment Portfolio
    CalPERS | 9/15/2014

Because… Calpers’ decision to shed the $4 billion investment in 24 hedge funds and 6 hedge fund-of-funds is a huge blow for the hedge fund managers it has worked with, but the pullout should open up new opportunities for other liquid alternative asset managers, especially those that provide less complicated strategies with lower costs. As the largest U.S. public pension fund, Calpers’ asset allocation moves are closely watched by many in the investment industry. We believe other plan sponsors looking to increase the weight of hedge strategies in their portfolios may reassess costs and benefits of their hedge fund exposure.

2) Financial Services Providers Failing to Connect with Millennial Generation, According to New Study by BNY Mellon & the University of Oxford
    BNY Mellon | 9/15/2014

Because… Firms that have welcomed social media with open arms may be taken aback by the survey result that reveals less than 1% of Millennials want financial services providers to connect with them through social media. Although this finding should not put a stop to the use of social media, firms that expected it to be an effective way of engaging investors need to reconsider how to make the most use of the technology to deepen the connection with this young generation of investors.

3) New DC Thinking Based on DB Best Practices
    Plansponsor | 9/16/2014

Because… For DC plans to evolve into a better retirement savings system, providing DB-like benefits, such as income replacement, will significantly increase plan participation and contribution rates. However, DB-ization of DC plans, no matter how appealing the concept is to plan participants, is complex to implement in reality. DC plan sponsors may not want to offer some retirement income solutions due to fiduciary concerns, while product providers in the fund industry are still searching for a cost-effective, guaranteed source of income.



Weekly Net Flows Report, 9/3 Data (9/12/14)
Total estimated outflows from long-term mutual funds were $1.05 billion for the week ending Wednesday, September 3, according to the Investment Company Institute (ICI). Investors withdrew $4.0 billion from equity funds, its largest outflows in nine weeks. Domestic Equity suffered $5.3 billion in redemptions while World Equity gathered $1.3 billion. Although Taxable Bond drove sales with nearly $1.8 billion in net inflows, this intake marked a decrease from the $2.8 billion gathered during the previous week. Municipal Bond collected $661 million in net inflows—a slight dip from the $734 million posted the prior week. Following the same trend, Hybrid funds gathered $544 million in net inflows, marking a significant drop from its intake of $943 million from the previous week.


Source: Investment Company Institute


Don't Miss This (9/9/14)
1) Retirement Plan Landscape Stabilizing as Fewer Fortune 500 Companies Shifting Defined Benefit Plans to 401(k)s, Towers Watson Analysis Finds
    Towers Watson |  9/4/2014

Because… The Towers Watson analysis showed that the number of traditional DB plans declined from 251 in 1998 to 34 in 2013 whereas the number of DC plans increased from 195 to 382 during the 15-year span. While the shift from DB to DC plans may reduce employers’ fiduciary responsibility of managing the retirement assets, it does not mean plan sponsors should sit on the sidelines without providing adequate assistance. Plan sponsors need to be more proactive in engaging their workers to save for retirement, offering advice on asset allocation and risk management, and incorporating retirement income solutions.

2) MFS Investment Management Names Co-Chief Executive Officers
    Business Wire  |  9/8/2014

Because… The announcement of promoting Michael Roberge to Co-CEO should generate positive publicity for MFS, which ranked #7 among all long-term mutual fund and ETF managers for YTD net flows as of the end of July. A growing number of asset managers have evaluated the competitive environment that they operate in and revisited the corporate management team structure. By sharing the firm’s strategic vision and initiatives the firm is implementing with the public, MFS is giving investors more confidence in its future growth.

3) BB&T to Acquire The Bank of Kentucky Financial Corp.
    PR Newswire  |  9/8/2014

Because… Although the deal size is on the small side, it has broad implications for the banking industry. Community banks now operate with rising compliance costs under heightened market pressure. The concerns about reduced earnings and profitability lead some smaller banks to contemplate a sale. Meanwhile, these banks may provide unique services that target local residents, which makes them very appealing to larger national banks looking to expand their service regions and offerings.


Don't Miss This (9/2/14)
1) Retirement Plan Industry Trends Then Versus Now
     Plansponsor  |  8/28/2014

Because… The Employee Retirement Income Security Act (ERISA) was signed into law forty years ago on September 2. A review of the past and the present would help industry professionals contemplate how to move into the future. The retirement plan industry has changed dramatically over the past four decades. Although some developments, such as the establishment of fiduciary standards, the passage of the Pension Protection Act that provides a safe harbor for automatic features, and the fee disclosure requirement, have helped workers better prepare for the retirement, the industry should make greater efforts to enhance public awareness of retirement savings needs and increase the enrollment in retirement plans.

2) WBI Shares Hits $1 Billion Milestone Their First Day Out
    Business Wire  |  9/2/2014

Because… Raising more than $1 billion on the first trading day is remarkable for a new issuer, considering these funds have not established a track record and they are not offered by a well-recognized leading player. While quite a few asset managers are seeking opportunities in non-transparent active ETF space due to front running concerns, the asset-gathering success of WBI indicates transparency should not be a major hurdle in the active ETF arena and there is plenty room for actively managed ETF sponsors to grow their business if they have developed a compelling value proposition.

3)  Rafferty Asset Management Closing Five Leveraged Exchange-Traded Funds
     PR Newswire  |  9/2/2014

Because… Direxion is not alone in shutting down its ETFs. PIMCO and iShares also filed last month to dissolve their ETFs. With ETF providers bringing more funds to the market, the competition has become more intense than ever. A large number of ETFs are unable to raise $100 million, a break-even point for profitability, which should spell further possibilities for product rationalization. Narrowly focused funds exposed to subsectors of a specific industry or targeted geographic areas are more likely to become candidates for elimination.


Weekly Net Flows Report, 8/20 Data (8/29/14)
Total estimated inflows to long-term mutual funds were $8.46 billion for the week ending Wednesday, August 20, according to the Investment Company Institute (ICI). All broad asset classes experienced inflows. Domestic Equity posted $738 million in net inflows, a reversal from outflows experienced since April, while World Equity gathered $1.9 billion. Investors poured nearly $4.2 billion in Taxable Bond and $814 million into Municipal Bond, quite the improvement from the $8.2 billion in redemptions during the week ending August 6. Hybrid funds collected $827 million in net inflows—a 67% increase from the prior week.


Source: Investment Company Institute


Don't Miss This (8/26/14)
1) U.S. Investors Opt for Human Over Online Financial Advice
    Gallup  |  8/15/2014

Because… The Gallup study discovered that only 20% of survey participants use an online financial planning or investing website, compared with 44% using a dedicated personal financial advisor and 35% using a financial advisory firm. The delivery of online advice can help individual investors become more financially sophisticated and more capable of taking control of their own finances. While they have a positive impact on the way investors organize their financial life, they are yet to pose a serious threat to the financial advisor community.

2) iShares to Liquidate 14 ETFs
    SEC Filings  |  8/18/2014

Because… The closure by the largest ETF manager includes 10 target date funds (TDFs), which suggests the difficulty of ETFs to gain traction in the TDF space. Deutsche will become the only ETF TDF provider after the liquidation of iShares funds. But with a higher expense ratio, a lower level of brand recognition, and lower average trading volumes, it will still be hard for Deutsche offerings to capitalize on the iShares’ absence in the near future.

3) Looking Beyond Past Performance in Manager Selection
    Plansponsor  |  8/25/2014

Because… Despite the warning that past performance does not guarantee future results, investors still pay much attention to historical returns when making investment decisions. Like studies published before, Segal Rogerscasey once again found evidence of long-term performance inconsistence within nearly all investment classes, which leads to the conclusion that even five-year performance can be a poor indicator of future success. Asset managers should place more emphasis on investment philosophy, process, strategies, risk management infrastructure, and principles of corporate governance to better assist investors with decision-making.


Weekly Net Flows Report, 8/6 Data (8/15/14)
Total estimated outflows from long-term mutual funds were $9.41 billion for the week ending Wednesday, August 6, according to the Investment Company Institute (ICI). Bond funds suffered its first withdrawals since early February with nearly $8.2 billion in net outflows, marking the largest redemptions from bond funds in nearly a year. Investors pulled $8.6 billion from Taxable Bond while adding $454 million into Municipal Bond. Equity funds also fell into the red with $422 million in net outflows. The $3.1 billion in redemptions from Domestic Equity could not offset the $2.6 billion investors poured into World Equity. Hybrid funds experienced its first outflows since early May with $799 million, its largest redemptions since December 2013.


Source: Investment Company Institute


Don't Miss This (8/12/14)
1) Large Plans Bested Small Ones in Q2
    Plansponsor  |  8/11/2014

Because… Large plans typically have lower expense ratios, which can lead to higher returns. Also, large plans tend to have a more diversified investment menu, including a larger allocation to alternative investments, which can result in better portfolio diversification. The underperformance of smaller plans indicates these plans may need more help with fee evaluation, selection of investment options, and simplification of operational procedures.

2) BlackRock Launches Multi-Manager Alternative Strategies Fund
    BlackRock  |  8/12/2014

Because… According to FUSE’s estimate, multi-strategy alternative mutual funds had assets of $33 billion, up 41% from their 2013 assets of $23.5 billion. While we expect more fund firms to offer alternative strategy funds in a multi-manager structure, we believe the selection of sub-advisors and investor education are critical to a fund’s success. Fund firms need to share why they choose certain sub-advisors, what their investment processes are, what advantages they have over their peers, and how they minimize risks associated with their respective strategies.

3) TIAA-CREF Survey Finds One-Third of Americans Have Never Increased Their Retirement Plan Contribution Rate
    TIAA-CREF  |  8/12/2014

Because… The finding that many Americans have not increased their contribution to retirement plans is not unexpected. The need to pay other expenses, the inertia often associated with retirement savings, and the indifference to the power of compounding can be factors that prevent investors from adding to their savings accounts. Financial firms need to illustrate the benefits of maximizing contributions, the difference a small increase can make in the long term, and help plan sponsors modify the auto-escalation feature to encourage more participants to boost their contributions.


Weekly Net Flows Report, 7/23 Data (8/1/14)
Total estimated inflows to long-term mutual funds were $1.33 billion for the week ending Wednesday, July 23, according to the Investment Company Institute (ICI). This cumulative intake represents a 16.4% increase from the prior week and is a significant turnabout from the $4.2 billion in net outflows during the beginning of the month. Domestic Equity remained in negative territory with approximately $3.4 billion in redemptions while all other broad assets classes experienced inflows. World Equity drove sales with $2.1 billion in net inflows during the week. This was followed by the $1.1 billion in net inflows collected by Hybrid funds. Municipal Bond funds garnered $884 million, surpassing Taxable Bond’s $577 million intake.


Source: Investment Company Institute


Don't Miss This (7/22/14)
1) The Largest Leakage Culprit: Job Change Cashouts
    
EBRI  |  7/17/2014

Because… EBRI estimated that the effect from 401(k) cashouts at job change turns out to be approximately two-thirds of the total leakage impact. Financial firms should first help employers motivate their workers to save for the long term. Service providers should also simplify the rollover process for job changers by using web-based rather than paper forms. A more convenient and easy-to-follow electronic process could curb the urge to take money out, especially for younger employees who are more likely to take advantage of the latest technology.

2) DC Plan Sponsors Called On to Offer In-Plan Annuities
    
Plansponsor  |  7/17/2014

Because… Higher costs, product complexity, unscrupulous sales tactics, and suitability lawsuits that often accompany annuities have scared away many DC plan sponsors. In addition, plan sponsors and participants may lack confidence in insurers whose financial strength and ability to meet ongoing obligations to policyholders determine payments of guaranteed benefits. So the call for in-plan annuities may meet with objection despite the good intention of offering lifetime income solutions to hedge against longevity risk.

3) Natixis Global Asset Management Funds $1 Million Investor Behavior Project at MIT
    
Business Wire  |  7/21/2014

Because… Experts in the behavior finance field have published a lot of studies that attempt to reveal the influence of human emotions and cognitive errors on investor decision-making. A small number of asset managers, such as LSV Asset Management, Dreman Value, and Fuller & Thaler, have embedded behavioral finance into their investment strategies. But the fund industry, for the most part, has not paid sufficient attention to tenets of behavioral finance. The efforts, such as the collaboration between Natixis and MIT, are likely to elevate awareness of the importance of behavioral finance.




Don't Miss This (7/15/14)
1) Annual Survey Finds Continued Rise of Mutual Funds as Vehicle of Choice for Alternative Strategies; Long-Short Equity Garners Most Investor Interest for Fourth Year in a Row
    Morningstar  |  7/7/2014

Because… The record-high asset flows into alternative funds and the largest number of fund launches in 2013 are a clear indication that liquid alternative mutual funds are becoming a viable option for investors who are turning to alternative investments for diversification and risk management. We believe investors will continue to take advantage of the availability of alternative mutual funds because they are SEC-registered, provide liquidity and transparency, and charge lower fees than comparable hedge funds.

2) Utility & REIT Funds Come Roaring Back
    ETF.com  |  7/11/2014

Because… Utilities became the second best-selling category among all ETFs in June, according to Morningstar. Utilities ETFs pulled in $2.4 billion in the month and $3.3 billion in the first half of the year, compared with net redemptions of $1.5 billion in 2013. SSgA’s Utilities Select Sector SPDR ETF alone raised $1.4 billion in June and $1.9 billion this year through June, accounting for 58% of the category flows for both time periods. The fund’s YTD return of 18.5%, more than doubling the 7% return from the S&P 500, could be a factor appealing to performance-chasing investors.

3) Industry Responses Vary on TDF Disclosure Proposals
    Plansponsor |  7/11/2014

Because… We think enhanced disclosures are necessary and helpful to improve investor understanding of target-date funds (TDFs), but challenges still exist beyond including more information in marketing materials. TDF providers need first to engage participants as many individuals do not pay sufficient attention to required disclosures at all. Since a lot of investors lack the knowledge to get a handle on such concepts as “glide path” and “risk profile,” TDF managers should also consider whether average investors can fully digest the information provided to them and how to improve their ability to make sound decisions based on fund profiles and their risk tolerance.


Don't Miss This (7/8/14)
1) Perceived Expense Stops Many from Seeking Advice
    Plansponsor  |  7/2/2014

Because… The survey pointed out 23% of respondents feel financial professionals are too expensive to hire. To dispel investor misconceptions, plan sponsors should let their employees know the actual cost of advice, benefits of obtaining professional guidance, and their due diligence process to identify affordable advice providers. While easy accessibility and proliferation of online information may impel some investors to take advantage of “free” advice, they have not realized that only advice that is tailored to individual needs can help optimize their investment outcomes.

2) IndexIQ Files for IQ Private Equity Tracker ETF
    SEC Filings  |  7/3/2014

Because… Although asset managers are increasingly rolling out alternative investment products, funds with a private equity focus are still very rare in the marketplace. The new IndexIQ offering, which is not a fund of private equity funds, seeks to “track the returns of private equity fund managers” and “replicate the beta return characteristics of private equity funds”. Pension plans, charities, foundations, and endowments have already been investing in private equities with success. We expect more investment firms to explore opportunities in this trillion dollar industry.

3) Myron Scholes and Ashwin Alankar Join Janus Capital
    Janus  |  7/8/2014

Because… The hiring of Myron Scholes as Chief Investment Strategist and Ashwin Alankar as the head of Asset Allocation and Risk Management suggests Janus is placing an emphasis on asset allocation solutions. Bringing a Nobel Laureate on board could help Janus draw more investor attention, produce insightful thought leadership content, and enhance brand equity. Leveraging their expertise will likely boost investor confidence on the firm’s new customized products.


Don't Miss This (7/1/14)
1) SEI White Paper: Advisors Must View Succession Planning As Growth Strategy, Not Just Retirement Strategy
    SEI  |  6/24/2014

Because… Despite the aging of the advisor community, many advisors have not taken the time to think about succession planning. They may be reluctant to address the issue due to emotional attachment to their business, but the presence of a succession plan can give clients a sense of stability and help retain clients. Financial firms can work with advisors to develop a well-crafted succession plan by stressing the importance of creating a succession plan, presenting succession planning options, helping advisors conduct a comprehensive business assessment and identify the succession model that best protects the advisor interests, and providing referral services.

2) BlackRock Adjusts Target-Date Fund
    Financial Advisor  |  6/25/2014

Because… BlackRock has followed Fidelity and Russell to adjust the asset allocation for its target date funds (TDFs). Increasing exposure to equities has appeared to be a common theme for the reallocation. TDFs with aggressive glide paths performed well in 2013. TDF managers that have remained conservative and kept bond exposure at a relatively high level will have a hard time to help investors attain their retirement goals because of the lagging fund performance. On the other hand, plan sponsors expect TDF managers to refine portfolio construction to respond to the changing market environment. If TDF provider lacks the capability to adapt to the evolving markets, plan sponsors have the flexibility to switch to another that can better prepare for interest rates’ eventual hikes.

3) Alger Announces Opening of London Office and Hiring of Head of International Sales
    PR Newswire  |  6/26/2014

Because… Just as Alger opened its London office, the London-based Henderson announced its acquisition of Geneva Capital Management, a U.S.-based mid- and small-cap growth equity specialist. Reaching across the pond has become a strategic priority for asset managers to accelerate their business growth. However, geographic expansion, which often comes with both rewards and risks, requires long-term commitment and patience, as brand recognition, local investor demand, regulatory hurdles, and different distribution models can pose serious challenges for firms expanding overseas.


Weekly Net Flows Report, 6/18 Data (6/27/14)
Total estimated inflows to long-term mutual funds were $4.31 billion for the week ending Wednesday, June 18, according to the Investment Company Institute (ICI). This cumulative intake represents a 25.3% increase from the prior week. Domestic Equity remained in negative territory with $2.2 billion in redemptions while all other broad assets classes experienced inflows. After two weeks of record $3.0 billion-plus inflows, World Equity captured nearly $1.3 billion in net inflows. Taxable Bond led sales during the week with $3.7 billion, and Municipal Bond managed to gather $419 million. Hybrid funds collected nearly $1.1 billion.


Source: Investment Company Institute
 


Don't Miss This (6/24/14)
1) BlackRock Shifts Pay Formula for U.S. Sales Force
    Reuters  |  6/20/2014

Because… BlackRock’s bold move is bringing the business goal and sales compensation into closer alignment. Fund firms would want to pursue more predictable and reliable revenue stream, but non-sticky assets make it difficult for them to recover the cost of acquiring assets and achieve long-term profitability. By switching to a “net”-based pay formula, BlackRock is focusing more on asset retention than most firms in the industry with a conventional “gross”-based compensation structure.

2) The Impact of “Leakage” on 401(k) Accumulations
    EBRI  |  6/23/2014

Because… The leakage from defined contribution plans is concerning because it may reduce retirement assets, lead to lower contribution, and result in the erosion of retirement readiness. From a plan sponsor’s view, the plan’s asset allocation and investment performance can also be affected when plan participants take money out. The EBRI analysis, by quantifying the impact of leakage on 401(k) accumulations, underscores the need for financial firms to help plan sponsors minimize leakage.

3) Fidelity's Sector ETFs Pass the $1 Billion Mark
    Bloomberg  |  6/23/2014

Because… While the fund giant’s ability to garner assets is not surprising, pulling $1 billion into its new ETFs in eight months is still impressive. With the lowest expense ratios, the commission-free trading, a powerful distribution network, a well-known brand, the partnership with BlackRock, sector-specific educational effort, and an easy access to guidance tools, Fidelity is on its way of becoming a formidable competitor in the sector ETF space.


Don't Miss This (6/17/14)
1) Eight in Ten Millennials Say Great Recession Taught Them to Save “Now,” Wells Fargo Survey Finds
    
Wells Fargo  |  6/10/2014

Because… While millennials’ increased confidence in the stock market and their own financial future is comforting, the survey result that revealed 45% of the generation are not saving for retirement indicates financial services firms need to work harder to engage these younger investors. Firms should urge them to participate in employer-sponsored retirement plans, adopt a consultative approach, deliver personalized practical solutions for individual situations, and dispel any myths and misunderstandings they may have.

2) Guggenheim to Launch the Multi-Asset Fund
    
SEC Filings  |  6/13/2014

Because… World Allocation, where global multi-asset funds belong, was the fourth best-selling mutual fund category this year through the end of May with net inflows of $11.5 billion. Investors’ demand for investment flexibility has spurred the growing interest in global multi-asset funds. Investors pursue go-anywhere approaches that can exploit investment opportunities around the world without being confined to market capitalization ranges, investment styles, or specific asset classes. The combination of multiple asset classes in a single fund holds the potential of return maximization and portfolio diversification.

3) Plan Sponsors Moving to Retirement Income Mindset
    
Plansponsor  |  6/17/2014

Because… This study’s finding of plan sponsors moving to retirement income mindset is a remarkable change from the past. Research in previous years showed that many plan sponsors focused more on asset accumulation than retirement income. Most of them did not take the responsibility of helping employees generate and maintain a stream of income after their retirement because of the concerns about fiduciary liability in selecting specific retirement income solutions and assessing product providers’ ability to offer steady income payments. Plan sponsors’ willingness to help with retirement income planning will certainly improve the appeal of their plan.


Weekly Net Flows Report, 6/4 Data (6/13/14)
Total estimated inflows to long-term mutual funds were $4.40 billion for the week ending Wednesday, June 4, according to the Investment Company Institute (ICI). This intake is up significantly from the $696 million accrued during the prior week and is aligned with cumulative weekly sales totals throughout May. World Equity led sales with $3.2 billion, marking its largest intake since March. One the other hand, for the sixth consecutive week Domestic Equity remained in the red with $1.1 billion in net outflows. With $785 million in net inflows, sales into Municipal Bond fund surpassed the $371 million in net inflows into Taxable Bond. Finally, Hybrid funds gathered $1.1 billion, on par with its totals during the past few weeks.


Source: Investment Company Institute


Don't Miss This (6/10/14)
1) Trustworthiness Important in Selecting Plan Provider
    
Plansponsor  |  6/6/2014

Because… The survey of 809 plan sponsors found that only 9% of plan sponsors can “always trust financial institutions to do the right thing for plan sponsors and participants.” Such a low level of trust suggests the industry has to assume the responsibility of addressing the integrity issue. To build credibility, financial firms should nurture a strong ethical culture, instill ethical practices among employees, disclose revenue sharing arrangements, develop proactive communication campaigns to ease investor concerns, and deliver unbiased advice without promoting proprietary products.

2) Vanguard Passes Fidelity to Become Number One in 401(k) Assets
    Bloomberg  |  6/6/2014

Because… Although Vanguard offers actively managed funds as well, its reputation as an index fund provider should be a contributing factor for its rise to the top. With investors’ quest for passive investing showing no sign of abating, the heightened scrutiny of plan costs, and fiduciary duties plan sponsors have to fulfill, the adoption of passively managed products will only increase in the years ahead. This requires actively managed fund providers to reflect upon the evolving market and identify a plan of attack that can effectively defend its market position.

3) Blackrock Expands iShares Core For Buy-And-Hold Investors
    BlackRock  |  6/10/2014

Because… The competition with Vanguard is getting heated in the ETF arena. According to BlackRock’s May report, Vanguard gained 1% of market share this year whereas iShares’ market share remained unchanged. iShares’ market share in the U.S. has dropped to 39% from about 50% in 2009. Vanguard had YTD net flows of $24 billion into 67 U.S.-listed ETFs, while iShares attracted $19.6 billion into its line of 303 ETFs. The sales momentum gained by iShares Core Series funds indicates the strategy of offering low-cost products for long-term investors’ strategic allocation has been working, and the firm expects to capitalize on the series’ popularity to maintain its leading position.


Weekly Net Flows Report, 5/28 Data (6/6/14)
Total estimated inflows to long-term mutual funds were $717 million for the week ending Wednesday, May 28, according to the Investment Company Institute (ICI). This cumulative intake represents a dramatic drop for the $4.1 billion in net inflows accumulated during the prior week. Domestic Equity was the only broad asset class to fall into the red with nearly $2.6 billion in net outflows. Its Word counterpart managed to gather $149 million in net inflows, bringing the total for stock funds to $2.4 billion in net outflows—its largest in four weeks. Meanwhile, investors continue to reach for yield and poured approximately $2.1 billion in bond funds, its 16th consecutive week of inflows. After suffering outflows of $402 million during the beginning of the month, Hybrid funds bounced back and garnered $1.1 billion during the week.


Source: Investment Company Institute


Don't Miss This (6/3/14)
1) S&P, BlackRock Plan 'Smart' Bond Indexes and Funds
    
Reuters  |  5/22/2014

Because… While smart beta equity funds have proliferated, smart beta bond funds are few and far between. Traditional bond indexes overweight the most indebted issuers, which at the same time may have lower debt-to-equity ratios than issuers with less debt. Smart beta bond indexes will challenge this rationale and emphasize on other factors than market weights, which some believe are an inefficient indicator. We have no doubt an indexing methodology that provides investors with an alternative will find its ardent supporters, whether it will be embraced in the marketplace will come down to its ability to deliver outperformance.

2) Morningstar, Inc. to Acquire HelloWallet Holdings, Inc., Leading Provider of Online Financial Wellness
    
Morningstar  |  5/29/2014

Because…With already a $13.5 million stake in HelloWallet and a partnership in place over the past couple of years, Morningstar’s acquisition is not totally unexpected. HelloWallet’s client roster includes 17 plan sponsors and 3 plan providers. Some notable financial firms, such as Vanguard, Aon, and Marsh & McLennan, have teamed up with the firm to improve financial wellness services. HelloWallet’s expertise in behavioral and consumer research, the holistic guidance and integrated solutions it provides, and its advanced technology will make Morningstar’s advice offering more attractive to plan sponsors and participants.

3) BlackRock Cuts Europe ETF Fees in Race with Vanguard for Assets
    Bloomberg  |  6/1/2014

Because… The price cut and introduction of the Core Series of ETFs to European investors will strengthen iShares’ leading position in the region. According to BlackRock, iShares ETFs accounted for 47% of the assets in the European market. The firm raised $7 billion in Europe this year through April, representing one-third of net flows into all Europe-listed ETPs. The Core Series has achieved huge success in the highly competitive U.S. market. We believe the low-cost lineup can help the firm fend off the competition in other countries as well.


Don't Miss This (5/27/14)
1) Target-Date Funds Underperform in Q1'14
    Plansponsor  |  5/19/2014

Because… As mentioned in the Ibbotson Target Date Report, it is uncommon for target-date funds to fare worse than both the S&P 500 and the Barclays U.S. Aggregate Bond Indexes. However, slight underperformance for one quarter should not become a concern for plan sponsors and participants. Target-date fund providers need to remind investors to always take a long-term perspective. Meanwhile, an explanation of why target-date fund performance lagged behind would help investors understand the impact of exposure to different asset classes and trade off between risk and return.

2) What Are the IRA Trends over Time?
    EBRI  |  5/21/2014

Because… The EBRI study found that balances of Roth IRAs grew at more than double the rate of traditional IRAs among a consistent set of IRA owners from 2010 to 2012. The smaller average balance was one of the major factors for the faster growth of Roth IRAs, as pointed out by EBRI. In fact, there are still many individuals who either are unaware of Roth IRAs or lack a deeper understanding of the benefits of each IRA type. Since the Roth IRA contribution and conversion provide a good opportunity for financial advisors to grow their business, asset management firms should align behind advisor interests, help them demonstrate the potential value of Roth IRAs, and keep them abreast of relevant rule changes.

3) John Hancock Retirement Plan Services Expands Asset Allocation Offerings in JH Signature 401(k) Plan Platform
    PR Newswire  |  5/22/2014

Because… The additions of target-date options from T. Rowe Price and American Century indicate recordkeepers are increasingly providing non-proprietary choices to meet the demand of plan sponsors. Defined contribution plan sponsors are gradually shifting from being locked into proprietary offerings to selecting different providers for different services. The flexibility offered by an open architecture not only reduces conflicts of interests, but also benefits plan sponsors and participants because they are likely to experience better investment results.


Don't Miss This (5/20/14)
1) T. Rowe Price Launches Campaign to Help Parents of Young Children Cope with the "Sticker Shock" of College Costs
    
T. Rowe Price  |  5/13/2014

Because…Edward Jones found in its third annual survey that the 529 plan awareness dropped to 30% from 37% in 2012. The decline is quite disturbing as the student loan debt has reached a new high and many families are behind in saving for college education. 529 plan providers should be proactively working with state plan sponsors, advisors, and individual investors to broaden their knowledge of 529 plans. AllianceBernstein will offer 529 plan seminars to financial advisors, financial planners, and attorneys later this month. As the National 529 Day is approaching, we hope more events such as this can be organized to increase public awareness of college savings vehicles.

2) Asia-Pacific ETF Assets Under Management Could Reach US$250 Billion by 2016, Says BNY Mellon
    
PR Newswire  |  5/13/2014

Because… The Asia-Pacific ETF market is currently dominated by Japanese firms, with the country accounting for about 48% of the market. The region’s three largest ETP providers were all based in Japan, representing a combined 44% of the market. This year through April, 6 of 10 top sellers in the region were Japanese issuers. While mutual recognition of investment products between Hong Kong and mainland China may benefit ETFs in the area, the time needed to develop local market infrastructure and introduce regulatory reforms determines that the growth of the Asia-Pacific market in the next couple of years will likely continue to be driven by the asset-gathering ability of Japanese managers.

3) Is It ‘‘To” or “Through?” BlackRock Research Concludes TDF Asset Glidepath Should “Land” When Investor Retires
    
BlackRock  |  5/15/2014

Because… We feel that the BlackRock’s conclusion, no matter how rigorous its research is, will not put the “to-or-through” debate to rest once and for all. With both camps having their staunch supporters, there has not been, and will never be, a consensus on the optimal glide path. John Hancock even offers both “to” and “through” target-date portfolios to accommodate different types of investors. We believe the asset allocation after the retirement date should be determined by a combination of factors, such as withdrawal patterns, retirement account balances, risk tolerance, and retirement income needs.


Don't Miss This (5/13/14)
1) New ETF Managed Account Product is Latest From Groundbreaking Fidelity/BlackRock ETF Alliance
    Fidelity  |  4/24/2014

Because… The latest expansion of the Fidelity/BlackRock alliance reveals Fidelity’s aspiration to become a serious player in the ETF space. Fidelity saw assets of its 10 sector ETFs grow to more than $500 million since their inception last October. Meanwhile, assets of the 65 commission-free iShares ETFs on Fidelity’s platform increased 86% from the prior year. While these figures reflect Fidelity’s distribution power, the annual fee ranging from 0.55% to 1.1% (depending on the account balance) may prevent some investors from embracing this new managed account product right away.

2) AllianceBernstein Appoints Robert Hostetter as Head of Global Product Strategy
    PR Newswire  |  5/9/2014

Because… AllianceBernstein has made several high-level hires since the beginning of the year. Besides Robert Hostetter, the firm brought in Michael Conn as Head of Strategy and Development for its fund of funds group, Roberta Matheny as Senior Client Service Officer to support the growth of its defined contribution business, and Christopher Thompson as Head of U.S. Retail Client Group to expand its retail footprint. These new appointments show the firm’s commitment to product innovation and diversification as well as its ambition to grow its retail and DCIO businesses. AllianceBernstein attracted $2.5 billion in 1Q14 after experiencing net redemptions of $668 million in 2013.

3) LSE in Talks to Buy Russell to Expand in U.S. Stock Indices
    Reuters  |  5/13/2014

Because… The potential sale of Russell has attracted different types of suitors, including index providers and private equity firms. The interest from the London Stock Exchange indicates the firm’s index business is considered more valuable and appealing than its asset management unit. Major ETF sponsors, such as iShares, SSgA, Vanguard, ProShares, and Direxion, have all licensed its indices. Russell’s fate is not yet set in stone if Northwestern Mutual’s decision to sell it in whole collides with a buy’s intention to focus only on its benchmark business. It is imperative for Russell to maintain business stability before the M&A dust settles.


Weekly Net Flows Report, 4/23 Data (5/2/14)
Total estimated inflows to long-term mutual funds were $6.75 billion for the week ending Wednesday, April 23, according to the Investment Company Institute (ICI). Bond funds gathered $2.3 billion in net inflows, marking its 11th consecutive week of inflows. According to Reuters, “…outperformance in bonds this year has lured investors back into the funds after massive outflows in 2013.” Equity funds captured $3.5 billion during the week with investors putting $2.1 billion into World Equity and $1.4 billion into Domestic Equity. Hybrid funds collected $944 million, representing a 19% decrease from its $1.2 billion intake during the prior week.


Source: Investment Company Institute


Don't Miss This (4/22/14)
1) Grandeur Peak Global Reach Fund to Soft Close
    Grandeur Peak |  4/16/2014

Because… The soft closure of the Global Reach Fund means Grandeur Peak will have no offerings available for new investors. Two months after its announcement of closing the Emerging Markets Opportunities Fund, the firm has decided to shut the door to the only fund available to the public. Grandeur Peak’s rapid growth has amazed us, and we are even more impressed by its determination to put the pursuit of persistent performance ahead of the maximization of fee income. By protecting existing shareholders’ interests, the firm will win more investors when it launches new products in the future.

2) Eaton Vance Appoints Bradford G. Thomas Head of Global Consultant Relations
    
PR Newswire  |  4/21/2014

Because…Highland Capital and INTECH have also recently made new hires for this distribution channel. These additions indicate that firms have increasingly realized the importance of deepening relationships with investment consultants. The strong demand for investment consultants will be driven by several factors: Product complexity and sophistication have impelled institutional investors to search for investment expertise; more retirement plan sponsors are appointing an outside fiduciary to oversee their investment lineup; high-net-worth family offices seeking independent advice are starting to retain external consultants; and traditional long-only asset managers would like to leverage the research provided by investment consultants in the alternatives space.

3) Goldman Sachs Asset Management To Acquire Smart Beta Business Westpeak Global Advisors
    Goldman Sachs |  4/22/201

Because… Goldman Sachs struck another deal after acquiring Dwight in 2012 and Deutsche’s stable value business in 2013. The firm’s mutual fund sales rebounded dramatically from net redemptions of $431 million in 2012 to net inflows of $14.7 billion in 2013, finishing in 7th place among all long-term mutual fund and ETF managers. It became the third best-selling firm in the first quarter of 2014 with a net $8 billion. Smart beta strategies have gained much traction over the past couple of years. Their popularity may be maintained by the loss of confidence in active management, shortcomings in market cap-weighted indices, increased market volatility, and outperformance of some smart beta strategies.


Don't Miss This (4/15/14)
1) Manning & Napier, Inc. Announces Acquisition of 2100 Xenon
   
 Manning & Napier |  4/10/2014

Because… Compared with the overwhelming press coverage of TIAA-CREF’s buy of Nuveen (see below), Manning & Napier’s deal may not have captured much attention. But it suggests again that acquisition will continue to be a main avenue for traditional asset managers to enhance their alternative investment capabilities. As traditional firms evolve to meet the increasing demand for alternatives and diversify their businesses simultaneously, acquiring an alternative specialist can provide easier access to investment talent and their strategies with a track record. Meanwhile, it allows alternative boutiques to focus on their investment expertise without worrying about distribution challenges.

2) Guide to Understanding In-Plan Guaranteed Income Solutions
    Planadviser  |  4/11/2014

Because… Providing in-plan guaranteed income solutions is an effective way to help employees prepare for their retirement and bolster their confidence in retirement security. However, when it comes to the post-retirement income distribution, even some plan sponsors lack adequate knowledge in the selection of right products and product providers to maximize the benefits to plan participants. Financial services firms should allocate more resources to educate plan sponsors on available options in the marketplace and pros and cons of guaranteed income solutions.

3) TIAA-CREF to Purchase Nuveen Investments
    
TIAA-CREF  |  4/14/2014

Because… While it was no secret that Madison Dearborn wanted to offload Nuveen, more industry observers would have envisioned an IPO for Nuveen rather than an acquisition by TIAA-CREF. The price tag of the deal, total assets of the combined company, the ascendance of TIAA-CREF in the ranks of mutual fund families, and differences in each firm’s fund pricing structure, investment specialties, client base, and distribution focuses all make the transaction worth following for years to come. “This isn’t a consolidation or a synergy play. We look at it as a very smart investment,” as Roger Ferguson, TIAA’s CEO, concluded.


Don't Miss This (4/8/14)
1) SSgA Files for SPDR SSgA Risk Parity ETF
    SEC Filings  |  4/2/2014
 
Because… The risk parity strategy has gained popularity among institutional investors, such as large pension plans. Although it has not been widely adopted in the retail market, we are seeing asset management firms pay more attention to the concept. While the strategy can benefit from spreading portfolio risk equally across asset classes and levering up lower-risk assets, it has drawbacks too, such as lower expected returns due to increased exposure to lower-volatility asset classes, the possibility of excessive use of leverage, and subjective risk parity allocation resulting in the difficulty of performing peer group analysis.

2) Great-West Financial Acquisition of J.P. Morgan Retirement Plan Services to Create One of the Largest Retirement Recordkeeping Firms in the U.S. Marketplace
    Great-West  |  4/3/2014

Because… While we are still digesting the news that retirement divisions of Great-West and Putnam will be combined, the announcement of the deal between Great-West and J.P. Morgan is sending shock waves across the industry. The acquisition will turn Great-West into the second largest retirement services provider. Falling revenues and low margins in the large-market recordkeeping business have compelled firms to seek scale. We believe the consolidation of recordkeepers, the investment in newer technology for cost reduction, and the focus on more profitable opportunities are bringing about a paradigm shift in this industry.

3) MainStay Investments and Cushing Asset Management LP to Partner on Master Limited Partnership and Energy-Related Mutual Funds
    Business Wire  |  4/7/2014

Because… MainStay’s adoption of Cushing funds indicates its ambition to become a more important player in the alternative investments space. Its own success of acquiring the Marketfield Fund has set a powerful precedent. The fund raked in $13.4 billion in 2013, accounting for two-thirds of flows into Long/Short Equity mutual funds. MainStay’s partnership with a specialist in the fast-growing MLP sector also bears a striking resemblance to OppenheimerFunds’ acquisition of SteelPath funds. Backed by Oppenheimer’s marketing and distribution prowess, four SteelPath MLP funds gathered $5.5 billion in 2013, a substantial increase from their combined sales of $618 million in 2012.


FUSE Trends for 2014 - 10 (4/4/14)
  • Hiring Practices – Long-term assets are up nearly $2 trillion in 2013 through November and net flows for mutual funds and ETFs totaled nearly $450 billion, so we anticipate aggressive hiring in 2014. Established firms are likely to add moderately to field sales, while adding more aggressively to areas, such as the sales desk, national accounts, and due diligence and research support. Mid-tier and smaller firms are likely to utilize the boost in assets and revenues to add to field forces in order to deepen their penetration in the advisor markets.
  • Segmentation – Big data has been an industry buzzword for several years and may be slightly overhyped; however, we believe segmentation practices will continue to evolve in 2014. Firms will become increasingly involved in advisor targeting—aiding wholesalers to become more efficient with their business development efforts. Sales management can become more scientific in resource allocation and segmentation, which will lead to the next trend.
  • Internal Sales – Firms will continue to shift the focus of its internal sales group to active selling as opposed to a support function, which is a trend we have observed occurring for the past decade. Sales management is far better equipped to segment territories because of improved data mining capabilities, and firms are able to direct field and internal resources more efficiently to the proper advisor based on a multitude of metrics (book size, contact preference, practice type, etc.).



Don't Miss This (4/1/14)

1) Retirement Assets Total $23.0 Trillion in Fourth Quarter 2013
    ICI  |  3/26/2014

Because… ICI reported that total U.S. retirement assets of $23 trillion at the end of 2013 increased 15.6% from the prior year. A closer look at the long-term trends may help firms formulate business strategies. While assets in DC plans grew slightly faster than those in IRAs in 2013 and over the past five years, IRA assets rose at a 7.1% compound annual growth rate (CAGR) during the 10-year period from 2004 to 2013, beating the 5.9% CAGR of DC plans.

2) SEI Launches New Tax-Managed ETF Strategies to Help Advisors Meet Growing Investor Demand
    SEI  |  3/31/2014

Because… The launch of tax-managed strategies comes at an opportune time as investors filing their tax returns are more conscious of the tax burden and eager to look for tax-saving opportunities. For firms that already offer tax-efficient funds, tax season is a good time to put a marketing emphasis on this investment theme and elevate investor awareness of their benefits. Firms can shed light on the changes to portfolio returns if tax increases kick in, consequences of overlooking tax implications, strategies their portfolio managers employ to reduce tax liability, and approaches investors could explore to prevent take-home income from shrinking.

3) Fidelity Investments Marks National Financial Literacy Month with New Partnership, Employee Volunteer Programs Across the United States, and Innovative Tools
    Fidelity  |  4/1/2014

Because… An SEC literacy study published in 2012 concluded that “Investors have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud.” Investor education should always be a priority at investment firms. Investors’ procrastination and bad investing behaviors are caused by the lack of investment knowledge. The more educated they become, the more likely they will look for investment products to satisfy their individual needs.




FUSE Trends for 2014 - 9 (3/25/14)
Share Classes

1. 2014 will be the fifth consecutive year of net outflows for A-Shares, with their market share at year end around 17.5%—this will represent a decline of 1% annually over the last six years.

2. Institutional classes will continue to dominate the pricing landscape, holding about one-third of fund assets by year-end 2014.

3. Retirement designated classes, while still relatively small, will continue to see strong growth. All of the real growth in this space is coming from institutionally priced no-12b-1-fee versions both with and without administrative or sub-TA fees.

4. By the end of 2014, we expect the number of firms offering a zero-revenue sharing share class to increase by more than one-third and be close to 50 firms.

5. Level load classes, while having maintained market share over the last five years, will see a slight decline in 2014, confirming a slow but inevitable march to obsolescence.




Don't Miss This (3/25/14)
1) Nine in 10 Registered Investment Advisors Simply “Accommodating” Retirement Plan Business
    Fidelity  |  3/20/2014

Because… Plan sponsors are increasingly relying on advisors to design their investment menu, keep abreast of regulatory changes, and provide participant education, so advisors who have the experience and skills to offer practical guidance can significantly grow their business. For financial firms, supporting these advisors and helping them distinguish from their peers should become a priority. We have seen firms develop benchmarking tools, fiduciary solutions, best practice resources, and thought leadership pieces for advisors. By assisting advisors in their pursuit of retirement plan business, financial firms can eventually win their trust and expand their own market share.

2) FINRA Fines LPL Financial LLC $950,000 for Supervisory Failures Related to Sales of Alternative Investments
    FINRA  |  3/24/2014

Because… FINRA’s fine is sending a message to all advisory firms that offer alternative investments: they must enhance the oversight of alternative product sales. Alternatives are not suitable to most investors due to their illiquidity, complexity, and lack of transparency, so firms should have policies and guidelines in place to emphasize suitability requirements. Keeping the compliance system updated and the compliance process streamlined can also help firms stay compliant, identify potential violations, and avoid costly penalties. In addition, firms need to provide comprehensive, in-depth training to both advisors and supervisory staff to ensure they have an intimate knowledge of alternatives’ features, rewards, and risks.

3) AllianceBernstein to Launch First-of-its-Kind Age-Based Index Portfolio for College Savers Based on Morningstar's 529 College Savings Indexes
    AllianceBernstein |  3/25/2014

Because… According to the College Savings Plan Network, college savings in 529 plans reached a record $227.1 billion in 2013, representing an increase of 19% from the end of 2012. The average account size grew as well to an all-time high of $19,584 at the end of 2013, up 14% from a year ago. The more investors contribute to their plan, the more likely they will notice the impact of fees and performance on the account balance. While the brands of Morningstar and Ibbotson resonate well with advisors, the indexes were only introduced last October. Advisors may wait on the sidelines before taking the plunge.


Don't Miss This (3/18/14)
1) Federated Investors Fixed-Income Mutual Funds to Acquire $421 Million in Fixed-Income Assets from Huntington Funds
    Federated  |  3/14/2014

Because… Federated had net outflows of $4 billion in 2013, down significantly from net inflows of $1.1 billion in 2012. As a publicly traded company with about 80% of assets in money market funds, the firm is under shareholder pressure to strengthen its long-term fund lineup and lessen its reliance on money market products. While the fund adoption may increase Federated’s fixed-income assets and help the funds achieve economies of scale, whether the deal will appeal to investors remains to be seen because all five Huntington fixed-income funds experienced net redemptions last year, had lagging performance, and sported low Morningstar ratings.

2) Loomis Sayles Liquidates the Mid Cap Growth Fund
    SEC Filings  |  3/14/2014

Because… Just as Loomis Sayles shut down its 2-star Mid Cap Growth Fund with three consecutive years of net outflows, Neuberger Berman announced its Mid Cap Growth Fund exceeded $1 billion in assets. Though portfolio managers play an important role in divergent paths of the same strategy, it is hard to believe one management team is absolutely better than the other. A fund’s long-term track record, the firm’s marketing and distribution strategies, different levels of tolerance for underperformance and asset decline, or the need for eliminating funds with overlapping objectives can also be factors that drive product rationalization decisions.

3) DC Plans Ended 2013 Strong
    Plansponsor  |  3/14/2014

Because… The outperformance of DC plans over DB plans should boost DC plan sponsors’ confidence to encourage more people to participate in their plans. Meanwhile, asset managers that offer DC products deserve a pat on the back because some of them have streamlined fund offerings on the investment menu, set up different product structures for DC plans, lowered expense ratios of investment options, and developed education programs to help individuals make better investment decisions.


FUSE Trends for 2014 - 8 (3/17/14)
Product Development – Firms launched nearly 687 mutual funds/ETFs in 2013, which was almost exactly in line with 2012 (671 new products). About three-quarters of the products launched were mutual funds, which is consistent with 2012 and 2011. Alternatives continue to be an area of interest. During 2013, firms launched 90 alternative products (75 mutual funds, 15 ETFs), which was up from 81 in 2012. The peak years for product development in the alternative space continues to be 2010 and 2011 when firms launched more than 100 products during both years. For 2014 we anticipate robust product development again, with new funds and ETFs reaching 600 products. International Equity and Domestic Equity will be the top categories for product development, as firms look to take advantage of the recent momentum and economic sentiment. We also anticipate continued interest in alternative products, as the success of John Hancock, MainStay, and Wells Fargo drives additional firms into the space.


Don't Miss This (3/11/14)
1) Vanguard Seeks SEC Permission to Issue Actively Managed ETFs
    Reuters  |  3/7/2014

Because… Vanguard, a dominant leader in the passively managed fund space, has indicated it has no immediate plan to offer actively managed ETFs, though it filed for the SEC permission last week. If the firm eventually rolls out active ETFs, we believe the expense ratios will stay lower than offerings from other ETF providers. However, investors tend to link the firm with its index-based funds. Whether they embrace its actively managed ETFs will be determined by the additional value the new product can provide to the portfolio construction.

2) Franklin Templeton Survey Finds Retirement Full of Contradictions
    Franklin Templeton |  3/10/2014

Because… The survey discovered that 39% of pre-retirees have not started saving for retirement, including 42% of those aged 25-34 and 36% of those aged 35-44. Despite the industry’s push for retirement savings, a lot of individuals with more than 20 years in their career have yet to take action. Financial firms need to continue to advise the public that saving for retirement doesn’t necessarily come into conflict with other financial obligations. Those who start early have a better chance of building a larger nest egg. Figuring out a savings strategy, such as starting small and increasing the amount over time, may help someone without a big budget at the beginning.

3) Vanguard Reports that 55% of 401(k) Participants Own a Target-Date Fund
    Business Wire |  3/11/2014

Because… Vanguard found that 46% of target-date fund (TDF) investors held a TDF in combination with other investments. The mixed use of TDFs was originally questioned by some industry observers, but more plan sponsors and consultants now accept it as a reasonable idea. Some financial savvy investors use the TDF as a portfolio core and add a couple of other funds to either fill gaps in TDFs or take on more risk to generate a higher return. This approach can be considered logical if there is no overlap between self-selected funds and funds inside of a TDF.


FUSE Trends for 2014 - 7 (3/6/14)
Marketing departments are laying the groundwork to become strategic distribution partners rather than just acting as an extension of the sales organization. By leveraging technology, firms are creating more robust frameworks to measure the effectiveness of their marketing segmentation and campaign efforts. This results-oriented approach will elevate the influence of the marketing department, although it will be a multi-year process for most firms. Predictive analytics has also caught the attention of marketing departments, but the majority of firms will be too busy enhancing their existing technology, automating processes, and linking databases rather than actually implementing a predictive modeling strategy.


Don't Miss This (3/4/14)
1) U.S. Ranks No. 19 in Global Retirement Index
    Natixis  |  2/25/2014

Because… The Natixis analysis that finds the U.S. barely made the top 20 for overall retirement security should alert industry professionals to the urgency of helping individuals with their retirement security needs and expectations. While we do not think the entire retirement system is in need of a complete overhaul, retirement service providers could learn some lessons from higher ranked nations in the survey and identify approaches that will enhance participation in various retirement programs.

2) Asset Managers Join to Help Investment Professionals Learn the Latest on Alternative Mutual Funds
    PR Newswire  |  2/26/2014

Because… Previous road shows were well received as time-constrained advisors, who had access to alternative investment specialists from different fund firms, considered such events the best use of their time. From the perspective of product manufacturers and distributors, high attendance means a better chance to generate leads and build new relationships. These educational sessions can also help sponsoring firms stand out from the pack because knowledge sharing could potentially improve brand awareness and translate into rising product sales.

3) J.P. Morgan Releases "Breaking the 4% Rule," A Landmark Research Report that Lays the Groundwork For an Innovative Approach to Investing and Withdrawing Income in Retirement
    PR Newswire  |  2/27/2014

Because… As financial firms are focusing more on retirement income strategies, they are increasingly questioning the adequacy of the conventional 4% withdrawal rule. Other asset managers, such as T. Rowe Price and Vanguard, have also advocated dynamic withdrawal strategies. The risk of outliving their savings has been a major concern for retirees and pre-retirees. Since there are so many variables in determining an optimal withdrawal rate and asset allocation, a framework like the one provided by JP Morgan “that can be tailored to an individual's unique circumstances, preferences and appetite for risk” should have no problem finding a ready audience.


FUSE Trends for 2014 - 6 (3/3/14)
Liquid alternatives continue to see robust growth – Assets in liquid hedge-like strategies are expected to reach $250 billion by year-end 2014. This will translate to a 38% CAGR over the preceding five-year period. Broad global macro absolute return strategies as well as multi-strategy offerings will be the dominant products, as asset allocations to alternative strategies for most investors do not support building broad multi-fund portfolios. We anticipate net flows in 2014 to be in the $55 - $65 billion range, off of gross sales of approximately $100 billion. Product development will continue to be robust in 2014 but will represent a continued deceleration in the overall number of new products launched, the third such consecutive year since product development peaked in 2011.


Don't Miss This (2/25/14)
1) Who Are the Other ‘1%’? 5,000 Big Retirement Plans Hold 71% of All 401(k) Assets
    Judy Diamond  |  2/18/2014

Because… The asset concentration has led many financial firms to put their business focus on large plans, but it is small plans that need the most help. Retirement savings of small business owners and their workers are seriously lacking. Small plan sponsors are concerned about increasing complex regulatory and fiduciary requirements, costs of maintaining a retirement plan, and plan participants’ demand for better products and services. We have seen some industry leaders target the small plan segment. We hope more firms can join the crusade and help small plans improve their participation rates.

2) Personal Finance Web Sites: A Great Idea in Theory, But Still Confusing to People, According to New Study
    PR Newswire  |  2/18/2014

Because… Fund firms can learn some lessons from the issues personal finance sites are facing. First, topics need to be well-organized as users do not have time and patience for Web sites that are hard to navigate. In this fast-paced age of instant gratification, people want to find the information right away. Second, firms should develop content for people with different levels of investment knowledge or in different personal and financial situations because only relevant and informative content is valuable enough to bring Web users back again and again.

3) American Century Investments Launches New Collective Investment Trust
    American Century  |  2/20/2014

Because… We expect the use of target-date collective investment trusts (CITs) to increase in the defined contribution (DC) space. Because CITs are not regulated by the SEC, the disclosure requirements are less stringent than those for mutual funds. As a result, operating expenses for CITs can be significantly lower. The flexibility to negotiate management fees and customize the glide path and underlying investment options to suit plan demographics also make CITs very attractive for many plan sponsors.


FUSE Trends for 2014 - 5 (2/19/14)
ETFs – Assets in U.S. ETFs will end just shy of $2 trillion by end of December 2014. Organic growth will continue to slow slightly but will still be very attractive at around 10%. While the big three providers remain a dominant presence in the market, 2014 is likely to see their combined market share drop below 80% as mid and small players find success with new and innovative strategies. Active ETFs will see strong relative growth—close to 50% organic growth compared to passive ETF’s 10%. By the end of 2014, we expect close to 100 active products in the market, offered by over 20 firms. On an absolute basis, the active ETF market will remain relatively small, reaching around $25 billion by the end of 2014 and growing its market share of all ETFs to just over 1%.


FUSE Trends for 2014 - 4 (2/18/14)
Compensation – 2014 compensation will be considerably higher for many, as impressive market performance and another year of attractive overall flows make for significant bonuses. Many strategists predict low double digit gains for domestic equity markets and improvement in developed Europe, which should help sustain flows, though at a moderated pace. Fixed income-dominated firms and those with a heavy focus on emerging markets may see overall compensation come under pressure. Unexpected tightening or rate increases by the Fed are the wildcard.


Don't Miss This (2/18/14)
1) Global ETF and ETP Assets Suffer a 3.2% Decline in January 2014
    etfexpress  |  2/11/2014

Because… The ETFGI data show global exchange-traded products (ETPs) had a choppy start in 2014. U.S.-listed ETPs contributed the most to the asset decline and net redemptions thanks in large part to significant withdrawals from the SPDR S&P 500 ETF. According to Morningstar, U.S. ETPs experienced net outflows of $19.3 billion, a dramatic reversal from net inflows of $22.6 billion in December and $28.3 billion in January 2013. With global listings exceeding 5,000 for the first time in history, we believe the January slump was a temporary setback, which should not hurt the industry’s upward trajectory in the long run.

2) Fidelity Average 401(k) Balance Nearly Doubles Since Downturn
    Fidelity  |  2/13/2014

Because… A separate report released on the same day by EBRI also shows that overall retirement income adequacy for Baby Boomers and Generation X households improved last year. News like this is encouraging, but the industry should realize that there are still many Americans who do not have sufficient savings to ensure a comfortable retirement. Tax season is one of the best times to connect with individual investors, as some of them would want to seek professional advice after reviewing their financial situation.

3) John Hancock Investments Finds DC plan Sponsors Adding Alternatives
    PR Newswire  |  2/18/2014

Because… Plan sponsors adding alternatives to DC plans requires asset managers to improve services for those with alternative exposure. Asset managers need to communicate with plan sponsors frequently to illustrate how their funds lower the volatility, improve risk-adjusted returns, and provide portfolio diversification. They should address participants’ concerns about alternative investing. Creating marketing materials and programs to elevate the awareness of alternatives and offering wholesaler training so that messages to clients would not get lost in translation should also help plan sponsors and participants gain a better understanding of alternatives.


FUSE Trends for 2014 - 3 (2/11/14)
Interest Rates & Fixed-Income Funds

Intermediate and long-term rates will climb marginally higher in 2014, as the Fed slowly reduces its purchases. This action increases the pressure on corresponding government and municipal bond categories, leading to increased outflows. Investors searching for yield will seek out high yield and unconstrained bond funds. Massive cash on corporate balance sheets make corporate bonds a place to seek performance in a challenging environment. Fed tapering will likely impact global liquidity, increasing the risk and volatility around emerging market debt funds, building on recent category outflows.


Don't Miss This (2/11/14)
1) Schwab Retirement Plan Services Becomes First Major Firm to Launch Full-Service 401(k) Program Based on Exchange-Traded Funds
    Schwab  |  2/5/2014

Because… Schwab finally unveiled its long-awaited all-ETF 401(k) platform. For a long time, operational and technical barriers have prevented ETFs from being added to retirement plan menus. Although a small group of firms have already offered ETFs in retirement plans, ETFs only account for a very small portion of retirement assets. We believe plan sponsors and participants are slow to take up ETFs at this stage because of their unfamiliarity with this investment vehicle. The adoption rate will eventually go up after they gain a better understanding and become more comfortable with ETFs.

2) KKR Pulls Two Funds in Retail Investor Pitch Setback
    Reuters  |  2/10/2014

Because… While it seems too soon for KKR to liquidate two retail funds less than two years after their launch, it should not come as a complete surprise. Though top private equity firms like KKR may have technical skills that give them an edge over traditional mutual fund firms in the alternatives space, encroaching on the retail fund turf is obviously not a breeze for them. Illiquidity, higher expense ratios, distribution difficulty resulting from the complexity of alternative products, and lack of brand recognition among retail investors can all become significant hurdles.

3) Permal Group Launches Alternative Multi-Manager Mutual Fund
    PR Newswire  |  2/10/2014

Because… Multi-strategy, multi-manager alternative funds can provide diversification benefits and capitalize on favorable market conditions, but the overall fund performance could be diluted by underperforming strategies or managers even though a particular strategy or manager generates strong returns. As of 2/10/14, the Multialternative category posted returns of 1.98%, 1.56%, and 6.32% for 1-, 3-, and 5-year periods, respectively, which are much lower than returns of some traditional fund categories. Fund firms need to stress the consistency, reduced volatility, and enhanced risk-adjusted returns when marketing these types of funds, so investors do not have unreasonable expectations.


FUSE Trends for 2014 - 2 (2/4/14)
Passive Investing

Passive investing will continue to attract assets and take market share from active managers. Ever increasing scrutiny over retirement plan fees will lead plan sponsors to consider indexing as a cost-saving measure, particularly in categories that investors deem to be efficient. Evolving asset allocation methods for financial advisors find them using passive strategies for core holdings while paying higher fees for more esoteric offerings, including liquid alternatives. We anticipate passive strategies will exceed $4 trillion in assets (both ETF and open-end) and growing its market share to nearly 30% of AUM. Active managers will need to take advantage of lower market correlations and a slow growth environment if they wish to prove their value to overall portfolios.


FUSE Trends for 2014 - Trend 1 (2/3/14)
Firms to Watch

Perennial favorites

DFA – This firm offers 75 funds with 58 in positive flows for 2013. Of the 17 that were in net outflows, the average MStar rating is 3.6 stars and the average 1-year performance is in the 24th percentile. Given the cult-like devotion expected of advisors (coupled with impeccable service / support), we expect 2014’s net sales total to surpass the $22.6 billion record set in 2013.

T. Rowe Price – Complex, highly concentrated offerings may be the key to success for new entrants or firms trying to gain a foothold, but that is largely due to the fact that firms like T. Rowe are so good at what they do in the core areas. This firm offers 102 funds which, on average, carry 3.7 stars and a 37th percentile 1-year category rating (it is even better for the 50 funds with more than $1bil in AUM – 3.84 stars and 38th percentile). Maybe the next McKinsey-esque report on the keys to success will include being really good at what you do over an extended period of time, so as to develop a reputation for excellent results for pretty much everything you touch. If 2014 is the year that T. Rowe comes down market (from their professional buyer focus), it is going to be hard for marginal performers to hold on to assets.

Vanguard (active only) – With 57 funds accounting for $681 billion in AUM, this firm is the third largest manager of actively managed mutual fund assets. For funds with at least $5 billion in AUM, the average star rating is 3.8 and the 1-year category rating is, on average, in the 40th percentile. While the set of active offerings saw net outflows in 2013 (largely isolated in a couple of fixed-income funds), the Top 10 selling funds pulled in $20+ billion. With a growing presence in the intermediary channels, it would be wise not to only think of Vanguard as a low cost index provider.

JPMorgan – Net sales were down in 2013 to only $21 billion (vs. the $29 billion posted in 2012), but top sellers are quite secure and five funds (out of 99 total) accounted the bulk of outflows (again mostly bond funds). Among its top 10 selling funds in 2013, seven sport a 4- or 5-star rating. The firm’s overall presence continues to expand, and issues in other areas of the firm do not seem to have created much by way of distraction for JPMAM.
John Hancock – A remarkable year with net flows 3.5 times higher than in 2012. Ten of their top 12 funds in terms of 2013 net sales are well positioned for success in 2014, and only $2.4 billion of their $41 billion in AUM is in funds whose performance may present a challenge. Sales are well diversified across domestic equity, international equity, alternatives, and value-add fixed (bank loan, HY, and strategic income). The firm has been punching well above its weight class, and we expect this to continue.

MFS – Net sales ramped up nicely from $13.6 billion in 2012 to $18 billion in 2013. All five of the top selling funds are equity offerings (as are 13 of the top 15) with a good balance between international and domestic. The net sales leader (Intl Val) is one of the best in its category, but much of the rest of the selling success was with products that have solid, but not spectacular, performance records over the 1-, 3-, and 5-year time periods. The combination of stable / consistent investment performance with one of the industry’s better distribution machines is the formula for success that will help to sustain record high net sales.

Make sure you keep an eye on…


Artisan – Of the firm’s 13 funds, 9 are exceptional in terms Mstar ratings (all carry 4 or 5 stars) and category ranks (average is 28th percentile for 1 year). Only 2 funds—representing just 7% of total MF assets—are likely to struggle to produce positive flows in 2014. As two of the very best international equity funds are offered by the shop, we would not be surprised to see 2014’s net sales double the total from 2013 (which was double the total from 2012).

Dodge & Cox
– All five funds carry 4 stars and are ranked in the top decile of their categories for 1-year performance (5-year category average is the 11th percentile). The firm experienced net outflows in 2013 of $1.5 billion (on AUM of $151 billion), and we are willing to wager that 2014’s results will be decidedly positive. While not sexy by today’s standards, Balanced Fund may be one of the best products the industry has ever offered.

MainStay – This firm established momentum with a Large Cap Growth (Winslow sub-advised) and then took it up just a notch or two with $12 billion in net flows (out of $13 billion total for the complex) into the Marketfield L/S offering. Sales momentum appears solid for this liquid alts fund, and we believe that several complementary offerings are ready to carry more of the overall sales load—ICAP International, Unconstrained Bond, and Epoch Global Equity.

Putnam – Net flows of $3.7+ billion in 2013 marked the return to positive territory for the first time in a few years. Two of the three sales leaders (the Capital / Equity Spectrum funds) carry 5 stars and are both in the 1st percentile over the last 3 years, so the foundation for building on 2013’s success is firmly in place. If you have not been paying attention, nearly half of the firm’s offerings (those with at least 1 year of performance) are in the top one-third of their category for 2013. With meaningful performance improvements in funds like Voyager and Growth & Income and other offerings ready for prime time (i.e., Equity Income, Diversified Income, and Floating Rate), we feel certain that Putnam will surpass last year’s production.

Shops you will be hearing about…

Ariel – Only $5 billion in AUM in 6 funds, but the two largest funds (90% of MF assets) are solidly back on track, which led to a turnaround in net flows from $340 million in outflows in 2012 to $400+ million in inflows in 2013.

American Beacon – This $25 billion in AUM sub-advised shop generated $2.5 billion in net sales in 2013. With 10 of its 21 funds carrying 4 or 5 stars (only one fund is below 3 stars), we expect 2014 to be its best year on record.

Baron – $21 billion in MF assets with 8 of 13 total funds carrying very attractive ratings and rankings and in categories, we expect to sell well in 2014. The firm broke out of negative flow territory with $1.8 billion in net sales in 2013, and they seem poised to surpass this in 2014.

Fairholme – With only two funds and $9 billion in mutual fund AUM, this firm has suffered through two straight years of significant outflows. However, with very strong near-term performance and a reputation that remains largely intact, we predict a complete turnaround for this Value shop in 2014.

First Eagle – With assets now passing the $70 billion mark, ongoing rumors of an impending liquidity event do not seem to have negatively impacted the firm’s investment capabilities (average star rating of 4.2) or marketplace desirability (net sales in 2013 of $6B).

Harding Loevner – With $8.3 billion in 6 funds, this AMG property doubled its net sales year-over-year and is very well positioned as an expert in international equity.

PRIMECAP – Only three funds but $11 billion in AUM. Nothing too sexy about the line-up (Large Blend, Large Growth, Mid Cap Growth), but truly superior performance in each fund enabled the firm to record $3 billion in net sales in 2013.



Weekly Net Flows Report, 01/15 Data (1/24/14)
Total estimated inflows to long-term mutual funds were $10.14 billion for the week ending Wednesday, January 15, according to the Investment Company Institute (ICI). All broad asset classes gathered inflows, something we have not witnessed since mid-May 2013. Stocks gathered the lion’s share of inflows with investors pouring $4.2 billion into Domestic Equity and $4.0 billion into World Equity amid positive economic news. Taxable Bond garnered $684 million, a dramatic decrease from the $3.0 billion intake during the prior week. Municipal Bond reversed its 33 consecutive weeks in the red by gathering $228 million in net inflows, a shift that could help stabilize the markets according to reports by municipal strategists. Hybrid funds took in $951 million in net inflows, slightly down from its $1.1 billion intake during the prior week.


Source: Investment Company Institute (ICI)



Don't Miss This (1/21/14)
1) Nomura to Shutter Three More Funds 
    SEC Filings  |  1/14/2014

Because… Nomura’s planned exit from the U.S. market reflects the challenges foreign asset managers face. Besides the performance issue that remains relevant, foreign-based asset managers have to make a long-term commitment to building and fostering strong relationships with distributors, as it usually takes a longer time for distributors to get familiar with a foreign investment firm’s philosophy, process, and management approaches. Foreign firms also need to raise brand awareness in order to stand out in a highly competitive industry.

2) Participants Are Conservative in Their Investments
    Plansponsor  |  1/15/2014

Because… Baby Boomers who control the most assets are reluctant to take additional risks that come with equity investing. Younger investors who are still traumatized by the financial crisis lack a long-term perspective that drives them to increase allocations to equities. The consequence of being too conservative is investors who are missing out when the market rallies will be unable to achieve their retirement savings goals. Some firms have been advocating more equity exposure, but investors’ ignorance or neglect of long-term market trends suggests that more effective strategies should be developed when sending messages out.

3) Warburg Pincus to Acquire Majority Stake in Source
    PR Newswire | 1/20/2014

Because… While Warburg Pincus’s acquisition of a majority stake in Source is newsworthy, Lee Kranefuss’ joining Source as Executive Chairman may catch more attention among industry observers. As the former CEO of iShares, Kranefuss built the company into the largest ETF provider in the world. Source has already partnered with PIMCO to distribute its ETFs in Europe. We believe Kranefuss’ insights and guidance will help the firm grow to be a more important player in the European ETF market.


Don't Miss This (1/14/14)
1) SEC Announces 2014 Examination Priorities
    SEC  |  1/9/2014

Because… Quantitative trading model is listed as one of the SEC’s examination priorities. Some investors shun quant funds as they feel blindsided by the so-called black-box models. The SEC is increasing the scrutiny of these quant models to help win back investors’ trust. From fund firms’ perspective, quant fund managers need to bring more transparency into the investment process as well. Disclosing their trading techniques and explaining how they reengineer outdated models to avoid making the same mistakes could ultimately restore investor confidence.

2) ING U.S. to Become Voya Financial in 2014
    ING  |  1/13/2014

Because… Enhancing brand awareness should be the top priority at ING. Although VOYA is already used as the ticker symbol for the company’s stock, most people would not associate the name with the firm at this stage. While existing shareholders are unlikely to part with the firm solely because of its name change, ING should still invest in creative ads and effective marketing campaigns to get more people familiar with the new brand. Meanwhile, refining product line and improving the quality of its offering are equally important to bring in potential investors.

3) Lord Abbett Positions Multi-Asset Strategies for Growing Demand
    Business Wire  |  1/14/2014

Because… While new names can better describe fund strategies and the sales charge reduction gives investors an easier access, multi-asset fund providers need to provide more education when repositioning such funds in the marketplace. Some multi-asset funds (like these from Lord Abbett) are offered in a fund-of-funds format, so they charge an additional layer of fees apart from management fees in underlying funds. Firms need to ensure investors understand the fee structure. In addition, fund firms should demonstrate how to assess fund performance as these funds typically do not track a specific benchmark.


Weekly Net Flows Report, 12/31 Data (1/12/14)
Total estimated inflows into long-term mutual funds were $4.24 billion for the eight-day period ended Tuesday, December 31, according to the Investment Company Institute (ICI). Equity funds ended the year on a strong note with $6.0 billion in net inflows, its largest intake in seven weeks. Domestic Equity led sales with $3.3 billion while World Equity gathered nearly $2.7 billion. For the 14th consecutive week, bonds remained in negative territory with outflows of $2.4 billion and $404 million from Municipal and Taxable Bonds, respectively. Hybrid funds captured approximately $1.1 billion, representing a 32% increase from its sales during the prior week.

Based on preliminary 2013 year-end ICI estimates, stock funds pulled in $167.5 billion throughout 2013—its strongest sales since 2004. On the other hand, bond funds witnessed $81.1 billion in net outflows throughout the year, marking its largest redemptions in at least three decades.


Source: Investment Company Institute


Don't Miss This (1/7/14)
1) Equity ETPs Hit All-Time Record in 2013 - BlackRock's Report
    Investment Europe  |  1/6/2014

Because… The BlackRock report shows that 2013 was the third strongest on record for the global ETP industry. However, ETP sponsors in the U.S. are still facing challenges on several fronts. First, ETF product developers have to identify specific investor needs and offer specialized exposure. Second, actively managed equity ETFs have not taken off as anticipated. Third, the market is dominated by a few leading players. It is hard for new entrants to attract investor attention and gather meaningful assets.

2) Invesco Expanding Suite of Liquid Alternatives
    Invesco  |  1/6/2014

Because… Invesco’s launch of six alternative strategy mutual funds at the beginning of the year indicates asset managers have remained committed to alternatives despite the lagging performance of most alternative strategies in the past year. A low correlation to stocks and bonds makes alternatives a good portfolio diversifier, and risk-averse investors are seeking hedging strategies to manage market volatility, which could drive more asset managers to introduce liquid alternative funds to the marketplace.

3) Nuveen Asset Management’s Bob Doll Releases 2014 Ten Predictions
    Nuveen  |  1/6/2014

Because… Bob Doll is known for issuing his annual list of 10 market predictions. Nuveen, better known for its municipal bond fund lineup, lacks a strong profile in equities. Since Doll made regular appearances on financial television networks while working at BlackRock and was widely followed in the advisor community, Nuveen expects him to help build brand identity and improve investor awareness of the firm’s equity offerings. Doll’s direct communication with investors may help Nuveen raise its visibility in the large-cap equities space.


Weekly Net Flows Report, 12/23 Data (1/6/14)
Total estimated outflows from long-term mutual funds were $930 million for the five-day period ended Monday, December 23, according to the Investment Company Institute (ICI). Despite marking the 13th week of overall redemptions, this is a notable improvement from outflows of nearly $7.2 billion during the prior week. Taxable Bond continued to drive redemptions with approximately $2.2 billion in net outflows followed by Municipal Bond’s outflows of $1.4 billion. Domestic Equity was able to inch into positive territory after suffering four consecutive weeks of outflows with $254 million in net inflows. Meanwhile, World Equity led inflows with $1.5 billion but was down significantly from its $3.1 billion intake during the prior week. With an 88% increase from sales gathered during the prior week, Hybrid funds captured $875 million in net inflows.


Source: Investment Company Institute (ICI)



Weekly Net Flows Report, 12/18 Data (12/27/13)
Total estimated outflows from long-term mutual funds were $7.21 billion for the week ended Wednesday, December 18, according to the Investment Company Institute (ICI). Amid fears of a pullback in the Federal Reserve’s bond buying program, investors pulled $8.1 billion from bond funds, representing its 12th consecutive week of redemptions. Taxable Bond suffered $5.6 billion while Municipal Bond experienced $2.5 billion in net outflows. Stock funds managed to gather $433 million in net inflows due to World Equity’s intake of $3.1 billion. However, Domestic Equity stayed in the red for the fourth consecutive week with nearly $2.7 billion in net outflows. Hybrid funds gathered $483 million in net inflows, representing a 45% decline from its intake during the prior week.


Source: Investment Company Institute



Don't Miss This (12/17/13)
1) SEI Poll: Pension Plan Sponsors Remain Dedicated to Liability Driven Investing (LDI) in 2013
    SEI  |  12/12/2013

Because… The emphasis on pension plans’ liabilities has driven plan sponsors to continue embracing liability-driven investing (LDI) strategies despite the recovery of equity markets. In addition, the growing number of frozen plans, regulatory and accounting changes, and concerns about a rise in interest rates make the implementation of LDI strategies still compelling. Asset management firms should mull over the best approaches of providing LDI solutions and services in order to respond to the growth in LDI demand.

2) Vanguard Set to Capture Fund Flows Crown for Third Straight Year
    Reuters  |  12/16/2013

Because… Please note that $65.3 billion mentioned in the article refers to the flows into Vanguard mutual funds. If we combine flows of both mutual funds and ETFs, Vanguard brought in $116.7 billion this year through the end of November. Vanguard’s YTD sales more than tripled those of iShares, the second best-selling firm in the industry with a net intake of $37.8 billion. However, it appears that Vanguard would unlikely generate more sales this year than last year when it garnered $138.9 billion.

3) Pershing Expands Donor-Advised Funds Platform Available to Advisors
    Pershing  |  12/17/2013

Because… As a part of tax and estate planning process, donor-advised funds (DAFs) have gained more recognition in the past few years. Benefits of DAFs are multi-fold: they do not involve substantial start up costs and administrative expenses, and receive more favorable tax treatment than a private foundation. DAFs also offer the option to recommend grants anonymously, which protects donors from other charitable solicitation. Donors can avoid capital gains taxes and take an immediate, fair-market-value tax deduction by transferring assets to a DAF. In addition, DAFs are not subject to a legal minimum payout requirement.


Don't Miss This (12/10/13)
1) MFS Launches Two Low-Volatility Equity Funds
    Business Wire  |  12/5/2013

Because… S&P 500 Index has returned 26.8% this year through 12/9/13. VIX, the CBOE Volatility Index which moves in the opposite direction as the S&P 500 about 80% of the time, has averaged about 14.2 a day this year, the lowest reading since 2006. When introducing low volatility funds to the marketplace, asset managers should inform investors of both the advantage (smooth out the market’s roller coaster ride) and the disadvantage (a smoother ride does not necessarily translate into better returns) of this type of products.

2) Society of Actuaries Release New Survey Report on Retirement Risks
    Society of Actuaries |  12/9/2013

Because… One of the findings in the 188-page SOA report pointed out the disparity between pre-retiree expectations and the actual retirement age of retirees. The fact that many retirees left the work force earlier than planned demonstrates that counting on working longer may not be realistic after all. Health issues, job loss, caring for family members, and other unforeseen circumstances can force workers into an early retirement, so individuals should take the initiative to maximize their savings now instead of relying on delaying retirement.

3) Active Investment Strategies Outperform in Many Less Efficient Asset Classes, Finds New Forward Analysis
    Forward Management |  12/10/2013

Because… While the active-passive debate is not new, it is interesting to see another study with data supporting active investment strategies. In September, American Funds publicly defended active investing with its own study, which measured 17 of its funds’ performance over 1-, 3-, 5-, 10-, 20-, and 30-year periods, on a rolling monthly basis, from 12/31/1933 to 12/31/2012. The results show the funds beat their benchmark indexes in the majority of almost 30,000 periods over the past 80 years, which included 57% of one-year stretches, 67% of five-year periods, and 83% of 20-year ranges.


Weekly Net Flows Report, 11/26 Data (12/6/13)
Total estimated outflows from long-term mutual funds were $2.28 billion for the six-day period ending Tuesday, November 26, according to the Investment Company Institute (ICI). Cumulative flows had remained in positive territory over the prior five weeks. Domestic Equity fell into the red with nearly $1.4 billion in outflows after seven weeks of positive sales. However, World Equity gathered $2.9 billion in net inflows, pulling the overall stock total to approximately $1.6 billion in net inflows. Investors pulled $3.7 billion and $1.0 billion from Taxable and Municipal Bond, respectively. Meanwhile, Hybrid funds managed to gather $870 million in net inflows—its lowest intake in six weeks.


Source: Investment Company Institute (ICI)



Don't Miss This (12/3/13)
1) Goldman Sachs Asset Management Launches First Closed-End Fund
    Business Wire  |  11/26/2013

Because… The IPO of Goldman’s first closed-end fund is the sixth largest this year and the third largest among those focusing exclusively on MLPs. There were 24 closed-end fund IPOs in 2013 as of the end of November, already surpassing last year’s total of 22. MLPs are a popular asset class in the closed-end fund space because the closed-end structure has a relatively stable asset base, which allows portfolio managers to invest in securities with less liquidity.

2) Global X Funds Lists Three ETFs On Colombian Stock Exchange
    PR Newswire  |  11/26/2013

Because… There were only 38 exchange-traded products listed in Latin America with total assets of $11.5 billion at the end of October, according to BlackRock. While Global X may have the first-mover advantage in Colombia, other ETF issuers need to take a cautious approach if they plan to explore new distribution opportunities in the region. Firms should have a good understanding of local rules and regulations concerning listing procedures and reporting requirements, conduct research on local investors’ preferences as well as the competitive landscape, and provide adequate marketing support to get funds proper exposure.

3) Allstate Launches Emerging Manager Program
    PR Newswire | 12/3/2013

Because… Emerging manager programs have been developed or expanded by a growing number of institutional investors, such as pensions, endowments, investment consultants, multi-manager fund sponsors, and asset allocation funds with alternative sleeves. The definition of emerging managers varies. It is sometimes applied to women- or minority-owned firms with a high degree of employee ownership. Many studies have shown that these smaller investment managers tend to deliver better performance compared with their more-established counterparts.


Don't Miss This (11/26/13)
1) 401(k) Participants Expect to Slow Retirement Savings – Mercer Workplace Survey
    Mercer  |  11/19/2013

Because…The inability and unwillingness on the part of 401(k) plan participants to save more for the future is worrisome. When providing education for employees on their retirement readiness, plan sponsors should point out that saving for retirement doesn’t necessarily come into conflict with other financial needs. Budgeting for retirement savings is also critical. As everyone has to address special financial considerations throughout different life stages, creating a budget to identify available sources for savings will help people save in a more systematic, disciplined, and structured manner.

2) American Century Investments Rolls Out New Retirement Plan Assessment Tool
    American Century  |  11/19/2013

Because…As asset managers are competing for DCIO business, they are contemplating the most effective approaches to stand out from peers. American Century’s new tool can expose key areas of improvement so that retirement plan advisors and sponsors can search solutions to enhance plan effectiveness. Meanwhile, the delivery of analytical tools is just one way of supporting plan advisors and sponsors. DCIO managers also need to combine quantitative analysis with qualitative evaluation to provide ongoing value.

3) JP Morgan to Launch a Multi-Manager Alternatives Fund
    SEC Filings  |  11/22/2013

Because… The filing did not disclose the names of sub-advisors, but we have found that tapping multiple sub-advisors to manage alternative funds has become an emerging trend in the fund world. Firms that offer multi-manager funds should put a special emphasis on portfolio managers’ expertise in screening sub-advisors because alternative fund managers generally have greater flexibility in investment approaches. They do not focus on the comparison with a benchmark, which can lead to the wide dispersion of returns among fund managers. Therefore, manager selection plays a pivotal role in a fund’s success.


Don't Miss This (11/19/13)
1) RS Investment to Launch the Emerging Markets Small Cap Fund
    SEC Filings  |  11/15/2013

Because… Besides RS Investment, American Century introduced the Emerging Markets Value Fund on 10/31/13. With asset management firms accelerating the launch of emerging markets funds, Emerging Markets is no longer a niche asset class. Asset managers, who are not content with broad market-based funds, are increasingly slicing and dicing emerging markets. By targeting specific sectors, market caps, or investment styles, these funds enable investors to tailor the emerging markets exposure to their portfolio construction needs. While more fund firms will develop such products, this group of funds, with a narrower investment universe, usually carries a higher level of risks.

2) Acquisition and Strategic Relationship with Lloyds Banking Group
    Aberdeen  |  11/18/2013

Because…Aberdeen’s purchase of Scottish Widows Investment Partnership will turn the firm into Europe’s largest publicly traded money manager. The fact that Aberdeen resorted to the acquisition once again as it has done quite a few times in the past decade shows that asset managers are eager to grow their size to achieve economy of scale and become more diversified to weather various market cycles. Meanwhile, regulatory requirements and the Eurozone crisis have prompted many European banks to consider divesting non-core business segments, which provides great opportunities for investment managers to expand their presence.

3) Russell Investments to Acquire On-Line Partnership Network
    Citywire  |  11/19/2013

Because… In addition to Russell’s and Aberdeen’s (see above) deals, Henderson Global Investors has announced its purchase of the alternative investment manager H3 Global Advisors. These transactions suggest M&A activities around the globe are picking up toward the end of the year. Asset managers are actively seeking opportunities to broaden their product distribution or strengthen their investment capabilities in areas where they do not possess in-house expertise. However, deals may fall through because of divergent expectations between buyers and sellers, as in the case of Crestview’s failed sale of Munder Capital.


Weekly Net Flows Report, 11/6 Data (11/18/13)
Total estimated inflows to long-term mutual funds were $6.06 billion for the week ending Wednesday, November 6, according to the Investment Company Institute (ICI). This cumulative intake represents a 7% increase from the prior week’s sales. Stock fund experienced its fourth consecutive week of inflows with Domestic Equity gathering $5.4 billion and World Equity capturing $3.6 billion. Although Hybrid funds collected nearly $1.4 billion in net inflows, it was a decline of 35% from the prior week. Bond funds remained in the red with $4.3 billion in net outflows, on par with its redemptions from the prior week. Taxable Bond suffered $3.5 billion while Municipal Bond experienced $833 million in net outflows.


Source: Investment Company Institute (ICI)




Don't Miss This (11/12/13)
1) Gross Loses World’s Largest Mutual Fund Title to Vanguard
    Bloomberg  |  11/4/2013

Because… We hope the widespread press coverage on which fund is the world’s largest will not sway investors’ decisions. Investors should be advised to invest their assets based on their own needs. Performance chasing and asset class rotation can be primary reasons behind the asset shift. PIMCO Total Return Fund produced negative YTD and one-year returns as of 10/31/13, although it still managed to beat its benchmark – Barclays U.S. Aggregate Index – for all time periods. On the other hand, Vanguard Total Stock Market Index Fund (Investor shares) generated returns of 26.29% for YTD as of 10/31/13 and 28.74% for one year.

2) Fidelity Labs Experiments With Online Game to Educate Investors
    Fidelity  |  11/6/2013

Because… Engaging, fun, and interactive games are rarely associated with investor education. Money management is always a serious topic, and most financial education programs follow the traditional approach of having investment experts give lectures. However, we have recently seen more firms are experimenting with “edutainment,” marrying entertainment and financial learning to pique people’s interest. With the goal of bringing back investors, developing innovative and interesting games can also enhance brand awareness and differentiate a firm from its competition.

3) AllianceBernstein to Introduce the Floating Rate Strategies Fund
    SEC Filings  |  11/8/2013

Because… Fund firms are increasingly rolling out floating rate funds to help investors hedge against rising rates. Besides AllianceBernstein, SSgA also filed for a floating rate ETF last Friday. As the best-selling category for the most recent quarter, YTD, and past one year, floating rate mutual funds garnered $21.1 billion in 3Q13, $51.5 billion this year through September, and $57.5 billion over the past 12 months. Investors are flocking to these funds as they tend to outperform fixed rate bond funds in a rising rate environment. Floating rate loans can also provide portfolio diversification because they generally have a low correlation to other fixed-income sectors.


Weekly Net Flows Report, 10/23 Data (11/3/13)
Total estimated inflows to long-term mutual funds were $13.54 billion for the week ending Wednesday, October 23, according to the Investment Company Institute (ICI). Investors poured nearly $9.2 billion into Domestic Equity reportedly on expectations the Federal Reserve would keep its easy money policies intact into 2014. World Equity garnered almost $4.4 billion followed by Hybrid fund’s intake of $2.3 billion. Bond funds, on the other hand, remained in negative territory. Taxable Bond suffered $1.3 billion in net outflows while Municipal Bond experienced $1.0 billion in redemptions.


Source: Investment Company Institute




Weekly Net Flows Report, 10/16 Data (10/24/13)
Long-term mutual funds experienced outflows of $2.16 billion for the week ending Wednesday, October 16, according to the Investment Company Institute (ICI). Bond funds continue the battle with Taxable Bond experiencing nearly $3.9 billion in redemptions and $1.8 billion in net outflows for Municipal Bond. Meanwhile, Domestic Equity managed to reverse the tides and posted inflows of $839 million compared with outflows of $5.2 billion during the prior week. World Equity continues to lead sales, gathering nearly $2.1 billion in net inflows. Hybrid funds accumulated $618 million, up from $191 million during the prior week.


Source: Investment Company Institute



Don't Miss This (10/22/13)
1) Schwab ETF OneSource Expands to Offer More Than 120 Commission-Free ETFs
    Schwab  |  10/16/2013

Because… As the largest platform with the most commission-free ETFs, Schwab ETF OneSource has attracted greater investor attention. The decision of putting more funds onto ETF OneSource shows that ETF providers are satisfied with the flows their ETFs have gathered from the platform. On the other hand, the latest additions come from ETF managers that are already on the platform. If Schwab can consistently help less popular ETFs capture new assets, more ETF sponsors could be tempted to jump on the bandwagon.

2) Vanguard Increases Access to Admiral Shares to Bring Lower Costs to More Clients
    Vanguard  |  10/16/2013

Because…By gradually phasing out Signal Shares and eliminating Admiral Share minimums, Vanguard is simplifying its pricing structure and making Admiral Shares more widely available. The easier accessibility to the ultra-low-cost share class means investors have to compare advantages and disadvantages of mutual funds and their ETF counterparts and make final choices based on their real needs and personal situation. In Vanguard’s case, expense ratios of different product vehicles are no longer the key to investment decisions.

3) JP Morgan Files for the Global Equity ETF
    SEC Filings  |  10/21/2013

Because… JP Morgan, this year’s fourth best-selling fund family through the end of September, is preparing for an enhanced-index ETF. While the firm did not disclose the index the fund will be tracking, it did state in the filing that securities will be “selected for their specific investment characteristics based on a multi-factor investment selection process,” such as attractive relative valuation, positive price momentum, low volatility, and specific market capitalization. Whether this new ETF can gain traction will depend on its expense ratio and its ability to produce market-beating returns.


Weekly Net Flows Report, 10/9 Data (10/18/13)
Long-term mutual funds experienced outflows of $5.47 billion for the week ending Wednesday, October 9, according to the Investment Company Institute (ICI). Investors pulled money from all broad asset classes with the exception of World Equity’s $2.1 billion intake and the mere $192 million captured by Hybrid funds. Domestic Equity suffered nearly $5.2 billion in net outflows, its largest withdrawal since the beginning of the year. With $1.5 billion in redemptions, Taxable Bond fell back into the red after two weeks of positive inflows. Municipal Bond experienced $1.0 billion in net outflows.


Source: Investment Company Institute



Don't Miss This (10/15/13)
1) Nationwide Financial Survey Finds One in Four Investors Do Not Have a Financial Plan
    Nationwide  |  10/8/2013

Because… The Nationwide survey found that 38% of investors who have no financial plan have no intention of ever creating one. When providing education for individual investors on their future financial health, financial firms should emphasize the need for having a sound plan in place, provide resources that can help them develop one, and point out benefits of working with advisors in formulating an effective planning strategy. Offering planning tools that allow people to see how minor changes in their saving and spending habits can affect their retirement would be helpful.

2) Fama’s Nobel Work Shows Active Managers Fated to Lose
    Bloomberg  |  10/15/2013

Because… The news that Eugene Fama won the Nobel Prize will potentially attract more attention to the passive investment approach. It may also bring new assets to DFA, which boasts on its web site that Professor Fama's groundbreaking work inspired the founding of the firm. As a board member and consultant at DFA, Professor Fama has a profound influence on the firm’s research. DFA is the third best-selling fund company this year with net flows of $16.8 billion as of the end of September.

3) U.S. Debt Ceiling Crisis Would Start Quiet, Go Downhill Fast
    Reuters  |  10/15/2013

Because… The debt ceiling impasse highlights the importance of improving communications during times of market uncertainty. Failure to connect with investors at a time of increased market volatility could be detrimental to the client relationship. The press coverage of the debt limit debate can be overwhelming and nerve wracking for average investors; therefore, insight and perspective on the turbulent market that can relate to investors’ situation would be valuable.


Weekly Net Flows Report, 10/2 Data (10/14/13)
Long-term mutual funds experienced outflows of $3.90 billion for the week ending Wednesday, October 2, according to the Investment Company Institute (ICI). Investors pulled nearly $3.4 billion from stock funds with $4.1 billion in outflows from Domestic Equity amid concerns regarding the U.S. government shutdown and whether or not the debt ceiling will be raised. Domestic Equity outflows mark the largest redemptions since January 16. World Equity, on the other hand, gathered $739 million in net inflows. Also, Taxable Income managed to collect $468 million while Municipal Income shed $868 million. Hybrid funds also fell into negative territory with $114 million in net outflows.


Source: Investment Company Institute



Don't Miss This (10/8/13)
1) Fidelity Tax-Exempt Defined Contribution Business Doubles Since 2008; Participant Growth Up 30 Percent
    Fidelity  |  10/2/2013

Because… Fidelity data shows the fast growth of tax-exempt plan assets and the increased plan participation in the past five years. While this market is dominated by TIAA-CREF, it does not prevent other financial services firms from capitalizing on the market growth. Firms can grow their business with non-profit institutions by helping them simplify their investment menu, dedicating more resources to target specific market segments (e.g. higher education and health care), and enhancing educational programs to offer more relevant advice. Supporting TPAs that exert significant influence in the channel can also provide expanded market opportunities.

2) Alternatives in Plans Raise Red Flags
    Planadviser  |  10/3/2013

Because… Besides being exposed to hard-to-value investments, alternative funds that involve short selling, leverage, derivatives, and arbitrage are too sophisticated for average investors to comprehend. Most plan sponsors and DC-focused advisors have to be educated as well. In addition, many alternative funds have yet to establish a long track record. Whether they can diversify investor portfolios or generate additional sources of returns remains to be seen. Considering the regulatory scrutiny, the lack of knowledge, and the need to prove their mettle, plan sponsors should take necessary cautions when adding alternatives to their plans.

3) Schwab ETF Platform for 401(k)s Hits Regulatory Speed Bump
    Investment News  |  10/7/2013

Because… We are not clear what issue Schwab has encountered that is delaying the launch of its ETF 401(k) platform, but we believe that if Schwab’s undertaking is eventually successful, it will help more ETF providers make headway into 401(k) plans. Though some ETFs’ advantages, such as tax efficiency and intraday trading, are largely irrelevant in 401(k) plans, we think that low costs, portfolio transparency, easier access to particular market sectors, and the absence of revenue-sharing practices may still make ETFs an appealing alternative in retirement plans.


Weekly Net Flows Report, 9/25 Data (10/4/13)
Long-term mutual funds experienced outflows of $1.00 billion for the week ending Wednesday, September 25, according to the Investment Company Institute (ICI). Bond funds experienced a turnabout by attracting nearly $1.3 billion in net inflows after suffering redemptions for eight consecutive weeks. Taxable Bond drove sales with nearly $1.6 billion amid reports that the Fed is keeping its bond buying program intact, as we mentioned last week. However, Municipal Bond experienced its 18th straight week in the red with $289 million in net outflows. Equity funds posted nearly $3.6 billion in net outflows, its largest redemptions since the week ended May 1. Outflows were attributed to Domestic Equity with approximately $3.8 billion in outflows compared with World Equity’s intake of $196 million. Hybrid funds gathered $1.3 billion in net inflows, representing an 18% decline from its intake during the prior week.


Source: Investment Company Institute



Don't Miss This (10/1/13)
1) Prudential Investments Launches Global Infrastructure Fund
    Prudential  |  9/25/2013

Because… Global infrastructure has drawn more attention recently. The stable income stream, historically low volatility, inflation-linked assets, and government support of infrastructure projects may increase infrastructure funds’ appeal to investors who are shunning traditional stocks and bonds and looking for new investment themes to generate yields and diversify their portfolios. However, infrastructure investments may be at a disadvantage if interest rates rise because net asset value of the debt carried by infrastructure projects will decline.

2) Fidelity Investments Enhances Industry-Leading Target Date Retirement Strategies
    Fidelity  |  9/26/2013

Because… As the largest target-date fund (TDF) provider, Fidelity’s shift to a more aggressive approach will likely prompt other TDF managers with relatively lower equity allocations to reassess their asset allocation strategies. We agree that increasing equity allocations can be an effective way of dealing with longevity risk and inflation risk, but equities possess a higher degree of uncertainty and risks. We believe the equity exposure should be determined by a combination of various factors, such as withdrawal patterns, retirement account balances, risk tolerance, and retirement income needs.

3) Sovereign Funds Boosting Alternative Investments, Invesco Says
    Bloomberg  |  9/30/2013

Because… Sovereign funds could represent an important revenue source for asset managers, but few mutual fund firms have placed an emphasis on this market. Sovereign funds’ increased investment in alternatives does not come as a surprise. In its Global Alternatives Survey published in July, Towers Watson also expected sovereign funds “to continue diversifying into other alternative asset classes beyond real estate and private equity.” Fund firms must be aware of these investment trends and leverage their core competencies if they want to tap into this market.


Weekly Net Flows Report, 9/18 Data (9/27/13)
Long-term mutual funds experienced inflows of $2.29 billion for the week ending Wednesday, September 18, according to the Investment Company Institute (ICI), more than double its intake from the prior week. Although bond funds experienced its eight consecutive week of outflows, redemptions tapered to $2.6 billion amid reports that the Fed is keeping its bond buying program intact. Taxable Bond experienced $891 million in net outflows while Municipal Bond experienced its lowest level of redemptions in 11 weeks with $1.7 billion. World Equity continued to drive sales by attracting nearly $3.4 billion, but Domestic Equity only captured $44 million in net inflows. Hybrid funds continue on a steady pace with $1.5 billion in net inflows.


Source: Investment Company Institute



Don't Miss This (9/24/13)
1) State Street Survey Debunks Misconceptions about the Alternative Investment Industry
    Business Wire  |  9/17/2013

Because… The industry’s effort to dispel misconceptions about alternative investments is laudable. Although the alternative space is expanding with more fund launches and asset inflows, alternative fund assets only accounted for 1.5% of the total long-term mutual fund assets as of the end of August, according to Morningstar data. In the retail market, investor demand for alternatives is increasing, but the allocation to alternative funds within an investor’s portfolio is still relatively small. For the alternative industry to grow more rapidly, asset managers should ensure investors have a better understanding of industry trends.

2) Capital Group Breaks Silence to Defend Active Management
    Bloomberg  |  9/19/2013

Because…While American Funds’ expansion of its sales force from 115 to 145 in the next six to eight months and its shift toward fee-based advisors have gained a lot of media coverage, we believe that the firm’s willingness to talk to the press is more noteworthy. Although American Funds’ wholesaler team is still highly regarded by advisors after years of heavy redemptions, the firm has been known for its limited public relations exposure. Developing more aggressive marketing and PR strategies could enhance communications with distribution partners and help the firm advance its thought leadership position.

3) TA Considers Selling Stake in First Eagle
    Reuters  |  9/23/2013

Because… We do not expect the sale of TA Associate's 25% stake to have a significant impact on First Eagle’s business operation, but we believe the seller could potentially fetch a high price if the deal does eventually go through. The firm has a lineup of just seven funds, but all of its six eligible funds carry 4- or 5-star ratings from Morningstar. It enjoyed the 1-year asset growth of 19% as of 6/30/13 and raked in $4.7 billion in 2012 and $3.7 billion in the first half of 2013. Benefiting from a distinct research-driven philosophy and solid value investing principles, First Eagle has become one of the industry’s 30 largest asset managers.


Weekly Net Flows Report, 9/11 Data (9/19/13)
After four consecutive weeks of overall redemptions, long-term mutual funds experienced inflows of $1.00 billion for the week ending Wednesday, September 11, according to the Investment Company Institute (ICI). Equity funds drove sales by garnering $5.2 billion during the week, marking the largest intake for stock funds since the week ended July 10. World Equity collected nearly $2.8 billion while its domestic counterpart gathered nearly $2.5 billion. Hybrid funds attracted slightly less than $1.3 billion, up sharply from inflows of $349 million during the prior week. Bond funds continued in the red, marking the seventh consecutive week of redemptions. Taxable Bond suffered $2.8 billion in net outflows, which was an improvement from the $4.7 billion in outflows during the prior week, while Municipal Bond posted $2.7 billion in net outflows.


Source: Investment Company Institute



Don't Miss This (9/17/13)
1) Global ETFs and ETPs Suffered Net Outflows of $16.77 Billion in August 2013
    ETF Daily News  |  9/5/2013

Because… The fact that sales of global ETPs went from near-record net inflows in July to record net outflows in August demonstrates again the market uncertainty and the herd mentality among investors. If we take a closer look at listing regions, U.S.-listed ETPs accounted for 70% of global assets and 76% of YTD global flows. Specifically, flows (inflows of $13.8 billion in July and outflows of $14 billion in August) of the world’s largest ETF, SPDR S&P 500, have a significant impact on overall industry sales.

2) Nationwide Financial Introduces Simplified Small Plan 401(k) Product
    Nationwide  |  9/9/2013

Because…Besides Nationwide, Genworth Wealth Management is introducing a similar offering this week for advisors to capture small plan market share. Since DC assets are highly concentrated in larger retirement plans, financial firms tend to dedicate more resources to large plans. Large plans typically exert their bargaining power over costs and can be very demanding at the same time. On the other hand, small businesses have greater growth potential, which could potentially translate into more stable revenue streams. In addition, the lack of participation in small plans also presents opportunities for service providers.

3) iShares Plans 4 Active ‘Core’ ETFs
    IndexUniverse.com  |  9/10/2013

Because…With the filing of Core Allocation series ETFs, iShares is making a new push to target advisors and individual investors. While we are not sure at this point whether the new ETFs will quickly gain traction in the marketplace, we believe the trend for ETF managers evolving from providing building blocks to offering complete portfolio solutions is here to stay. Asset allocation ETFs are increasingly embraced by advisors who choose to focus more on developing new business and strengthening client relationships. This can be witnessed by the asset growth of ETF managed portfolios.


Weekly Net Flows Report, 9/4 Data (9/13/13)
Total estimated outflows from long-term mutual funds were $5.6 billion for week ending Wednesday, September 4, according to the Investment Company Institute (ICI), marking the fourth consecutive week of overall redemptions. Bond funds continue in the red due to concerns that the Federal Reserve may start scaling back on its bond-buying program. Taxable Bond experienced $4.7 billion in net outflows, an improvement from $6.4 billion in redemptions during the prior week. Municipal Bond recorded $2.0 billion in net outflows, compared with prior-week outflows of $2.9 billion. Domestic Equity was also in the red with $694 million in redemptions, nearly half the amount redeemed during the prior week. On the other hand, World Equity continued to lead sales with nearly $1.6 billion in net inflows, representing a 40% increase from its intake during the prior week. Hybrid funds, which have been gathering a steady $1.0 billion intake over the past few weeks, slipped but managed to stay in the black by garnering $263 million in net inflows.


Source: Investment Company Institute (ICI)



Don't Miss This (9/10/13)
1) SSgA Files for SPDR MSCI Beyond BRIC ETF
    SEC Filings  |  8/27/2013

Because… When BRIC countries are dealing with their growing pains, we begin to see asset managers turn their attention to other emerging markets than BRICs. BRIC nations have been a popular theme in the emerging market investing arena, but they are struggling to maintain their high growth rates. Their equity markets have been somewhat losing their appeal in recent years. With the enthusiasm for the BRICs cooling off, other groups of emerging markets are becoming attractive.

2) Fidelity Research Finds Gen Y Financial Perspective the “Most Changed” Following the 2008 Financial Crisis
    Fidelity  |  9/4/2013

Because… As the fastest-growing segment of the workforce, Gen Y represents a huge potential market for financial services. Financial institutions should target them now rather than run the risk of losing a big customer base in the long term. To develop relationships with Gen Yers, financial firms need to have a good grasp of the generation’s key characteristics as well as their financial needs, take advantage of social media to engage them, take a holistic approach instead of promoting specific products, and provide relevant information at the time of servicing their parents.

3) Emerging Global Advisors Announces Fund Closures
    Business Wire  |  9/5/2013

Because… The closure of 12 funds shows that small ETF providers are facing more challenges than their larger counterparts. First, smaller firms generally do not have the luxury of charging lower fees. As a result, their funds may not be competitive in terms of costs and returns. Second, the lack of brand awareness can become a hurdle for small ETF managers to gain market share. Third, smaller firms typically have limited marketing and sales resources, which may hamper their ability to reach out to more investors.


Weekly Net Flows Report, 8/28 Data (9/6/13)
Total estimated outflows from long-term mutual funds were $7.71 billion for week ending Wednesday, August 28, according to the Investment Company Institute (ICI). Investors continued to pull money from bond funds with Taxable Bond experiencing nearly $6.3 billion in redemptions and $2.9 billion from Municipal Bond. With $1.0 billion in net outflows, Domestic Equity witnessed its third consecutive week in the red while World Equity captured $1.3 billion in net inflows. Hybrid funds continued on its steady trajectory with nearly $1.2 billion in net inflows.


Source: Investment Company Institute



Weekly Net Flows Report, 8/21 Data (8/30/13)
Total estimated outflows from long-term mutual funds were $8.72 billion for week ending Wednesday, August 21, according to the Investment Company Institute (ICI). Amid continued fears of a potential pullback in the Federal Reserve’s stimulus program, investors pulled nearly $7.4 billion from Taxable Bond and $3.8 from Municipal Bond. For the third consecutive week, World Equity led sales with $1.7 billion while Domestic Equity experienced outflows of $378 million. With $1.1 billion in net flows, Hybrid funds experienced a 31% decrease from its intake during the prior week.


Source: Investment Company Institute




Weekly Net Flows Report, 8/14 Data (8/23/13)
Total estimated outflows from long-term mutual funds were $879 million for week ending Wednesday, August 14, according to the Investment Company Institute (ICI). World Equity drove sales for the second consecutive week with nearly $2.3 billion in net inflows. On the other hand, Domestic Equity slipped into the red with $764 million in redemptions after gathering $357 million in net inflows during the prior week. Bond funds experienced its third consecutive week in negative territory. Investors pulled nearly $2.1 billion and $1.8 billion from Municipal Bond and Taxable Bond, respectively. Hybrid funds collected $1.5 billion, representing a 17% increase from its intake during the prior week.


Source: Investment Company Institute (ICI)



Don't Miss This (8/20/13)
1) Schwab Expands Fundamental Index Line-up with Introduction of Six Exchange-Traded Funds
    Schwab  |  8/8/2013

Because… The new Schwab ETFs are capitalizing on the increasing recognition of fundamental indexing. Index-enhancing strategies may vary from one fund to another. The use of proprietary indexes or multi-factor models can lead to very different results. ETF providers need to communicate with investors in a clear and transparent manner so that they understand the rationale behind each offering.

2) PIMCO to Unveil TRENDS Managed Futures Strategy Fund
    SEC Filings  |  8/16/2013

Because…PIMCO, the bond powerhouse that saw outflows of $6.7 billion in July and $18.1 billion in the last three months, is venturing into the managed futures space. As of the end of June 2013, Managed Futures was the only one of eight alternative categories that showed an asset decline during the 12-month period, whereas Absolute Return boasted an asset increase of 104%.  With the majority of Managed Futures funds struggling this year, new funds without a solid track record may have a hard time gathering assets.

3) BofA Will Dissolve Merrill Lynch Unit While Keeping Name
    Bloomberg  |  8/16/2013

Because… Unlike Morgan Stanley that dropped the Smith Barney name, Bank of America will keep the Merrill Lynch brand. Merrill Lynch, as well as its charging bull logo, is one of the most recognized names in the investment community. Keeping it alive indicates the brand still carries significant power. While we have yet to learn how advisors feel about this executive decision, timely communication that addresses the move is absolutely necessary.


Weekly Net Flows Report, 8/7 Data (8/15/13)
Total estimated inflows to long-term mutual funds were $2.63 billion for week ending Wednesday, August 7, according to the Investment Company Institute (ICI). This intake represents a turnabout from $4.50 billion in net outflows during the prior week. World Equity drove sales with nearly $3.1 billion in net inflows, while its Domestic counterpart managed to gather $355 million in net inflows. After leading sales last week with $1.7 billion, Hybrid funds collected a steady $1.3 billion in sales. Fixed income remained in the red for the second consecutive week with nearly $2.09 billion in redemptions. Investors pulled $2.12 billion from Municipal Bond funds. According to analysts, investors are wary of muni debt due to the city of Detroit filing for bankruptcy on July 18. Meanwhile, Taxable Bond reversed its $4.1 billion in outflows from the prior week and inched into the black with $33 million in net inflows. Clearly, investor concern persists regarding the Federal Reserve cutting back on its $85 billion in monthly bond-buying program, which will create interest rate risk.


Source: Investment Company Institute



Don't Miss This (8/13/13)
1) 401(k) Participants Say a Retirement Income Stream is Their Top Priority
    TheStreet  |  8/1/2013

Because… If participants leave their assets in their employers’ plans because of attractive retirement income choices, the overall plan assets would increase and average fees would decline, which would improve the appeal of a retirement plan. Unfortunately, no one type of retirement income product is dominant in the marketplace. Mutual fund firms, as well as insurance companies, are scrambling to find the “best” solution, but the next-generation product that can truly satisfy retiree needs has yet to take a definite shape.

2) 401(k) Plan Leakage is a Crisis: New York Life Retirement Plan Services Annual Report
    PR Newswire  |  8/1/2013
 
Because… Leakage from retirement plans has become a serious issue that hampers the preservation of retirement assets. To stop the leakage of plan assets, concerted efforts are needed from both regulators and retirement industry participants including plan sponsors as well as product and services providers. Rules that would reduce the number of loans workers may take from a 401(k) could discourage plan participants to tap into their retirement savings. Education programs that increase the awareness for adverse effects of taking out retirement savings are equally critical.

3) Rising Rates Put Risk Parity Sector on Defensive
    Investment News  |  8/6/2013
 
Because… The risk parity strategy gained traction over the past couple of years, and now it is being put to the test. By equalizing the level of risk each asset class contributes to the portfolio, risk parity funds attempt to keep risk at a relatively low level. However, research has shown risk parity portfolios generally perform better during times of economic weakness and underperform during booms. This requires fund providers to explain their investment process and clarify the advantages and disadvantages of their approach.


Weekly Net Flows Report, 7/17 Data (7/25/13)
Total estimated inflows to long-term mutual funds were $3.54 billion for week ending Wednesday, July 17, according to the Investment Company Institute (ICI). Hybrid fund led sales with nearly $3.2 billion in net inflows. Domestic Equity followed its lead with approximately $2.5 billion in net inflows, representing a significant decrease from the $4.6 billion in sales during the prior week. World Equity gathered almost $1.4 billion, down from $3.0 billion during the prior week. Although Taxable Bond continued in the red, its $1.0 billion in net outflows was an improvement from last week’s $5.7 billion in net outflows. Municipal Bond experienced nearly $2.5 billion in net outflows, which is on par with its redemptions from the prior week.


Source: Investment Company Institute (ICI)


Don't Miss This (7/23/13)
1) Succession Planning Still Major Issue for Advisors, Opportunity for Distributors According to Signator Investors, Inc. Equity and Succession Planning Survey of Advisors
    PR Newswire  |  7/17/2013

Because… A large number of advisors spend far more time on business development than on succession planning strategies. For them, whether selling to outside parties or transferring the business to someone internal is an issue they would rather consider in the future. Financial firms need to inform their advisor clients of the consequence of insufficient succession planning and provide guidance on all succession planning alternatives.

2) Drop in 2013 ETF Launches Hardly An Issue
    IndexUniverse.com  |  7/18/2013

Because… We agree that the declining pace of ETF launches and the increasing number of ETF closures are nothing to be worried about. This is actually a healthy sign for a maturing industry with already 1,475 funds at the end of June 2013. ETF sponsors are moving away from simply rolling out “me-too” products and becoming more deliberate over developing products that truly meet investor needs and show market potential.

3) Improve Your Plan—Or Else?
    Planadviser  |  7/22/2013

Because… The 6,000 letters sent to plan sponsors from the Yale law professor have caused a stir in the industry. While Prof. Ayres may have a good intention of reminding plan sponsors of their fiduciary duties, his use of outdated data (Form 5500 from 2009), lack of investment background, premises based on false assumptions, and incomplete assessment of plan costs have led many to question the integrity of his study.


Weekly Net Flows Report, 7/10 Data (7/19/13)
Total estimated inflows to long-term mutual funds were $1.28 billion for the eight-day period ended Wednesday, July 10, according to the Investment Company Institute (ICI). This marks a turnabout for overall fund flows after five consecutive weeks of redemptions. Despite the positive turn, fixed income still fell into the red with Taxable Bond and Municipal Bond experiencing $5.7 billion and $2.4 billion in net inflows, respectively. Amid redemptions, stocks managed to gather flows over the past four weeks. During this period, Domestic Equity drove sales with $4.5 billion in net inflows followed by World Equity’s $3.0 billion. Hybrid funds collected $1.7 billion, more than double its intake from the prior week.


Source: Investment Company Institute




Don't Miss This (7/16/13)
1) Nuveen Asset Management Launches New Equity Strategies Managed by Bob Doll
    Business Wire  |  7/10/2013

Because… Betting on Bob Roll may raise Nuveen’s visibility in the equity space, but whether putting nine strategies under his management can resonate with investors remains to be seen. The success will depend on how he collaborates with new team members, whether his investment approach can help him establish a solid track record, and whether he can adjust his stock selection to changing market conditions. As Nuveen is preparing for an IPO in the next few years, having a diversified lineup of products instead of being known as a muni bond shop will make a difference in the value of the firm.

2) Vanguard ETFs Surpass $1 Billion in Assets
    Business Wire  |  7/10/2013

Because… While the U.S. press put the spotlight on Vanguard’s first month of net outflows since ’94, we noticed that the firm’s ETF assets in Canada quietly surpassed the $1 billion mark, which is an impressive achievement considering the firm entered the market just a year and a half ago. Now the fifth largest ETP provider in the country, Vanguard will likely jump into the top three very soon. With extremely low costs, the ability to minimize tracking errors, and high quality client support, the firm is becoming a formidable competitor in the Canadian market.

3) Are You a Woman of Influence? Allianz Life Study Reveals Profile of More Financially Empowered Woman
    Allianz Life  |  7/15/2013

Because… An increasing number of financial firms are targeting women as they are realizing women investors represent a significant underserved market. The Allianz Life study identified “the Woman of Influence” and gained insight into how financial institutions can engage this select group of investors. While these women are more financially empowered, they need help with wealth preservation and retirement savings as well. Firms should reach out to them, provide investment advice based on individual circumstances, and determine the most effective approaches to alleviate their fear about running out of money.


Weekly Net Flows Report, 7/2 Data (7/12/13)
Total estimated outflows from long-term mutual funds were $4.89 billion for the six-day period ended Tuesday, July 2, according to the Investment Company Institute (ICI). This marks the fifth consecutive week of redemptions, with outflows peaking at $28.8 billion during the week ended June 26. World Equity and Hybrid were the only broad categories to experience sales, with $2.3 billion and $851 million in net inflows, respectively. Taxable Bond led redemptions with nearly $5.1 billion in net outflows, which is a dramatic improvement from $20.5 billion in the red during the prior week. Domestic Equity shed nearly $2.1 billion while Municipal Bond witnessed $920 million in net outflows after suffering nearly $7.7 billion in net outflows during the prior week.


Source: Investment Company Institute







Don't Miss This (7/9/13)
1) Few Get Paid Advice – Fewer Take It
    EBRI  |  7/3/2013

Because… The EBRI survey found that just 23% of workers have obtained investment advice from a financial professional and only 27% of these workers followed all of the advice. Distrusting the advice was cited most often as a reason for not following all of the advice. Financial firms therefore need to convince people of their ability to deliver value. Plan sponsors and service providers should demonstrate how professional management can incorporate all income sources into retirement planning and how programs are customized based on retirement goals, risk characteristics, and other personal financial situation.

2) What Multifamily Offices Need Now
    Bank Investment Consultant  |  7/3/2013

Because… The shift from relationship management to business development could present opportunities for asset management firms as mid-size and smaller multi-family offices (MFOs) with limited resources may outsource the investment function. Risk management is an area that many MFOs seek external assistance because it requires both technical competence and substantial investment in business infrastructure. Firms that boast a robust risk control system and expertise in risk management would be very appealing to multi-family offices.

3) Assets of Top 100 Alternative Investment Managers Hit $3 Trillion
    Towers Watson |  7/8/2013

Because… The Towers Watson research shows that total global alternative AUM is now $5.1 trillion. This asset figure seems very large at first sight, but users of the research should bear in mind that the research covers seven groups of alternative investments, including real estate, infrastructure, funds of hedge funds, and private equity funds of funds. The term “alternatives” encompasses a wide variety of investment products, which can make comparative analysis extremely challenging.


Don't Miss This (7/2/13)
1) Pimco’s Emerging-Market Equity Research Head Leaves Firm
    Bloomberg  |  6/28/2013

Because… John Longhurst’s departure is the second in the equity group after Neel Kashkari, the former head of global equities, left the firm five months ago. Although both headed for the exit for personal reasons and PIMCO should have developed organizational bench strength, each leave still suggests the difficulty for a well-known bond shop to break into the equity business (which accounted for 11% of its long-term mutual fund assets at the end of May).

2) Vanguard Completes Switch to Lower Cost Indexes
    Reuters  |  6/28/2013

Because… Vanguard’s decision to move to lesser-known indexes drew much skepticism initially, but the flow numbers show the firm has not been deterred by the index transition. This year through the end of May, Vanguard raked in $83.1 billion, more than doubling the flows of $34.7 billion into the second best-selling family, PIMCO. Vanguard’s YTD sales also surpassed $76.7 billion it gathered in the first five months of 2012.

3) TCW Launches TCW Emerging Markets Multi-Asset Opportunities Fund
    TCW  |  7/1/2013

Because… An increasing number of fund firms have launched or are planning to launch multi-asset emerging markets portfolios. By combining diverse asset classes, these funds can broaden the investment universe and allow fund managers to capture the most attractive opportunities. For firms that already offer emerging markets equity and bond funds, such an integrated approach should not be a tall order as they already possess the capabilities of investing in emerging markets.


Weekly Net Flows Report, 6/19 Data (6/27/13)
Total estimated outflows from long-term mutual funds were $5.43 billion for the week ended Wednesday, June 19, according to the Investment Company Institute (ICI). Despite the third week of overall redemptions, outflows stemmed from last week’s total of $13.35 in redemptions. Stock funds managed to post overall inflows, thanks to the $2.3 billion investors poured into World Equity. On the other hand, Domestic Equity experienced its fifth consecutive week in the red with $463 million in net outflows. Taxable Bond led redemptions with $4.6 billion in outflows followed by $3.4 billion in outflows from Municipal Bond. Hybrid Funds collected $678 million, a 41% decrease from its intake last week.


Source: Investment Company Institute




Don't Miss This (6/25/13)
1) Russell Survey: Financial Advisors Confident about Client Acquisition in 2013
    Russell  |  6/20/2013

Because… Despite the wide adoption of social media, the latest Russell quarterly survey of U.S. advisors found that receiving client referrals reactively remains the top client acquisition strategies, whereas social media is one of the three least popular sources. This survey result will make many advisors reassess whether social media is adding true value to their business, what goals they want to achieve with the use of social media, and how they can use social media more efficiently.

2) Fund Firms to Increase Tech Spending
    Financial Planning  |  6/23/2013

Because… The MME Technology Survey indicates that deploying mobile devices is one of the focuses of tech spending at fund firms. A growing number of fund companies are investing in the development of a mobile platform and upgrading their mobile apps in order to better serve investors and remain competitive. A solid mobile strategy helps enhance brand awareness too as a mobile site that gives users a streamlined and memorable experience will stand out from the competition.

3) Annual Survey Finds Continued Interest in Alternative Investments; Shift from Hedge Funds to Alternative Mutual Funds
    Morningstar  |  6/24/2013

Because… The survey conducted by Morningstar and Barron’s is giving alternative mutual fund managers a confidence boost.  Alternative fund assets (as defined by Morningstar) reached $147 billion as of the end of May, up 24% from a year ago.  But they accounted for just 1.3% of the total long-term mutual fund assets. Both traditional asset managers and investment boutiques are now providing access to alternative strategies; however, the space is very much fragmented without any dominant players, which points to the possibilities for new firms to enter the fray and existing players to strengthen their presence.


Weekly Net Flows Report, 6/12 Data (6/21/13)
Total estimated outflows from long-term mutual funds were $13.34 billion for the week ended Wednesday, June 12, according to the Investment Company Institute (ICI). For the second consecutive week, all broad asset classes experienced redemptions with the exception of World Equity with approximately $1.3 billion in net inflows and Hybrid funds, which garnered $1.1 billion in net inflows. In the wake of Federal Reserve Chairman Ben Bernanke’s comments to Congress on May 22 that the central bank could reduce its monthly bond-buying if the U.S. economy looked set to maintain momentum, investors pulled nearly $13.5 billion from bond funds, the largest amount since late 2008. Taxable Bond suffered $10.2 billion in redemptions while its Municipal counterpart shed $3.2 billion. Domestic Equity experienced its third consecutive week of outflows with nearly $2.3 billion in redemptions.


Source: Investment Company Institute


Don't Miss This (6/18/13)
1) iShares Predicts "Incredibly Bright Future" for ETFs in the U.S.
    iShares  |  6/14/2013

Because… ETF assets are projected to grow from $1.5 trillion to $3.5 trillion in five years, according to iShares. This will translate into a compound annual growth rate (CAGR) of about 18.5%. In comparison, the CAGR was 16.8% for the past five years from 2007 to 2012. ETF assets fell 13% in 2008 during the financial crisis. If we do not undergo another major financial upheaval, the accelerated growth that more than doubles the current assets is not impossible, as the increasing investor demand will bring more asset managers into the ETF market.

2) MainStay Investments Launches New Retirement Share Class (R6)
    Business Wire  |  6/17/2013

Because… In addition to MainStay, Wells Fargo, American Century, Franklin Templeton, and Neuberger Berman have all added R6 shares to their funds recently. The greater scrutiny of plan fees, the demand for lower-cost options, fee disclosure regulations, and competition from other cost-efficient investment vehicles have impelled asset managers to identify ways to better address plan needs. The new R6 shares enable asset managers to provide more choices and flexibility for plan sponsors so that they can better compete in the DCIO market.

3) Number of Super Wealthy Reaches All-Time High
    On Wall Street  |  6/18/2013

Because… The increase of the high-net-worth population means new opportunities for the asset management industry. To develop and implement targeted strategies and solutions that truly satisfy needs of high-net-worth individuals (HNWI), a better understanding of this investor segment is essential. Asset management firms should also tap the expertise of portfolio managers, chief investment officers, and economists so as to establish themselves as a trusted source for investment knowledge and help HNWI make informed investment decisions.


Weekly Net Flows Report, 6/5 Data (6/14/13)
Total estimated outflows from long-term mutual funds were $11.53 billion for the week ended Wednesday, June 5, according to the Investment Company Institute (ICI). All broad asset classes experienced redemptions with the exception of World Equity with nearly $1.6 billion in net inflows and Hybrid funds, which only managed to gather $347 million in net inflows. Amid fears that the U.S. Federal Reserve could reduce its bond-buying program this year, investors pulled nearly $8.7 billion from Taxable Bond and $2.3 billion from Municipal Bond. Meanwhile, Domestic Equity experienced its third consecutive week in the red with $2.5 billion in net outflows.


Source: Investment Company Institute (ICI)


Don't Miss This (6/11/13)
1) SEC Proposes Money Market Fund Reforms
    SEC  |  6/5/2013

Because… The SEC has not given up on the money market fund reform since the original proposal was abandoned last August. As the proposed switch from a stable share price of $1 to a floating NAV would only apply to institutional prime funds, firms with primarily an institutional investor base would be most affected. On the retail fund side, expert opinions are divided on whether liquidity fees and redemption rates can effectively stop mass redemptions during times of stress.

2) Considering Alternatives as DC Investments
    Planadviser  |  6/5/2013

Because… The DCIIA research paper points out that asset allocation is a key factor for the DB/DC return differential as DB plan sponsors’ use of alternatives contributed to their outperformance. However, DC plan sponsors need to have answers to a series of questions before incorporating alternatives into their plan: What alternative investments are appropriate for their participants? What level of exposure to alternatives would be adequate? How should performance of alternatives be measured? Would the use of alternatives elevate plan costs? How can plan participants be educated about benefits and risks of alternatives?

3) SSgA Seeks Active Nontransparent ETFs
    IndexUniverse.com  |  6/11/2013

Because…SSgA, the oldest ETF provider, is also planning for nontransparent ETFs, like BlackRock and Eaton Vance. The SEC’s daily disclosure requirement is a key impediment to the growth of actively managed ETFs, but existing active ETFs have been able to deal with the issue and abide by the rule. If nontransparent ETFs are allowed, industry observers argue that the SEC is not creating a level playing field for everyone in the game. Besides, transparency is one of primary advantages ETFs have over mutual funds. Investors may not be ready to accept ETFs with periodic portfolio disclosures.


Weekly Net Flows Report, 5/29 Data (6/7/13)
Total estimated inflows into long-term mutual funds were $1.48 billion for the week ended Wednesday, May 29, according to the Investment Company Institute (ICI). This intake represents a dramatic decrease from weekly inflows during May, with a high of $12.38 billion during the week ended May 8. Taxable Bond led sales with a mere $1.6 billion, while its Municipal counterpart experienced outflows of $216 million. As FUSE previously reported, the declining inflows suggest the fear of rising interest rates is starting to erode investor confidence in bond funds. However, investors were not willing to commit to Domestic Equity either—the broad asset class saw redemptions of $1.7 billion, representing the third week during May that it fell into the red. World Equity managed to gather $707 million in net inflows. Meanwhile, Hybrid funds remained on its steady pace by garnering $1.1 billion during the week.


Source: Investment Company Institute



Don't Miss This (6/4/13)
1) Vanguard Broadens "Total Market" Index Fund Lineup with Low-Cost International Bond Fund and ETF
    Vanguard  |  5/31/2013

Because… After rolling out the Emerging Markets Government Bond Index Fund a couple of weeks ago, Vanguard is bringing another international bond fund to the market. Despite the delayed launch, Vanguard Total International Bond Index Fund is expected to pick up steam quickly, especially the ETF shares since there are no other broad market-based ETFs that can compete directly with the fund. In addition, with international fixed-income being the world’s largest asset class, investors who look for more diversification would be drawn to its broad international bond exposure.

2) Amundi to Acquire Smith Breeden Associates
    Marketwire  |  6/3/2013

Because… Aberdeen has just completed its acquisition of Artio. Henderson is looking for more deals after lifting out a credit team from Delaware. Amundi’s transaction once again demonstrates that leading European asset managers are eager and determined to expand their presence in the U.S. Although Amundi, with assets close to $1 trillion, is the largest fund manager in France and the second largest in Europe, its U.S.-sourced business is negligible. Drawing on its key areas of expertise and leveraging Smith Breeden’s institutional relationships may help Amundi ease into the competitive U.S. market.

3) BlackRock's International ETF Should Lower Costs
    FT Adviser  |  6/4/2013

Because… Multiple listings can broaden the investor base and help ETF providers build greater economies of scale. Cross-exchange listed ETFs are very common in Europe. The plan to reform ETF trade processing and settlement across Europe could speed up the growth of the European ETF industry because the success of the iShares ETF would attract other ETF managers to the new issuance structure and investors would embrace lower-cost ETFs with open arms.


Weekly Net Flows Report, 5/22 Data (5/31/13)
Total estimated inflows into long-term mutual funds were $797 billion for the week ended Wednesday, May 22, according to the Investment Company Institute (ICI). This cumulative intake represents a 7% decrease from the prior week’s sales. All broad asset classes experienced inflows with the exception of Domestic Equity, which slipped into the red with $475 million in net outflows. On the other hand, World Equity gathered $2.9 billion, up 29% from the prior week. Taxable Bond continued to lead sales with nearly $4.0 billion in net inflows while Municipal Bond managed to stay in the black with $156 million. Finally, Hybrid funds took in nearly $1.4 billion.


Source: Investment Company Institute


Don't Miss This (5/28/13)
1) LIMRA Benchmarks In-Plan Guarantee Market for 2012
    LIMRA  |  5/20/2013

Because… The LIMRA study uncovered that early adoption of in-plan guarantees has occurred most often on small retirement plans, which is quite contrary to what we would have expected. Large plan sponsors may feel reluctant to take the plunge because of their concerns about fiduciary liabilities, costs of guaranteed solutions, and the greater need for education. But, these concerns should not become hurdles for plan sponsors to embrace in-plan guarantees if they are committed to helping plan participants achieve their retirement income goals.

2) "529 Day" is Around the Corner and 69 Percent of Americans Don't Know a 529 Plan is a College Savings Tool
    PR Newswire  |  5/22/2013

Because… The percentage of Americans that have no knowledge of 529 plans rose to 69% from 62% last year, according to the annual Edward Jones survey. While states across the nation are sponsoring programs and events around 529 Day, fund firms that offer 529 plan products and services should also play a part in educating the public and encouraging families to consider the advantages of this college savings option.

3) Roth IRAs Get Most Contributions; IRAs Funded by Rollovers Hold the Most Money
    EBRI  |  5/23/2013

Because… The EBRI analysis found that most assets held in traditional IRAs originated from rollovers and individuals who rolled over their assets to a traditional IRA had the highest average and median balances. These results underline the importance of capturing rollover assets. Providing products with guaranteed elements, offering asset allocation or risk reduction models, and establishing partnerships with providers of rollover solutions are among effective ways of attracting rollover assets.


Don't Miss This (5/21/13)
1) Aberdeen to Launch First Global Brand Advertising Campaign
    Aberdeen  |  5/8/2013

Because… Aberdeen’s first ever global advertising campaign in its 30-year history demonstrates the firm’s ambition to strengthen its foothold around the world. In the U.S., the firm had $15.5 billion of retail mutual fund assets at the end of 1Q13, ranking #79 among all long-term mutual fund managers. While the opening of a New York office, the addition of a wholesaling team, the deal to purchase Artio, as well as the effort to raise brand awareness have revealed the firm’s strategic emphasis on the U.S., penetrating the highly competitive U.S. market remains challenging for overseas firms.

2) Vanguard Launches Emerging Markets Government Bond Index Fund
    Vanguard  |  5/14/2013

Because… The much-awaited fund is Vanguard’s first international fixed-income offering available to U.S. investors. The fund has expense ratios of 0.30% for institutional shares, 0.35% for Admiral and ETF shares, and 0.50% for Investor shares. Although these expense ratios compare favorably with funds in the same market segment, the caveat for investors is that “the fund will assess a purchase fee of 0.75% on all non-ETF shares to help offset the higher transaction costs associated with buying emerging markets bonds.”

3) Government Employees Postponing Retirement
    Plansponsor  |  5/15/2013

Because… Delaying retirement seems to provide a practical solution for seniors who look to boost their nest egg; however, not all people can stay on the job for as long as they wish. There are unforeseen circumstances that can derail a person’s plan, such as job elimination, health issues, and the need to take care of an elderly spouse. Financial firms should remind investors of the possibility of not being able to work past the traditional retirement age and encourage them to save aggressively and increase their plan contributions now so they won’t be faced with the possibility of needing to postpone retirement.


Weekly Net Flows Report, 5/8 Data (5/17/13)
Total estimated inflows into long-term mutual funds were $12.39 billion for the week ended Wednesday, May 8, according to the Investment Company Institute (ICI). Although overall sales have remained in positive territory, this week's total broke the downward trend occurring since March 20 when inflows reached $12.38 billion. All broad asset classes experienced inflows with the exception of Municipal Bond, which experienced $263 million in redemptions. Taxable Bond led sales with approximately $7.7 billion in net inflows followed in a distant second by World Equity’s $3.1 billion intake. Hybrid funds gathered $1.5 billion, which is on par with its overall sales throughout the year with the exception of last week’s record $6.5 billion intake. Domestic Equity managed to reverse its outflows from the prior week by gathering $378 million in net inflows.


Source: Investment Company Institute


Don't Miss This (5/14/13)
1) European ETP Assets Set to More than Double by 2017, Says iShares
    Fundweb  |  4/26/2013

Because… iShares’ optimism may lead more foreign ETP managers to compete in the European market, which has lagged behind its U.S. counterpart in both size and product sophistication. U.S.-listed ETPs accounted for 71% of global ETP assets at the end of April, whereas European ETPs represented only 18% of the global total. This year through the end of April, European ETPs raised $6.7 billion of assets, compared to the $65.6 billion absorbed by U.S. ETPs.  iShares dominates the European market with a 40% share, but other leading ETF providers in the U.S., including SSgA and Vanguard, have not established a significant presence in the region.

2) Mutual Fund Boutiques Find Success, Challenges
    On Wall Street  |  4/29/2013

Because… For small investment boutiques, the expertise of managing money does not always translate into the success of gathering assets. Although many research studies have proved the outperformance of small money managers, these entrepreneurial firms face daunting hurdles in raising assets due to their unknown brands and lack of marketing resources. While smaller managers need to maintain their focus on delivering value to shareholders regardless of market conditions, it is more important for them to identify distribution partners and get their funds onto different platforms in order to broaden their reach to the investing public.

3) Nationwide Financial Adds Four New Managed Volatility Funds to Core VA Line-Up to Help Investors Address the "New Normal"
    Nationwide  |  5/1/2013

Because… Offering managed volatility funds has become an emerging trend in the variable annuity (VA) world. Besides Nationwide, asset managers such as BlackRock, Calvert, and Fidelity have also introduced managed volatility funds for their VA products this year. As insurance companies are increasingly focusing on risk management, the target volatility asset allocation strategy is considered an effective tool that can benefit both investors and insurers. In particular, volatility management limits exposure to tail risks and lowers the cost of VA guarantees, making it a valuable solution for insurance carriers.


Weekly Net Flows Report, 5/1 Data (5/10/13)
Total estimated inflows into long-term mutual funds were $3.07 billion for the week ended Wednesday, May 1, according to the Investment Company Institute (ICI). This cumulative total represents the lowest sales intake since the first week of January when sales were in the red. Equity funds contributed to the drag, with Domestic Equity experiencing nearly $4.1 billion in redemptions and World Equity posting $319 million in net outflows. Taxable Bond only managed to gather a mere $888 million in net inflows while its Municipal counterpart took in a paltry $73 million. Meanwhile, Hybrid funds led sales with a record $6.5 billion in net inflows, indicating investors were not willing to bet on either stocks or bonds.


Source: Investment Company Institute


Weekly Net Flows Report, 4/24 Data (5/3/13)
Total estimated inflows into long-term mutual funds were $8.42 billion for the week ended Wednesday, April 24, according to the Investment Company Institute (ICI). This cumulative intake represents a 55% increase from last week’s total of $5.44 billion. All broad assets classes garnered inflows with the exception of Domestic Equity, which fell into the red by $608 million. World Equity collected $1.9 billion, pulling overall stock funds into positive territory. Taxable Bond led sales with $5.6 billion, while its Municipal counterpart only managed to collect $133 million in net inflows. Hybrid funds gathered nearly $1.4 billion, on par with last week’s total which was restated from $246 million in net outflows to $1.3 billion in net inflows.


Source: Investment Company Institute


Weekly Net Flows Report, 4/17 Data (4/26/13)
Total estimated inflows into long-term mutual funds were $3.66 billion for the week ended Wednesday, April 17, according to the Investment Company Institute (ICI). Dropping 21% from last week’s intake, sales have been on a downward trend since the week ended March 20 when inflows reached $12.38 billion. Hybrid funds, which have been garnering steady inflows throughout the year, fell into the red with $246 million in net outflows. Municipal Bond led outflows with $698 million, while Taxable Bond led sales by gathering $2.2 billion—its third lowest total to date this year. With $1.7 billion in net inflows, Domestic Equity experienced its best week since January 30. On the other hand, World Equity managed to collect $645 million, but this represents its lowest intake since the week ended January 2.


Source: Investment Company Institute


Don't Miss This (4/23/13)
1) CIBC to Acquire Atlantic Trust Private Wealth Management
    Invesco  |  4/11/2013

Because… Just as other asset management firms are wooing private wealth business, Invesco is offloading Atlantic Trust to concentrate more on growing its retail and institutional assets. Considered a non-core business by Invesco, Atlantic Trust will help CIBC break into the U.S. private wealth market. With its nationwide presence, strong investment results, high quality client service, and powerful brand, Atlantic Trust can be a valuable addition to Canadian-based CIBC.

2) Designing a Better DC Investment Menu
    Plansponsor  |  4/18/2013

Because… The white paper, authored by several industry experts, recommends tiered investment structures for DC plan menus. Such tiers can be effective because they take participant behavior profiles into consideration. Plan sponsors traditionally offer the same investment options to all their plan participants, but they need to recognize different levels of participant involvement. A tiered structure gives self-directed investors more choices while simplifying the decision-making process for unsophisticated participants.

3) SEI Study: Active Exchange Traded Funds Will Help Fuel Sector's Next Growth Phase
    SEI  |  4/22/2013

Because… We concur that actively managed ETFs will drive growth and innovation in the ETF evolution. Quite a few asset managers have received regulatory approval for launching active ETFs. With the success of PIMCO Total Return ETF and the SEC’s permission to use derivatives, we expect more active ETFs to be brought to the market in the next couple of years, especially in the fixed-income space.


Weekly Net Flows Report, 4/10 Data (4/19/13)
Total estimated inflows into long-term mutual funds were $4.83 billion for the week ended Wednesday, April 10, according to the Investment Company Institute (ICI). This total marks the lowest intake since the first week of 2013, when net flows fell into negative territory, and a dramatic decrease from the high of $26.6 billion during the week ended January 9. Despite generating nearly half of the cumulative sales, Taxable Bond only gathered $2.7 billion compared with $6.4 billion during the prior week. Falling into the red for the third time this year, Municipal Bond experienced net outflows of $857 million. On the other hand, World Equity gathered $1.2 billion, and its domestic counterpart collected $405 million—a reversal from net outflows of $1.8 billion during the prior week. Representing a 19% increase from the prior week, investors put nearly $1.4 billion into Hybrid funds.


Source: Investment Company Institute


Don't Miss This (4/16/13)
1) Guggenheim to Add Four BulletShares ETFs
    SEC Filings  |  4/9/2013

Because… Target maturity bond funds, with attributes of both traditional bond funds and individual bonds, are relatively new in the fixed-income space. Guggenheim, which currently offers eight BulletShares corporate bond ETFs and six BulletShares high yield corporate bond ETFs, has become a leader in this niche market. The firm had $2.3 billion of assets in this fund series as of the end of March. The declining interest rate risk sensitivity, low turnover rate, and low trading costs make these funds very appealing, especially in a rising interest rate environment.

2) Vanguard Expands Availability of Low-Cost 401(k) Plan Service for Small- to Mid-Size Businesses
    Business Wire  |  4/10/2013

Because… Small plan sponsors generally select plan providers based on the diversification of investment options, brand name awareness, and compliance support. Their choice of plan providers is usually limited because of the small size of their plan. Vanguard, with its low-cost products, reputation for high quality services, and the collaboration with Ascensus, should be able to gain traction in the fast-growing small plan market segment.

3) Average Expense Ratios Paid by Mutual Fund Investors Continued to Decline in 2012
    ICI  |  4/11/2013

Because… Investors are benefitting from lower expense ratios, but the downward trend is putting tremendous pressure on fund firms. Several factors may continue to bring expense ratios down. First, investors are increasingly putting money into low-cost funds, as they have realized the impact of expense ratios on a fund’s total return. Second, ETF sponsors’ price reduction initiatives are forcing mutual fund managers to revisit their pricing policies in order to stay competitive. Third, fund mergers and acquisitions are creating economies of scale, which will generate more cost efficiency.


Weekly Net Flows Report, 4/3 Data (4/12/13)
Total estimated inflows into long-term mutual funds were $8.84 billion for the week ended Wednesday, April 3, according to the Investment Company Institute (ICI). Taxable Bond was responsible for nearly three-quarters of the cumulative intake, with nearly $6.4 billion in net flows. Although Municipal Bond only managed $73 million in net inflows, the total represents a 35% increase from the prior week. Investors poured nearly $3.1 billion into World Equity, while Domestic Equity fell back into the red with $1.8 billion in net outflows after three weeks in positive territory. With $1.1 billion in net inflows, Hybrid funds experienced its lowest weekly intake since suffering outflows during the first week of January.


Source: Investment Company Institute


Don't Miss This (4/9/13)
1) Nationwide Financial Agrees to Acquire 17 Funds with $3.6B in Assets from HighMark Capital
    Nationwide  |  4/3/2013

Because… In spite of handing over 17 funds to Nationwide, HighMark will remain as the sub-advisor to nine funds it currently manages. This indicates smaller asset managers would rather focus exclusively on investment management than compete for shelf space with limited distribution resources. For Nationwide, which has developed a penchant for fund adoption, its marketing muscle and recently expanded sales team may help adopted funds gather assets at a faster pace.

2) AQR to Add Two Alternative Funds
    SEC Filings  |  4/3/2013

Because… AQR has established itself as a fast-growing alternative asset manager in the mutual fund space. With $3 billion of net inflows in 2012, the firm’s assets in retail mutual funds surpassed $10 billion as of the end of February. AQR already offers the Managed Futures Strategy Fund, with $3 billion in assets. The fund raked in $1 billion in 2012, while the Dow Jones Credit Suisse Managed Futures Index lost 5.51%. The newly filed AQR Managed Futures Strategy HV Fund adopts a “higher volatility” approach. We’ll watch whether this strategy will resonate with investors.

3) KKR to Carlyle Target $3.6 Trillion in 401(k)s Accounts
    Bloomberg  |  4/4/2013

Because… The idea of private equity firms serving the "Average Joe" was unthinkable just a couple of years ago. Now these firms are setting their sights on individual investors because it is becoming increasingly hard to raise assets from accredited institutional investors. We’ve seen private equity firms launch their own ’40 Act funds or team up with traditional asset managers to develop new products. However, they could have a long way to go before gaining acceptance in the 401(k) market due to concerns from plan sponsors, participants, service providers, and regulators.


Weekly Net Flows Report, 3/27 Data (4/5/13)
Total estimated inflows into long-term mutual funds were $9.12 billion for the week ended Wednesday, March 27, according to the Investment Company Institute (ICI). This total intake represents a 26% decrease from the $12.38 billion accumulated during the prior week. All broad asset classes experienced inflows; however, at decreased levels from the prior week with the exception of Municipal Bond and Hybrid funds. Municipal Bond was able to reverse outflows of $278 million and managed to gather $51 million in net inflows during the week. With $1.8 billion in sales, Hybrid funds increased its net flows from the prior week by 29%. Regarding the asset classes that experienced a drop from the prior week, Taxable Bond led sales with $3.4 billion in net flows—a 45% decrease from the prior week. Investors put $2.8 billion in World Equity funds despite a 24% decrease. Domestic Equity only managed to gather $958 million, a one-quarter dip from sales during the prior week. 


Source: Investment Company Institute


Don't Miss This (4/2/13)
1) Retirement Assets Total $19.5 Trillion in Fourth Quarter 2012
    ICI  |  3/27/2013

Because…When we took a look at the ICI data, which include U.S. retirement assets since 1974, we discovered that assets held in IRAs, DC plans, federal pension plans, and annuities all reached a record high at the end of 2012. Also climbing to an all-time high are DC assets in 401(k), 403(b), and 457 plans; IRA assets in mutual funds, bank and thrift deposits, and annuities; and assets in target-date funds and target-risk funds.

2) USAA Plans to Offer Active ETFs, Details 14 Funds
    IndexUniverse.com  |  4/2/2013

Because… USAA, which primarily serves military members, is joining a long list of asset managers to offer ETFs. On the one hand, it shows the appeal of ETFs. For a firm with $54.9 billion in mutual fund assets and $14.5 billion in managed accounts, we applaud its effort to provide a complete suite of products. On the other hand, we wonder whether USAA can turn up trumps in the ETF space. Its success will depend on how its ETFs differ from existing offerings in the market, how much its military clients know about ETFs, and if the firm wants to attract non-military investors.

3) Hedge Fund Industry Survey Reveals More than One-Third of Professionals Feel Pressured to Break the Rules in Pursuit of Alpha
    PR Newswire  |  4/2/2013

Because… While the pursuit of alpha is understandable, the survey result that revealed 35% of hedge fund professionals felt pressure to break the rules is appalling. Scandals involving insider trading, insufficient disclosure about complex products, misleading behaviors in product offerings, hiding losses and diverting investor funds for personal use are fueling investor distrust. Increased regulatory scrutiny and tighter enforcement of laws are not enough to restore investor trust. Ensuring that asset managers act with integrity and self-discipline is crucial.


FUSE News You Can Use - April 1st Edition (4/1/13)
1. In an amazing piece of brand positioning, it is believed that ING has decided not to use a sailboat OR a lighthouse in its new positioning (large birds of prey and marine mammals are still thought to be under consideration).
 
2. In a series of recent press releases, it was reported that Blackrock's Larry Fink likes the outlook for equity and bond funds as well as alternative strategies...in ETF or traditional mutual fund formats.
 
3. As expected, Frank Campanale has filed to launch mutual funds under the E.F. Hutton brand with plans to take over as CEO of Paine Webber, Kidder Peabody, Dean Witter and Mitchell Hutchins.
 
4. Some of the merger possibilities that are thought to be in the works include:

• 1492 and 1838 combine to form 3330
• ALPs, Alpine, Everest, Matterhorn Growth Fund and the offerings from McKinley and Adirondack combining under the "Von Trapp" brand (you know...the song..."Climb Every Mountain")
• Janus Enterprise brings on Vulcan (Investment Partners) to round out leadership team
• Two Oaks and Longleaf and Sequoia and Oak Associates are in talks...team from Forester has been cut loose
• Pioneer and Scout in a battle over New Frontiers
• NY Yankees tried to buy the Pennant Funds, as they do every year since 2009 (won WS in 2008), but with nothing to show for it. The team was hoping to use insurance money from Alex Rodriguez contract to fund the purchase. On a positive note, at least the team has reached the midpoint of the Alex Rodriguez contract and only owes him $135 million more over the next five year.

5. After completing an acquisition of an investment management company (FBR) that was 3 times the size of his mutual fund firm, Neil Hennessey is now looking for firms that are 20 times larger which would include the retail investment arms of firms like Goldman Sachs and GMO.
 
6. Durable portfolio construction has been front tested by United Laboratories and was found to dramatically reduce the impact of a crash.
 
7. After an exhaustive three month project in which they thoroughly evaluated each of the 15 most successful fund groups of 2012, consultants at McKinsey are reported to have concluded that all of their clients should change their structure to that of a not-for-profit...or bring out well known and low cost ETFs or have a reputation for consistently delivering above average performance or to combine a +30 year presence in the intermediary space covered by at least 50 wholesalers with a broad and high quality product line.
 
8. A consortium of academics from Sloan, Harvard and Wharton have produced the definitive research piece on investment performance in which they concluded that investors whose investment portfolios consistently produce higher than average returns tend to have more money, on average, for retirement.
 
9. Two New York area research firms conclude that the proliferation of professional buyers and the use of pre-packaged asset allocation models and widespread access to detailed product/performance data will have no impact on their recommendations that more wholesalers and better websites are the key to successful asset gathering.
 
10. Nominees for the 2013 "All Religious" team were recently announced with the winner to be selected by secret ballot on June 25th - they include Praxis, Ava Maria, Guidestone, Thrivent, New Covenant and Matthew 25.
 
HAPPY APRIL FOOL'S DAY!
FUSE Research



Don't Miss This (3/26/13)
1) SEC Approves Payments on Nasdaq for Making Markets in Some ETFs
    Bloomberg  |  3/22/2013

Because… While the incentive program intends to keep ETF trading spreads narrow and enhance liquidity of thinly-traded funds, some in the industry fear that relying on market makers to build volume and stimulate liquidity is not conducive to promoting a fair, orderly, efficient market. Allowing fund sponsors to compensate market makers would create a pay-to-play environment, and liquidity rebates would also pose a conflict of interest between market markers and ETF providers.

2) Majority of Active Managers Underperform Indices
    Financial Planning  |  3/26/2013

Because… Another year passed with passively managed funds winning the performance derby. While this result does not surprise asset managers any more, it serves as a reminder that they must find solutions to meet the challenge of passive management. Some firms have restructured investment divisions, improved the quality of the talent pool via team lift-outs, launched new products to get ahead of the curve, or even have chosen to join the ETF fray. In the end, asset managers need to focus more on helping the public enhance their investing experience.

3) Legg Mason Survey Finds Investor Expectations for Income Disconnected from Market Realities, Creating Income Gap
    Legg Mason  |  3/26/2013

Because… The survey found that almost three-quarters (74%) believed "now is a good time to be invested in equities," but 52% added that they are more inclined to use equities to generate income. These survey respondents neglected one of the main objectives of equity investing – capital appreciation. Recent data from Spectrum Group show that the number of U.S. households with a net worth of $1 million or more rose to 8.99 million from 8.6 million in 2011, and a key factor for the increase is millionaire households stayed in the stock market.


Weekly Net Flows Report, 3/13 Data (3/22/13)
Total estimated inflows into long-term mutual funds were $7.57 billion for the week ended Wednesday, March 13, according to the Investment Company Institute (ICI). This total intake represents a 36% decrease from sales accumulated during the prior week. In quite the reversal, Equity funds led sales with nearly $3.9 billion in net inflows, with World Equity responsible for the lion's share with $3.0 billion in sales. Hybrid funds gathered approximately $2.1 billion—on par with its weekly sales intake since the beginning of the year. On the other hand, Bond funds only garnered $1.6 billion, a dramatic decrease from the $6.4 billion in net inflows during the prior week. For the first time this year, Municipal Bond fell into the red with $335 million in net outflows, while Taxable Bond only gather $1.9 billion in net inflows.


Source: Investment Company Institute


Don't Miss This (3/19/13)
1) Fidelity and BlackRock Announce Groundbreaking ETF Strategic Alliance
    Fidelity  |  3/13/2013

Because… The alliance between the industry’s two giants will benefit both firms. iShares, already a top ETF sponsor with nearly 40% of market share, will be able to leverage Fidelity’s distribution prowess. Fidelity, a latecomer to the ETF game, will expand its presence with iShares’ assistance in product development. However, how iShares can help Fidelity grow the sector ETF business and whether investors would prefer an open architecture with various ETF providers remain to be seen.

2) SEC Issues Guidance Update on Social Media Filings by Investment Companies
    SEC  |  3/15/2013

Because… The SEC gave specific examples of what types of communications that generally need and need not to be filed. Financial service firms have been taking a conservative approach and proceeding very carefully with regard to the use of social media in order to avoid regulatory violations. The SEC’s clarification provides firms with a better sense of filing rules and allows them to use discretion in the disclosure of more general statements.

3) Younger Generations Struggle to Accumulate Wealth
    Plansponsor  |  3/15/2013

Because… Financial firms need to focus on helping younger generations with asset-building. Today’s younger generations have gone through a series of financial debacles and may have lost confidence in the financial system even before they start wealth accumulation. Unlike older generations, the lack of trust and commitment is pervasive among these investors. They tend to have more faith in themselves than outside sources of assistance, which could be a challenge for both advisors and asset managers.


Weekly Net Flows Report, 3/6 Data (3/15/13)
Total estimated inflows into long-term mutual funds were $11.85 billion for the week ended Wednesday, March 6, according to the Investment Company Institute (ICI). This total intake represents a 41% increase from sales accumulated during the prior week. Taxable Bond led sales with nearly $6.1 billion, its highest intake since the week ended January 23. Meanwhile, Municipal Bond continued on a downward trajectory with only $361 million in net inflows. Investors pulled $578 million from Domestic Equity—its second consecutive week in the red. However, Word Equity garnered $3.5 billion in net inflows, representing a 61% increase from the prior week. With nearly $2.5 billion in net inflows, Hybrid funds continued its increasingly positive course.


Source: Investment Company Institute


Attracting and Retaining Human Capital: Are You Ready to Compete? (3/14/13)
According to Kathy Freeman Company's Fourth Annual Executive Survey "Attracting and Retaining Human Capital: Are You Ready to Compete," top executives in investment management and wealth management are more satisfied than they have been since the beginning of the financial crisis. In just four years, senior sales and marketing executives have gone from being mostly dissatisfied to being mostly satisfied with their current position. To attract talent, firms will need to offer equity more frequently and act more decisively than they have in the recent past when a compelling candidate has been identified. To retain talent, firms will need to link compensation more closely to performance and create opportunities for executives to develop new ideas, products and solutions. Contrary to what some believe, it is not a buyer’s market for talent. Executives will only move if they perceive the firm as a partner in their long-term future. For more information, please click on the link the full report.


Don't Miss This (3/12/13)
1) Fidelity Reports 34 Percent Increase in Small to Mid-Market Defined Contribution Sales in 2012 Totaling $8.4b in Assets
    Fidelity  |  3/5/2013

Because…Targeting smaller retirement plans is not only helping people who work for smaller businesses save for retirement but also benefiting retirement plan providers. Since DC assets are highly concentrated in larger retirement plans, financial firms tend to dedicate more resources to large plans. However, large plans typically exert their bargaining power over costs and require custom services and product solutions. For the smaller plan segment, services can be more standardized, smaller businesses have greater growth potential, and the participation rate is low, which all present opportunities for service providers.

2) Global ETFs, ETPs Rake in $11 Billion
    Financial Planning  |  3/7/2013

Because…Three facts for February global ETP flows are noteworthy. First, equity ETP flows in the first two months of 2013 were the strongest January-February total on record, according to BlackRock. Second, U.S.-listed ETPs dominated both February and YTD flows, with Europe ranking as a distant second. The disparity will continue and drive ETF sponsors to exploit overseas markets. Third, Vanguard, a low-cost provider, accounted for half of February flows.

3) Social Security Misconceptions Threaten Middle-Income Americans' Financial Security, New Study Says
    PR Newswire  |  3/12/2013

Because… Financial firms need to focus more on middle-income Americans. In addition to their dependence on Social Security, these people are less likely to save for retirement because of other financial obligations. The fear of market uncertainties and the distrust of financial intermediaries are also factors in their decision to postpone retirement saving. Therefore, financial firms should change this cohort's mindset from relying on Social Security or employers to taking personal responsibility, help them determine their retirement needs, and equip them with knowledge and guidance that fit their needs.


Weekly Net Flows Report, 2/27 Data (3/8/13)
Total estimated inflows into long-term mutual funds were $8.43 billion for the week ended Wednesday, February 27, according to the Investment Company Institute (ICI). After seven consecutive weeks of positive sales, Domestic Equity fell into the red with $1.1 billion in net outflows. World Equity gathered nearly $2.2 billion, but this total represents its lowest intake since suffering outflows during the first week of the year. Taxable Bond continued to lead sales with $4.4 billion in net inflows, while its Municipal counterpart only managed to garner $579 million. With nearly $2.4 billion in net inflows, sales into Hybrid funds increased 18% from the prior week. 


Source: Investment Company Institute



Don't Miss This (3/5/13)
1) ProShares Launches Listed Private Equity ETF
    ProShares  |  2/28/2013

Because… ETF sponsors are increasingly turning their attention to alternative strategies or asset classes. In addition to ProShares' launch, First Trust introduced a high yield long/short ETF on the last day of February. Van Eck also filed for long/short ETFs last week. Alternative ETFs have not generated strong asset flows because most investors lack the sophistication to gain a deep understanding of these funds. So for ETF managers, developing innovative products is not enough. Education on risk/return characteristics of different alternative ETFs and their use in portfolio construction will determine investors’ adoption of such funds.

2) FPA Announces Conversion to No-Load Fund Family
    FPA  |  3/1/2013

Because… It is unusual for a fund company to convert from load to no load. FPA offers six funds, some of which have very attractive long-term performance. By eliminating front-end loads for all four funds (the other two, including the well-known FPA Crescent, are already no-load), FPA will benefit investors who have no interest in load funds. However, broadening the fund distribution in the direct channel could be challenging for a firm that has neither invested in marketing nor paid retail brokerages for shelf space. We wish FPA best of luck!

3) EBSA Offers Tips for Selecting TDFs
    Planadviser  |  3/4/2013

Because…The DOL guidance urges plan fiduciaries to inquire about whether a custom or non-proprietary target-date fund would be a better fit for the plan. This could provide opportunities for providers of custom target-date funds. Advantages of custom target-date funds include improved diversification for participants, modified glidepaths to accommodate specific participant needs, and the potential of lowering plan costs by negotiating fees with separate investment solution providers.


Weekly Net Flows Report, 2/20 Data (3/1/13)
Total estimated inflows into long-term mutual funds were $11.29 billion for the week ended Wednesday, February 20, according to the Investment Company Institute (ICI). This marks the seventh consecutive week of inflows; however, sales continue on a downward trajectory from the high of $26.56 billion accumulated during the week of January 9. Taxable Bond led sales with $4.1 billion in net inflows, on par with its intake during the prior week. On the other hand, the $590 million in sales into Municipal Bond funds represented a 30% decline from the prior week. Investors poured approximately $3.5 billion into World Equity and $1.1 billion in Domestic Equity, nearly doubling domestic stock’s intake during the prior week. Once again, Hybrid funds continue on a steady roll with $2.0 billion in net inflows.


Source: Investment Company Institute




Don't Miss This (2/26/13)
1) Schwab ETFs Achieve New Milestone: $10 Billion in Assets Under Management
    Schwab  |  2/21/2013

Because… Hitting the $10 billion mark in three years is a remarkable achievement. Schwab’s product line of broad market-based ETFs, market positioning as a low-cost ETF provider, its network of about 7,000 RIAs, and educational efforts to enhance investors’ understanding of ETFs have all contributed to the success. Schwab ranked #11 based on ETF assets as of 12/31/12. While the firm will not pose a threat to the top players any time soon, it has become a serious competitor in the ETF arena.

2) State Street Unveils Low Volatility SPDR Exchange Traded Funds Offering Targeted Exposure to Small and Large Cap Equities
    SSgA  |  2/21/2013

Because… Besides SSgA, Invesco PowerShares launched two low-volatility ETFs a week ago. The introduction of new funds and the popularity of existing low volatility funds from PowerShares and iShares indicate that low-volatility strategies are still in demand even though market volatility has recently been at a low level. Low volatility funds tend to outperform in bear markets and underperform in bull markets. Fund managers need to provide guidance on whether the fund is suited for a long-term, core holding or a short-term, opportunistic tactic.

3) Artisan Partners Announces New IPO Plans
    Pensions & Investments  |  2/26/2013

Because… Artisan has maintained an investment-centric culture since its founding in 1994. While its commitment to producing attractive returns will not be changed after becoming a public company, we expect to see heightened analyst and investor scrutiny to reduce its fees. If fund expense ratios are trimmed, the firm will have to expand investment capabilities to diversify the source of revenue generation and maintain business growth and profitability.


Weekly Net Flows Report, 2/13 Data (2/22/13)
Total estimated inflows into long-term mutual funds were $12.69 billion for the week ended Wednesday, February 13, according to the Investment Company Institute (ICI). This total intake represents a 10% decrease from sales accumulated during the prior week. World Equity led sales with $5.2 billion in net inflows followed by Taxable Bond with $4.1 billion. Their Domestic and Municipal counterparts lagged dramatically with only $509 million and $840 million in net flows, respectively. Meanwhile, Hybrid funds continue on a steady roll with $2.0 billion in net inflows.


Source: Investment Company Institute


Don't Miss This (2/19/13)
1) PIMCO to Launch Foreign Currency Strategy Exchange Traded Fund
    PIMCO  |  2/8/2013

Because… This actively managed fund may dominate the currency ETF market. PIMCO’s brand will help the fund raise assets, and the multi-currency ETF space is wide open with little competition. However, currency ETFs are not expected to benefit long-term investors because currencies do not generally follow an upward trend over a long period of time. This, combined with currency ETFs’ fairly high expense ratios due to high turnover, suggests the new fund may not achieve the same level of success as PIMCO Total Return ETF, which was launched last February.

2) BlackRock Says Reviewing ETF Index Contracts, Nothing 'Imminent'
    Reuters  |  2/11/2013

Because… If BlackRock eventually switches to low-cost index providers, it will be a huge blow for MSCI, as BlackRock accounted for 8% of its revenue in 2011. Vanguard already bid adieu to MSCI and adopted lesser-known FTSE and CRSP indexes. The change has not prevented the firm from bringing in new assets. Its ETFs collected $10 billion in January. The move by industry leaders will prompt other ETF providers to follow suit, which will put increasing pressure on major index providers, such as S&P, Dow Jones, and MSCI.

3) American Funds Back in the Black, Boosted by Shift to Equities
    Investment News  |  2/12/2013

Because…American Funds remained the second largest fund firm, although it had experienced massive redemptions in the past four years. January’s net inflows are a positive sign after investors yanked $61.6 billion in 2012 and $81.5 billion in 2011, but it is too early to pat the firm on the back for the improved sales. American Funds is still facing tremendous challenges before it will regain its lost glory, which include the shift to passively-managed ETFs, the rise of alternative investments, and the delivery of a differentiated value proposition that meets evolving investor demands.


Weekly Net Flows Report, 2/6 Data (2/15/13)
Total estimated inflows into long-term mutual funds were $13.79 billion for the week ended Wednesday, February 6, according to the Investment Company Institute (ICI). Bond funds led sales with $6.0 billion in net inflows, with Taxable Bond’s $5.4 billion intake responsible for the lion’s share. World Equity carried the weight for stock funds this week by garnering nearly $5.1 billion in net inflows, while Domestic Equity only managed to collect $683 million—a dramatic decrease from the $3.5 billion in sales during the prior week. Investors poured $2.0 billion in Hybrid funds, which is on par with its weekly sales since the week ended January 9.


Source: Investment Company Institute


Don't Miss This (2/12/13)
1) Alternative Investments Pose Challenges to Advisors
    Financial Advisor  |  2/4/2013

Because… With the complexity of alternative investments and lack of sufficient knowledge, performing due diligence on non-traditional strategies and asset classes has become a tough task for advisors and average investors. Several firms have embarked on road shows to introduce alternative funds, but more alternative fund providers need to take an active role in advisor and investor education. They should dissect investment approaches, expose potential risks, and discuss implications of specific exposure to provide a better sense of whether they should invest in alternatives and how to allocate assets to alternatives.

2) Fidelity and Extend Health Partner to Help Retiring Employees Transition to Private Health Coverage
    Fidelity  |  2/5/2013

Because… The rising health care cost has become the top retirement concern among investors. To help people save for the future health care, financial firms need to make them aware of the importance of health care planning as Medicare only covers about 48% of health care costs on average for enrollees. Firms should also encourage advisors to initiate conversations with their clients on health care-related issues, such as the role of Medicare and estimated medical expenses in retirement.

3) Vanguard to Introduce Low-Cost International Bond Index Fund and ETF
    Vanguard  |  2/6/2013

Because… After filing for the International Bond Index Fund in October 2011, Vanguard postponed the fund launch twice in 2012. The delay has driven some investors to other providers of foreign bond funds. Now that the new fund will be brought to the market with very low expense ratios and hedging strategies to reduce the impact of currency fluctuations, we expect the fund to reignite investor interest.


Weekly Net Flows Report, 1/30 Data (2/8/13)
Total estimated inflows into long-term mutual funds were $14.33 billion for the week ended Wednesday, January 30, according to the Investment Company Institute (ICI). This represents the fourth consecutive week of net inflows; however, inflows have been on a downward trajectory from its high of $26.56 billion for the week ended January 9. With nearly $4.7 billion in net inflows, World Equity drove sales followed by Domestic Equity’s intake of $3.5 billion. Meanwhile, investors put slightly more money into Hybrid funds ($2.65 billion) versus Taxable Bond ($2.63 billion). Municipal Bond garnered $874 million in net inflows, representing a 38% decrease from its intake during the prior week.


Source: Investment Company Institute


Weekly Net Flows Report, 1/23 Data (2/1/13)
Total estimated inflows into long-term mutual funds were $16.32 billion for the week ended Wednesday, January 23, according to the Investment Company Institute (ICI). This total intake represents a 26% decrease from cumulative sales during the prior week. All broad asset classes gathered inflows for the third consecutive week with Taxable Bond driving sales of $6.6 billion in net inflows. This was followed by nearly $3.5 billion and $2.9 billion gathered by Domestic Equity and World Equity, respectively. Investors put $1.9 billion into Hybrid funds, slightly surpassing the $1.4 billion garnered by Municipal Bond funds.


Source: Investment Company Institute


Weekly Net Flows Report, 1/16 Data (1/25/13)
Total estimated inflows into long-term mutual funds were $22.04 billion for the week ended Wednesday, January 16, according to the Investment Company Institute (ICI). Stocks gathered inflows for the second consecutive week, with Domestic Equity gathering $5.0 billion and World Equity nearly $4.3 billion. However, bonds led sales by a small margin, collecting nearly $10.6 billion. With $8.4 billion in net inflows, Taxable Bond led all broad asset classes while Municipal Bond collected $2.2 billion. Hybrid funds, which garnered $2.1 billion in net inflows, experienced a 24% decrease from its $2.8 billion intake during the prior week.


Source: Investment Company Institute 


Don't Miss This (1/22/13)
1) Aon Hewitt Survey Reveals Employers Making Retirement Readiness a Top Priority
    Aon Hewitt  |  1/16/2013

Because…A Deloitte report published in December 2011 found that only 20% of employers felt very responsible for preparing employees for retirement, whereas the most recent Aon Hewitt study revealed that 80% of employers are making financial wellness a top priority in 2013. This positive change indicates employers are no longer content with just offering a sound retirement plan. They are taking a more involved approach to help plan participants get ready for retirement.

2) SPY@20: First U.S. ETF Changed Investing
    IndexUniverse.com  |  1/18/2013

Because… Today is SPDR S&P 500 ETF’s 20th birthday. While we sing Happy Birthday, we can’t help taking a look at what the lone ETF two decades ago has become. SPY, boasting assets of $124 billion, is the largest fund in the ETF industry. It garnered $20 billion in 2012, nearly double the flows into the next best-selling ETF. With its low expense ratio, high trading volume, tight bid/ask spread, and minimal tracking error, the fund will continue to thrive and lead the $1.4 trillion industry to new heights.

3) Investors Are Most Optimistic on Stocks in 3 1/2 Years
    Bloomberg  |  1/22/2013

Because… Though the Bloomberg survey showed the stock market optimism among international investors, we have reason to assume U.S. investors are sharing the same sentiment. According to ICI, Domestic Equity mutual funds absorbed $8 billion in the week ended 1/9/13, compared to estimated outflows of $10 billion in the previous week. The shift to equities, if sustained, is significant because the asset class had experienced substantial redemptions for consecutive years. Asset management firms need to steer investors to equities, and meanwhile, caution against performance-chasing.




Weekly Net Flows Report, 1/9 Data (1/18/13)
Total estimated inflows into long-term mutual funds were $27.5 billion for the week ended Wednesday, January 9, according to the Investment Company Institute (ICI). The first full week of trading week in 2013 resulted in the highest closes for approximately four years, largely as a result of positive sentiment due to Congress’s budget deal to avert the fiscal cliff in addition to improved employment numbers. Investors poured nearly $8.0 billion in Domestic Equity and $6.8 billion in World Equity, surpassing the $9.8 billion garnered by fixed income. Taxable Bond gathered $7.3 billion while Municipal Bond collected nearly $2.5 billion. Hybrid funds experienced positive momentum with nearly $2.9 billion in net inflows. Whether or not the tides will turn from a bear market remains to be seen.


Source: Investment Company Institute


Don't Miss This (1/15/13)
1) BlackRock to buy Credit Suisse's European ETFs
    Reuters  |  1/9/2013

Because… The acquisition of Credit Suisse’s ETF business will increase iShares’ market share in Europe from 38% to 43%. If combined with Credit Suisse’s $18 billion, iShares’ assets would more than triple the assets of Europe’s second largest provider, db x-trackers. Since Credit Suisse was the second largest physical ETF provider in the region, the deal will give iShares control of 75% of the European physical ETF market, according to ETFGI. iShares’ dominance means reduced competition and limited investor choice of providers.

2) J.P. Morgan Asset Management to Increase Disclosure of Market-Based Net Asset Values (NAVs) for Three U.S. Money Market Funds
    PR Newswire  |  1/9/2013

Because… Seven large firms will disclose market-based NAVs for their money market funds, including Fidelity, Federated, BlackRock, Schwab, BNY Mellon, and Goldman Sachs. The more frequent disclosure shows fund firms are making an effort to enhance transparency and investor understanding of the asset class. But most investors do not pay attention to minuscule fluctuations of daily share values. Whether this initiative can fend off the call for tougher regulations remains to be seen.

3) FINRA Annual Regulatory and Examination Priorities Letter
    FINRA  |  1/11/2013

Because… ETFs, close-end funds, variable annuities, and structured products are among FINRA’s 2013 focus areas. With the guidance on what FINRA will be scrutinizing this year, asset management firms need to work with their distribution partners to identify potential problem areas and provide comprehensive education on complex products. Interests of distributors and product providers are intertwined. If a broker/dealer is targeted by FINRA, it will have a negative impact on product sales. So asset managers should assume the responsibility of helping their broker/dealers stay compliant.


Weekly Net Flows Report, 1/2 Data (1/11/13)
Total estimated outflows from long-term mutual funds were $6.4 billion for the week ended Wednesday, January 2, according to the Investment Company Institute (ICI). Fixed Income was the only broad asset class to garner sales. Taxable Bond gathered $2.9 billion while Municipal Bond managed to collect $291 million. On the other hand, investors pulled $8.3 billion from Domestic Equity, representing the largest redemption since the week ended October 3 with $10.6 billion in net outflows. World Stock shed $1.2 billion, and Hybrid funds suffered $152 million in net outflows. Outflows were experienced during the first week of 2012 ($5.4 billion) followed by 19 weeks of cumulative positive sales. Whether flows will follow the same trajectory this year remains to be seen.


Source: Investment Company Institute


Don't Miss This (1/8/13)
1) Freeman & Co. Reports that Slow Growth and Regulatory Environment Result in Mixed Year for Financial Services M&A Activity
    Freeman & Co.  | 1/2/2013

Because… The Freeman report points out that asset management was one of the most active sub-sector in terms of deal activity, and it anticipates that diversification of larger alternative firms through M&A will continue in 2013. From Virtus’ acquisition of Rampart Investment Management to OppenheimerFunds’ purchase of SteelPath, long-only asset managers are expanding their platform to capture new revenue opportunities. Acquiring alternative managers with attractive track records and reputation rather than building the capability internally has become a primary route for traditional asset managers.

2) Finra Fines LPL, Four Other Firms for Mutual Fund Lapses
    Investment News  |  1/2/2013

Because… Fund distributors are trying hard to improve the quality of their services, but occasionally they overlook some basic client needs. Fund prospectuses contain key information, such as a fund’s investment strategies and risks, so the requirement of timely delivery of prospectuses is in fact a means of providing investor protection. Firms should have adequate procedures in place to ensure prompt delivery and satisfy regulatory compliance when a potential delay is alerted by a third-party service provider.

3) "Fiscal Cliff" Tax Compromise Will Allow 401k Intra-Plan Roth Conversions
    401khelpcenter.com  | 1/72013

Because… The fiscal cliff deal includes a provision that allows Americans to convert their traditional 401(k) accounts into Roth accounts, but it is questionable whether the provision can raise $12 billion in 10 years as expected. First, people who expect their tax rates to be higher in the future will not be interested in the Roth conversion. Second, those who lack the money to pay the tax on the conversion cannot take advantage of the opportunity. Third, many employers have yet to provide a Roth plan option.




Weekly Net Flows Report, 12/26 Data (1/3/13)
Total estimated outflows from long-term mutual funds were $61 million for the week ended Wednesday, December 26, according to the Investment Company Institute (ICI). Cumulative outflows remained in the red throughout the month of December but tapered from approximately $4.6 billion and $6.6 billion in net outflows during the prior two weeks. Domestic Equity and Municipal Bond were the only broad objectives to experience redemptions with $3.6 billion and $685 million in net outflows, respectively. Taxable Bond led sales with $3.1 billion in net inflows, on par with the nearly $3.7 billion accumulated during the prior week. Representing a 26% increase from the prior week, World Equity gathered $363 million in net inflows. Finally, investors added $757 million into Hybrid funds after pulling $20 million during the prior week.


Source: Investment Company Institute


Weekly Net Flows Report, 12/12 Data (12/21/12)
Total estimated outflows from long-term mutual funds were $6.57 billion for the week ended Wednesday, December 12, according to the Investment Company Institute (ICI). Despite driving sales, Bond funds only gathered $1.8 billion during the week—its lowest intake since the week of July 3 when sales only reached approximately $1.4 billion. Meanwhile, Domestic Equity suffered $7.2 billion in net outflows while investors pulled $1.2 billion from World Equity funds. Hybrid funds managed to reverse its outflows from the prior week by collected $119 million in net inflows.


Source: Investment Company Institute


Don't Miss This (12/18/12)
1) RIAs and Fee-Based Advisors Say Tax-Deferred Investing Essential to Navigating Fiscal Cliff
    PR Newswire  |  12/13/2012

Because… As the year-end is quickly approaching, asset managers are busy addressing the fiscal cliff and its impact via economist commentary, blogs, white papers, webinars, and video clips. Vanguard, for example, has compiled all relevant content, including political perspectives and tax outlook, with a link prominently shown on its home page so that investors can easily gather insights from the firm. The efforts of educating investors on the subject and providing portfolio guidance need to be continued regardless of the outcome of the negotiation.

2) JPMorgan Wins Approval for First U.S. Physical Copper ETF
    Bloomberg  |  12/17/2012

Because… After waiting more than two years, JP Morgan finally got the support from the SEC to launch a physically-backed ETF. Copper manufacturers and merchants--worried about the manipulation of the copper market, imbalance between supply and demand, and inflated copper price--had opposed vehemently to JP Morgan’s plan. Now that the hurdle has been cleared, more ETF managers may follow suit to provide retail investors with direct access to copper in physical form, not in futures contracts.

3) SEI Unveils Resolutions For A Successful Advisor New Year
    SEI  |  12/17/2012

Because…. It’s that time of the year when investment firms offer their clients market outlooks and practice management advice for the next year. SEI’s resolutions, based on a recent survey of 275 financial advisors, are specific and actionable, setting a prime example for other firms. Besides the guideline, firms should also provide tools to motivate advisors and help them track their progress. Even with well-defined goals, resolutions can fail if they are not measurable.


Don't Miss This (12/11/12)
1) ICI Analysis of U.S. Retirement System: It Is Working and Serving Each Generation Better Than Previous
    ICI  |  12/5/2012

Because…The low level of retirement readiness among American individuals has prompted some people to question the validity of the entire system. Critics like Teresa Ghilarducci from the New School for Social Research even believe the government must step in and reform DC plans. The ICI analysis considered retirement resources as a pyramid with five components, as opposed to the traditional three-legged stool analogy, and concluded that the retirement system “has successfully provided adequate retirement resources to Americans, and successive generations of retirees have been better off than previous generations.”

2) Schwab Eyes Commission-Free ETF Supermarket
    Reuters  |  12/6/2012

Because… The decline of trading volumes, the hope for steady revenue, and the success of the OneSource platform for mutual funds have led Schwab to the pursuit of an ETF supermarket. But from ETF providers’ standpoint, the distribution and marketing fees of 5 to 10 basis points would cut into already razor-thin profit margins. ETF sponsors who may be interested in joining the network could be smaller firms that have the wherewithal to absorb additional costs, crave greater visibility, and do not offer products that compete directly with Schwab’s low-cost, proprietary ETFs.

3) SEC To Allow Derivatives In Active ETFs
    IndexUniverse.com  |  12/6/2012

Because… The SEC’s permission to use derivatives in actively managed ETFs is getting some ETF managers into the holiday spirit. While lifting the ban is not expected to quicken the pace of new fund launches, it does give portfolio managers more flexibility in investment strategy formulation and implementation. Investors will embrace funds that effectively use derivatives to provide downside protection and upside potential, but the complexity of derivatives suggests that adequate disclosure and enhanced education are indispensable.


Weekly Net Flows Report, 11/28 Data (12/7/12)
Total estimated inflows to long-term mutual funds were $4.09 billion for the week ended Wednesday, November 28, according to the Investment Company Institute (ICI). The last week of November ended on an upbeat note after suffering redemptions of $5.6 billion during the prior week. Investors pulled $496 million from Equity funds during the week, a dramatic improvement from $8.8 billion during the week of November 20th and $8.4 billion during the week of November 14th. Taxable Bond drove sales with $3.1 billion, while Municipal Bond gathered $1.3 billion. After experiencing two weeks of new outflows, Hybrid funds managed to gather $143 million in net inflows.


Source: Investment Company Institute


Don't Miss This (12/4/12)
1) Invesco PowerShares Lowers Fees on Six ETF Portfolios
    Marketwire  |  11/28/2012

Because… On the surface, PowerShares is joining other ETF providers in a price war, but unlike its competitors who focused the fee cuts on beta products, PowerShares slashed fees for fundamentally-weighted and factor-driven ETFs. These enhanced index ETFs do not have much head-to-head competition in the space. By reducing their fees to a level below 50 basis points, the firm is broadening their appeal to institutional investors, who are increasingly utilizing managed ETF portfolios.

2) Retiring Lawmaker Barney Frank Seeks SEC-CFTC Merger
    Reuters | 11/29/2012

Because… Some people believe combining the SEC and the CFTC would streamline operations, avoid regulatory overlaps, bridge communication gaps, and provide better investor protection, while others hold the view that the merger of two long-standing agencies would not make any difference in preventing a failure similar to the collapse of MF Global from happening again. With more pressing issues on the table (such as the fiscal cliff) and an unwillingness to give up jurisdiction, the odds of consolidating two entities in the near future may be low.

3) EEM Leads Nov. ETF Flows, As VWO Lags
    IndexUniverse.com  |  12/3/2012

Because…Ever since Vanguard announced the index switch, its MSCI Emerging Markets ETF (VWO) has lost its popularity. VWO brought in only $1 million in October and experienced outflows of $887 million in November, compared with an average intake of more than $1.2 billion this year through September. By contrast, iShares Emerging Markets Index Fund, with an expense ratio of 0.67%, garnered $1.3 billion in October and $2.3 billion in November. The flow pattern of these two ETFs indicates the underlying index does play an important role in investors’ investment decisions.


FUSE Survey - US Equity Flows (12/1/12)
Despite a strong start to the year, Domestic Equity funds will once again sustain net outflows in 2012. We have been conducting a survey during the year, assessing client sentiment and your outlook coincides with actual net flows trends. More than half of the respondents indicated significant net outflows, while only four percent felt net sales would exceed $20 billion.




5 Steps through the Complex "Minefields" of Asset Management Industry Data (11/28/12)
By Gary Maradik, Managing Partner, Celera Systems LLC

1)      Understand the landscape of asset management distribution

Making headway through the complex minefields of asset management industry data has to start with gaining a perspective on the landscape of asset management distribution.

2)     Learn how the structural framework of clearing operates

Probably no industry structural framework confounds small and medium size asset managers more than the proliferation of clearing platforms and custodians through whom advisors and their dealers clear their transactions.

3)      Aggregate transaction & clearing data

Getting a handle on how and through which clearing platforms an asset manager’s shares are being purchased and redeemed, and through which intermediaries, is not a task for the faint of heart. Systems infrastructure, both hardware and software is expensive, and sorting through the IT options and alternatives suitable for complex and time-sensitive data downloads is just the tip of the iceberg in terms of understanding where an asset manager’s business is coming from.

4)      Crack the omnibus account “nightmare”

Omnibus sub accounting makes the puzzle of who’s recommending and redeeming a company’s  fund shares or separate accounts, even more confounding.

For large asset managers, it’s not uncommon to have teams of operations, IT and back office personnel dedicated exclusively to sleuthing through mountains of data. For small and mid size asset managers, the ability to staff up with experienced operations and IT personnel is generally not an option; financially or otherwise.

5)      Make sense of mountains of data

Information is power. Transforming data into databases and data-informed reporting and business iintelligence is the underpinning of crafting informed business strategy.


Don't Miss This (11/27/12)
1) SEC Chairman Mary Schapiro to Step Down Next Month
    SEC  |  11/26/2012

Because…With Ms. Schapiro’s departure, SEC commissioner Elisse Walter has been appointed as chairman of the agency. The SEC has faced intense criticism on some controversial issues, such as money market fund reform and rules to lift advertising restrictions for hedge funds. While we do not expect major changes in terms of the SEC’s agenda, restoring the public confidence needs to be one of the regulator’s top priorities.

2) Guardian Retirement Solutions New ‘Retirement Style Matters’ Website Gets Personal with Future Retirees
    Guardian Life |  11/26/2012

Because… The four investor types Guardian has identified – the Connector, the Analyst, the Seeker, and the Adventurer – link the personality with financial behaviors, giving financial advisors and their clients a better idea of how to set financial goals and achieve these goals with appropriate planning. However, personality assessment can trigger people’s interest. Getting them to take immediate actions is more important in the retirement planning process.

3) F-Squared Investments Exceeds $300 Million in Liquid Alternative Strategies
    PR Newswire  |  11/27/2012

Because… F-Squared’s accomplishment of garnering more than $300 million in client assets in just over six months indicates investors who are seeking alternative strategies are placing increased emphasis on liquidity. While some insist illiquid investments can produce alpha in the long run, more investors seem to favor registered, liquid, transparent alternatives. To satisfy investor demand, a growing number of asset managers are using liquid instruments to replicate risk and return profiles of hedge strategies.


Don't Miss This (11/20/12)
1) Many Investors Expect Social Security to Be a Major Source of Retirement Income
    Business Wire  |  11/12/2012

Because… The Social Security Administration disclosed earlier this year that the average 2012 monthly Social Security benefits for a retired worker is just $1,229. According to the long-term projections by the Congressional Budget Office released last month, the Social Security trust funds would likely be exhausted in 2034. Both pieces of information point to the fact that individuals should not depend on Social Security income to cover their living expenses in retirement.

2) Eaton Vance to Launch the Bond Fund
    SEC Filings  |  11/13/2012

Because… The new Eaton Vance fund will be run by a team of portfolio managers led by Kathleen Gaffney, a highly regarded fixed-income manager from Loomis Sayles. The fund will have the flexibility to invest in multiple sectors across the fixed-income spectrum. We expect many advisors, investment consultants, and institutional investors to monitor the fund and follow Ms. Gaffney to Eaton Vance if the fund can build a solid three-year track record.

3) Target-Date Funds Are Growing in Popularity, Yet Few Consumers Understand Them
    LIMRA  |  11/14/2012

Because… The LIMRA study that found only 16% of investors were familiar with target-date funds (TDFs) reminds fund providers that TDF education still has a long way to go. The lack of the time, the knowledge, and the desire to make their own investment decisions gives plan participants excuses to put off learning about TDFs. Fund firms need to be more committed to engaging and educating plan participants so that they can have a better grasp of TDF features, benefits, and limitations.


Weekly Net Flows Report, 11/7 Data (11/16/12)
Total estimated inflows to long-term mutual funds were $6.24 billion for the week ended Wednesday, November 7, according to the Investment Company Institute (ICI). The first week of November proved to be quite the reversal from the last week of October when outflows totaled $571 million. Domestic Equity was the only broad asset class to experience redemptions with $2.1 billion in net outflows. As expected, Taxable Bond led sales with $6.4 billion, while Municipal Bond collected $1.1 billion. Investors put $553 million and $300 million into Hybrid and World Equity funds, respectively.


Source: Investment Company Institute


Don't Miss This (11/13/12)
1) PSCA Study Shows that Fee Disclosure Has Not Significantly Influenced Participant Behavior
    PSCA  |  11/8/2012

Because… The survey result that shows only 1.4% of plan participants asked about fees may surprise many in the industry who had expected a flood of questions from participants. For retirement plan service providers, participants’ inaction should not be construed as a positive feedback. Participants may not bother to read the disclosures. They may lack the knowledge to understand the fee impact on their investment. Or they may feel resigned to fees imposed on them.

2) Research Affiliates Withdraws Patent Infringement Lawsuit against WisdomTree
    WisdomTree  |  11/8/2012

Because… The news that Research Affiliates has dropped the lawsuit can finally give WisdomTree some peace of mind. WisdomTree, a publicly-traded ETF provider with the renowned professor Jeremy Siegel as its Senior Investment Strategy Advisor, is known for offering funds that track proprietary fundamentally-weighted indices. Now that the dispute has been resolved, the firm can allocate more financial and legal resources to the cause of boosting shareholder returns.

3) Investors Not Acting in Their Own Best Interest
    Business Wire  |  11/12/2012

Because… The State Street study entitled "The Influential Investor: How Investor Behavior is Redefining Performance," based on 12 months of research and input from more than 3,300 investment management industry participants, reveals a disconnect between investors’ decisions and their stated goals. In fact, many investor behaviors, such as their reluctance to take on risk due to recent experience and their inclination to favor immediate payoffs, can be linked to theories of behavioral finance. Asset managers that aim to deliver real value to investors must understand key drivers of investor behavior and help them overcome psychological barriers.


Weekly Net Flows Report, 10/31 Data (11/7/12)
Total estimated outflows from long-term mutual funds were $488 million for the week ended Wednesday, October 31, according to the Investment Company Institute (ICI). The estimated total intake is a dramatic turnabout from the nearly $5.5 billion in net inflows during the prior week. Fixed income was the only broad asset class to garner sales, with investors pouring $2.2 billion into Taxable Bond and $385 million into Municipal Bond. Following the overall trend, Domestic Equity let redemptions with nearly $1.9 billion in net outflows, while World Equity suffered $548 million. Despite gathering $1.3 billion during the prior week, Hybrid funds fell into the red, posting $672 million in net outflows.


Source: Investment Company Institute


Weekly Net Flows Report, 10/17 Data (10/26/12)
Total estimated inflows to long-term mutual funds were $7.95 billion for the week ended Wednesday, October 17, according to the Investment Company Institute (ICI). Fixed income amassed nearly $8.7 billion in net inflows, despite being down 7% from last week’s total. Investors poured $7.6 billion in Taxable Bond, while Municipal Bond collected slightly less than $1.3 billion. Although equity funds remained in the red, outflows continue to taper from $2.6 billion last week to $1.7 billion. This is a dramatic improvement from the $11.2 billion in net outflows experienced during the first week of October. Domestic Equity accounted for $1.4 billion in net outflows, and World Equity shed $369 million. With $818 million in net inflows, Hybrid funds rebounded from $242 million during the prior week.


Source: Investment Company Institute


Don't Miss This (10/23/12)
1) Goldman Sachs to Liquidate Three Single Country Funds
    SEC Filings  |  10/18/2012

Because…Goldman Sachs, where the term “BRIC” (Brazil, Russia, India, and China) was coined, will soon put Brazil Equity Fund and India Equity Fund to rest. The short lifespan for each of these funds makes us ponder on the causes of their demise, which may include the lack of appeal of the largest emerging markets, investors’ preference for broad market-based funds, and their gravitation to lower-cost, better-performing products.

2) Credit Suisse to Sell European ETF Business
    Reuters  |  10/19/2012

Because… Just as U.S. investors are warming to ETFs, Credit Suisse is planning to unload its ETF business across the pond. European ETFs only accounted for 27% of U.S. ETF assets, but the European ETF industry has exhibited faster growth in the past decade than that in the U.S. In addition, the European market is more fragmented than in the U.S., with top players controlling fewer assets in Europe. The deal with Credit Suisse will offer a U.S. manager a great opportunity to expand their presence in the continent.

3) Despite Market Rally, Investors Turn to Absolute Return Funds
    Reuters  |  10/19/2012

Because… Asset managers may feel impelled to develop absolute return funds by headlines like this, but we caution firms to use discretion when introducing such funds to the retail market. This group of funds has not delivered consistent returns under different market conditions. Investors have not gained a solid understanding of various investment strategies employed by these funds. Higher fees due to frequent trading and the cost of shorting can eat into fund returns.


Weekly Net Flows Report, 10/10 Data (10/19/12)
Total estimated inflows to long-term mutual funds were $7.04 billion for the week ended Wednesday, October 10, according to the Investment Company Institute (ICI). This cumulative estimated total represents a dramatic uptick from last week’s total of $564 million. Fixed income generated $9.5 billion in net inflows, on par with last week’s total. As expected, Taxable Bond was responsible for 86% of the sales with inflows of $8.2 billion, while Municipal Bond collected $1.3 billion. Although stocks remained in the red, outflows tapered from $11.2 billion last week to $2.6 billion. Domestic Equity accounted for $2.3 billion in net outflows, and World Equity shed $295 million. Hybrid funds gathered $139 million in net inflows, down significantly from $2.3 billion during the prior week.


Source: Investment Company Institute


Don't Miss This (10/16/12)
1) Old Mutual Asset Management Strategically Focuses Portfolio to Align with Growth Plan
    PR Newswire  |  10/11/2012

Because… After selling its retail mutual fund business to Touchstone last October and stable value-focused Dwight Asset Management to Goldman Sachs in February, Old Mutual is divesting its affiliates again. By handing five affiliates over to their respective senior management teams, Old Mutual expects to ratchet up its operating margin. On the other hand, these boutiques--which specialize in absolute return strategies, managed futures, or quant strategies--could become acquisition targets again in the future for companies eager to add alternative capabilities.

2) iShares Reduces Expense Ratios for Six Funds
    SEC Filings  |  10/15/2012

Because… iShares finally disclosed funds with reduced fee rates. Besides the fee cuts, iShares announced yesterday the debut of four new ETFs that are part of a core series of 10 funds targeting buy-and-hold investors, the launch of a major branding campaign, and the integration of the iShares and BlackRock U.S. retail sales teams. These initiatives will enable iShares to keep up with the competition from low-cost providers, broaden its reach, and hopefully put a brake on its market share decline.
 
3) Vanguard Offers Low-Cost Inflation Hedge with Introduction of Short-Term TIPS Index Fund and ETF
    Vanguard  |  10/16/2012

Because… Vanguard Short-Term Inflation-Protected Securities ETF (VTIP) is the firm’s first TIPS ETF. It will compete head-on with iShares Barclays 0-5 Year TIPS Bond, PIMCO 1-5 Year U.S. TIPS Index ETF, and FlexShares iBoxx 3-Year Target Duration TIPS Index ETF. These ETFs had assets of $392 million, $1 billion, and $670 million, respectively, as of 10/15, but VTIP has a good chance of raising more assets with an expense ratio of 0.10%, half of the fees charged by the three existing ETFs. VTIP’s use of the same benchmark as the iShares ETF will also give Vanguard an advantage in attracting flows.


Weekly Net Flows Report, 10/3 Data (10/12/12)
Total estimated inflows to long-term mutual funds were $2.05 billion for the week ended Wednesday, October 3, according to the Investment Company Institute (ICI). Fixed income garnered a record $10.9 billion during the week, surpassing its $10.7 billion intake during the week ended March 7, 2012. Taxable Bond gathered the lion’s share with $8.1 billion, while Municipal Bond collected $2.8 billion. Equity funds reached a record low for 2012 with nearly $11.1 billion in net outflows. Investors pulled $10.6 billion from Domestic Equity and $483 million from World Equity. Hybrid funds rebounded from $386 million in net outflows last week by capturing nearly $2.3 billion in net inflows this week.


Source: Investment Company Institute


Don't Miss This (10/9/12)
1) Retirement Plan Types of Fortune 100 Companies in 2012
    Towers Watson  |  10/4/2012

Because… The shift away from defined benefit (DB) plans has been widely publicized and is evident in the Towers Watson research. The switch to defined contribution (DC) plans, along with the fact that many private-sector employees are not covered by DB plans, has forced American people to rely more on personal savings options. Thus, incorporating DB-like benefits, such as income replacement, into DC plans is becoming more of a necessity than a wish for plan sponsors and participants.

2) Exchange-Traded Funds (ETFs) Are Here to Stay, Investors Tell Schwab
    Business Wire  |  10/4/2012

Because… The Schwab survey shows that a lot of people still consider themselves ETF novices, despite the seemingly ubiquity of this investment vehicle. With new products continuously brought to the market and more asset managers trying to capitalize on the fast growth of the ETF industry, investor education should be placed at the top of each provider’s agenda. Firms dedicated to educational efforts can move beyond product differentiation and create investor loyalty.

3) Aberdeen Introduces Three New Multi-Asset Funds
    PR Newswire  |  10/8/2012

Because… Multi-asset funds are becoming increasingly popular, as investors search for greater diversification and hedge against various risks. Unlike balanced funds with 60/40 stock/bond allocation, this group of funds provides exposure to a broader set of asset classes so that risks are spread out and reduced. The three fund-of-funds offerings from Aberdeen are interesting since they feature a blend of traditional and non-traditional asset classes, active and passive approaches, and proprietary and non-proprietary underlying funds.


Weekly Net Flows Report, 9/26 Data (10/5/12)
Total estimated inflows to long-term mutual funds were $448 million for the week ended Wednesday, September 26, according to the Investment Company Institute (ICI). Fixed income was the only broad asset class to garner sales during the week. Taxable bond collected nearly $6.9 billion, while Municipal bond posted net inflows of $1.4 billion. On the other hand, investors pulled $5.1 billion from Domestic Equity and $2.4 billion from World Equity. This represents the largest weekly outflow from stocks since the first week of January 2012. The positive momentum that Hybrid funds have experienced since June 6 came to a halt this week with $377 million in net outflows.


Source: Investment Company Institute


Don't Miss This (10/2/12)
1) Invesco to Acquire 49 Percent of Religare Asset Management
    Invesco  |  9/27/2012

Because… Owning the stake in the fast-growing Religare will enable Invesco to gain a foothold in the Indian fund industry, which has benefited from the country’s buoyant economy, increasingly active capital markets, rising personal wealth, and competition from foreign players. Meanwhile, challenges are abound, including a sluggish stock market, the ban on the entry load, and the lack of investor enthusiasm for mutual funds. How to maintain the economic viability amid the changing regulatory environment will be a tough issue for the new joint venture to tackle.

2) Pioneer to Unveil the Emerging Markets Local Currency Debt Fund
    SEC Filings  |  9/28/2012

Because… Unlike years ago when investors were wary of the exposure to emerging market currencies, emerging markets local currency-denominated debt has become an asset class with which more investors feel comfortable. Emerging markets debt has the potential to exhibit stronger growth if the economic crisis in developed markets continues in the next few years. However, the heightened interest in this emerging asset class does not mean that the embedded risks of emerging market bonds no longer exist.

3) Vanguard Wins Most Deposits Ever on Indexing Popularity
    Bloomberg  |  10/1/2012

Because… The fact that Vanguard attracted more money in the first nine months of 2012 than it has in any full calendar year in its 38-year history once again underlines the appeal of low-cost investing. Keeping costs low has been in the firm’s DNA. With its unique ownership structure, Vanguard is able to reduce expense ratios and pass the savings on to investors. Changing to benchmarks with lower license fees is the firm’s latest endeavor to cut fund costs.


Weekly Net Flows Report, 9/19 Data (9/28/12)
Total estimated inflows to long-term mutual funds were $4.47 billion for the week ended Wednesday, September 19, according to the Investment Company Institute (ICI). This total intake represents a 28% decrease from cumulative sales during the previous week. Taxable Bond gathered nearly $7.6 billion in net inflows, while Municipal Bond only managed to collect $446 million. Domestic Equity experienced an 80% decrease from the prior week with $4.8 billion in net outflows. World Equity also remained in the red for the ninth consecutive week with $355 million in net outflows. Hybrid funds, which have not experienced outflows since the week ended June 6, collected $1.6 billion in net inflows, which represents a 25% increase from the prior week.



Source: Investment Company Institute


Don't Miss This (9/25/12)
1) Schwab Reduces ETF Fees
    SEC Filings  |  9/20/2012

Because… Schwab’s move makes its low-cost ETFs even cheaper. The firm boasts that its ETFs now “have the lowest expense ratios in their respective Lipper categories.” The commission-free trading for its clients and a powerful distribution platform have also contributed to the rapid growth of Schwab’s ETF business. Schwab’s fee cuts are turning up the heat on BlackRock, which announced its own plan to slash fees just 10 days ago. Ultimately, investors will be the primary beneficiary of the price competition.

2) Research Funds Aren't All They're Cracked Up to Be
    Morningstar  |  9/24/2012

Because… Research funds epitomize collective wisdom since a group of stock-pickers call the shots. By giving analysts more clout, these funds are less likely to be influenced by a couple of portfolio managers’ personal biases. Analyst-driven funds have had their ups and downs over the past years, so they are neither a winning formula nor a recipe for disaster. This particular approach should not be the sole selling point of a fund. Fund firms with such offerings should concentrate more on entire investment process, analyst accountability, and performance appraisal system in fund marketing and distribution.

3) Morgan Stanley Smith Barney is Now Morgan Stanley Wealth Management
    Morgan Stanley  |  9/25/2012

Because… Morgan Stanley started floating names to replace “Smith Barney” more than a year ago. Many firms, such as Dean Witter and Wachovia on the brokerage side and Scudder and Evergreen on the asset manager side, lost their identity after being acquired, and this news of one of the most recognized names finally being scrapped is still hard to digest for quite a few in the industry.


Weekly Net Flows Report, 9/12 Data (9/21/12)
Total estimated inflows to long-term mutual funds were $6.12 billion for the week ended Wednesday, September 12, according to the Investment Company Institute (ICI). This total intake represents nearly double the $3.10 in sales during the prior week. Taxable Bond continues to drive sales with approximately $6.8 billion in net inflows. Municipal Bond’s intake was $1.3 billion, bringing fixed income’s total to $8.1 billion—the highest net flows since its $9.7 billion total during the week ended April 4. Domestic Equity shed nearly $2.8 billion, while World Equity shed $548 million, a significant drop from the $225 million in net outflows suffered a week earlier. With a 43% increase from the prior week, Hybrid funds gathered $1.3 billion in sales this week.


Source: Investment Company Institute


Don't Miss This (9/18/12)
1) State Street Global Advisors Launches MLP Strategy for Institutional Investors
    Business Wire  |  9/13/2012

Because… The unique partnership structure makes MLPs attractive since there is no income tax at the corporate level and MLPs generally offer dividend yields and cash distributions that are significantly higher than taxable income passed on to investors. MLPs are mostly held by private client wealth managers who understand the structure and tax complexity. Now that institutional investors are starting to employ this strategy, we expect more MLPs to be rolled out due to the low interest rate environment and investor pursuit of consistent income.

2) Janus Fixed Income Team Adds Investment Staff to Support Continued Growth
    Janus  |  9/17/2012

Because… Fixed income has been the only bright spot at Janus this year with net outflows of $2.2 billion from Domestic Stock and $1.4 billion from International Stock in the first two quarters. Expanding fixed-income capabilities may more effectively position Janus to seize opportunities in the bond arena. However, for an equity-oriented firm with just 12% of retail assets in fixed-income funds, enhanced fixed-income offerings would not be enough to move its sales out of the negative territory should performance and redemption issues persist on the equity side.

3) High-flying S&P 500 Actually Down Last Three Years? Investors Think So
    Investment News  |  9/18/2012

Because… Investor fear has been a key factor for their disbelief in the stock market. Consistently high unemployment rates, the fiscal cliff worries in the U.S., the ongoing sovereign debt crisis in Europe, slower growth in emerging markets, and political leadership changes around the world have only elevated their concerns about equity investing. For asset managers, education about historical post-crisis stock performance, the need for asset diversification, and improved risk control systems may help investors allay their fears.


Weekly Net Flows Report, 9/5 Data (9/14/12)
Total estimated inflows to long-term mutual funds were $3.11 billion for the week ended Wednesday, September 5, according to the Investment Company Institute (ICI). Sales during the first week of September continue to follow the same general pattern with all broad asset classes gathering inflows with the exception of stocks. Domestic Equity shed nearly $2.9 billion in outflows, while World Equity only experienced $225 million in net outflows. Taxable Bond drove sales with nearly $4.5 billion in net inflows, down from its intake of $5.4 billion during the prior week. With $794 million in net inflows, Municipal Bond experienced a 20% drop from its total during the prior week. On the other hand, Hybrid funds garnered $910 million, managing a 5% increase from the prior week.


Source: Investment Company Institute


Don't Miss This (9/11/12)
1) BlackRock to Lower Fees on Some ETFs to Better Compete
    Reuters  |  9/10/2012

Because… iShares has been sticking to its strategy of focusing more on client services and education instead of lowering fees, but the rising price competition has helped other ETF providers stealthily take away its market share. iShares’ market share has fallen to about 40% from about 60% five years ago. The effectiveness of iShares’ price cut will be determined by price disparities of its products relative to its peers as well as the total value it provides to investors.

2) Legg Mason Implements CEO Succession Plan
    Legg Mason  |  9/11/2012

Because… Mark Fetting has been under fire as the firm is struggling with lagging stock price, fund performance dips, and investor withdrawals. The firm has made some turnaround efforts, such as shaking up management ranks, streamlining its product line, replacing star stockpicker Bill Miller after his market-beating streak ended, venturing into alternatives, filing for ETFs, and pursuing overseas opportunities. However, these initiatives have yet to deliver solid results. The industry will keep an eye on who will head Legg Mason after Mark Fetting steps down.

3) U.S. District Court Dismisses Class Action Lawsuit against ProShares 
    ProShares  |  9/11/2012

Because… The dismissal of the class action suit handed ProShares a huge victory. The fact that the court sided with the firm in this case gives leveraged ETF providers much-needed peace. Leveraged ETFs have been generating a lot of negative publicity, controversy, and regulatory scrutiny over the past few years. To educate investors, leveraged ETF managers should continue to make sure their marketing messages are clear, comprehensive, and consistent. Also, they should allocate dedicated resources to clarify investor misconception and debunk myths surrounding their products.


Weekly Net Flows Report, 8/29 Data (9/7/12)
Total estimated inflows to long-term mutual funds were $2.99 billion for the week ended Wednesday, August 29, according to the Investment Company Institute (ICI). The total intake represents an 11% decrease from the prior week’s sales total. Once again, all broad asset classes experienced inflows with the exception equity funds. Domestic Equity shed $3.7 billion, while its World counterpart experienced $724 million in net outflows—an improvement compared to outflows of $4.5 billion and $1.4 billion, respectively, during the prior week. Taxable Bond gathered $5.6 billion in net inflows, slightly down from its $5.9 billion in sales during the prior week. Municipal Bond experienced an uptick in sales from the prior week with $993 million, representing an 8% increase. Despite gathering $866 million in net inflows, Hybrid funds faced the greatest decrease in sales from the prior week—64%.


Source: Investment Company Institute


Don't Miss This (9/4/12)
1) Fidelity Investments Names Abigail P. Johnson President of Fidelity Financial Services
    Fidelity  |  8/28/2012

Because… There has been much speculation about who will succeed Ned Johnson to run the financial services powerhouse. The promotion signals Abigail Johnson could take over the top job when her father steps down. Her exposure to various businesses within the organization is definitely a plus, but challenges that come with leading such a complex company will be daunting, including regaining lost market share, improving lackluster fund performance, and fighting the trend toward passively managed ETFs.

2) Significant Number of Boomers and Gen-Xers Falling Behind in March toward Secure Retirement
    The Insured Retirement Institute |  8/28/2012

Because…The finding that shows “significant portions of these demographic groups have insufficient savings, lack investment knowledge, and have not taken important retirement planning steps” is disturbing. Reasons for the grim situation include unawareness of how much they will need for retirement, perception that financial assistance may eventually cover living expenses after retirement, and anticipation of postponing retirement to maintain their standard of living. The problem of insufficient savings urges financial services companies to step up to the plate and seize every opportunity to educate people and help them develop a sense of urgency.

3) Cetera Financial Group Unveils New Brand Structure
    Cetera Financial Group  |  9/4/2012

Because… A unified brand may help a firm boost name recognition in the marketplace. Cetera, which was formed in 2010, is considered a fairly nascent brand, although it already provides services for more than 6,500 independent financial professionals and more than 600 financial institutions nationwide. While the rebranding effort is aimed at promoting collaboration, consistency, and alignment among its four separate affiliates, maintaining each firm’s independence is vital to retaining advisors and growing business.


Weekly Net Flows Report, 8/22 Data (8/31/12)
Total estimated inflows to long-term mutual funds were $3.37 billion for the week ended Wednesday, August 22, according to the Investment Company Institute (ICI). All broad asset classes experienced inflows with the exception equity funds. Domestic equity shed nearly $4.5 billion, while its World counterpart experienced $1.4 billion in net outflows. Taxable Bond gathered $5.9 billion in net inflows, on par with the near $6.0 billion gathered during the prior week. With $921 million in net inflows, Municipal Bond suffered a 42% decrease from its intake during the prior week. On the other hand, Hybrid funds gathered $2.4 billion, a dramatic increase from its $953 million in net inflows captured during the prior week.


Source: Investment Company Institute


Don't Miss This (8/28/12)
1) Legg Mason Plans Index ETFs Too
    IndexUniverse.com  |  8/22/2012

Because… After being hit by 18 consecutive quarters of net outflows, Legg Mason finally posted positive flows in the first two quarters of this year. However, attracting investor interest in the index ETF market will be a tough task for the firm. The fact that the dominance of leading players, namely iShares, SSgA, and Vanguard, has driven newcomers out of business (most recently FocusShares and Russell) reflects the highly competitive nature of the ETF industry.

2) Schapiro Raises the White Flag on Money Funds
    Investment News  |  8/23/2012

Because… The industry had waged a fierce lobbying campaign against Ms. Schapiro’s proposal. The SEC chair’s decision to call off the vote for money market fund reform may seem to be a victory for money fund providers, but whether they can breathe a big sigh of relief remains in question. Regulators may still push for changes as they deem the sector vulnerable and needing greater oversight.

3) Young Americans Start Saving for Retirement 10 Years Earlier than Parents, Grandparents
    TD Ameritrade  |  8/28/2012

Because… The TD Ameritrade survey put an emphasis on Gen Z (those between the ages of 13 and 22). This younger generation understands the importance of saving, but there appears to be disconnections between what they believe and what they practice. A much higher percentage of this cohort counts on Social Security and inheritances more heavily than their parents. Figuring out how to provide unbiased education and practical advice that can help them set realistic financial expectations and alleviate their financial concerns will be a challenge faced by many firms.


Don't Miss This (8/21/12)
1) Columbia Files to Offer 15 More ETFs
    IndexUniverse.com  |  8/17/2012

Because… Columbia is expanding its ETF product line just as Russell announced the liquidation of all passively managed ETFs to shift its focus to actively managed ETFs. Both firms are setting sights on the active ETF space, which shows the growth potential of active ETFs. But will they become successful with new strategies? Columbia’s five active ETFs have remained small ($25 million as of end June) since the firm acquired them from Grail Advisors a year ago. Russell Equity ETF, the firm’s lone survivor with an active asset allocation approach, held only $4 million.

2) HighTower Accelerates Chicago Expansion with $1 Billion Credit Suisse Team
    HighTower  |  8/20/2012

Because… HighTower has brought on 33 teams since its inception in 2008, becoming one of the fastest-growing firms in the wealth advisory world. Its hybrid model has attracted the attention of quite a few high-profile advisors due to growing dissatisfaction among wirehouse advisors, the equity stake in the company, an open architecture that provides access to multiple custodians and clearing firms, top-notch support services, and the offering of independent investment advice.

3) Carlyle Likely to Do More Money Manager Deals
    Pensions & Investments  |  8/20/2012

Because… Private equity firms are actively looking for deals in the asset management sector. Smaller, well-managed asset managers that generate steady revenues are more likely to become the next targets for acquisitions. The ownership by private equity firms enables investment managers to focus more on the long-term, unlike public firms that need to respond constantly to market pressure. Private equity investors also tend to increase the management ownership to retain and motivate key employees.


Weekly Net Flows Report, 8/8 Data (8/17/12)
Total estimated inflows to long-term mutual funds were $4.29 billion for the week ended Wednesday, August 8, according to the Investment Company Institute (ICI). The nearly $5.7 billion in sales from Taxable Bond was able to compensate for equity outflows. Domestic Equity suffered nearly $3.6 billion in net outflows compared to $5.7 billion in redemptions during the prior week. World Equity shed $122 million, which was a solid improvement from the $1.2 billion in outflows during the prior week. Municipal Bond gathered nearly $1.5 billion in net inflows, representing a 32% increase from its intake during the prior week. With $800 million in net inflows, Hybrid funds also fared well, representing a 27% increase from its prior week total.


Source: Investment Company Institute


Don't Miss This (8/14/12)
1) FocusShares Trust’s Board of Trustees Votes to Close Exchange Traded Funds
    Business Wire  |  8/6/2012

Because… Lessons should be learned from FocusShares’ second failed attempt. First, competing on price for commoditized products may not be as effective for smaller firms as for more established household names. Second, narrowly focused sector funds may face more challenges in asset-gathering than broad market-based funds due to relatively higher risks and volatility. Third, sufficient marketing and distribution support is a requisite if the brand is not PIMCO.

2) Invesco Balanced-Risk Allocation Fund Earns Top Morningstar Rating of 5 Stars
    PR Newswire  |  8/6/2012

Because…The fund raked in $3.5 billion in the first half of the year after garnering $2.3 billion in 2011. With 1-year and 3-year returns ranking in the top 1% and 4%, respectively, the 5-star fund is expected to maintain the sales momentum for the rest of the year. We believe the fund’s popularity results from a combination of its outperformance and Invesco’s distribution prowess. Moreover, it reflects investors’ strong need for solutions that can de-risk their portfolios.

3) Janus Capital Group Inc. Announces Strategic Alliance with The Dai-ichi Life Insurance Company, Limited
    Business Wire  |  8/9/2012

Because… We do not expect the investment from Japan’s second-largest life insurer to reverse Janus’ 12 quarters of redemptions in the near term, but the deal will benefit Janus on several fronts in the long run. Dai-ichi Life will invest USD$2 billion of its general account assets with Janus, sell Janus products in Japan through a joint venture between Dai-ichi and Mizuho Financial Group, and provide seed capital for Janus to diversify its product line. Such efforts as expanding overseas and building up its fixed-income business will ultimately make Janus a stronger company.


Weekly Net Flows Report, 8/1 Data (8/10/12)
Total estimated outflows from long-term mutual funds were $1.19 billion for the week ended Wednesday, August 1, according to the Investment Company Institute (ICI). This represents the fifth week during 2012 that overall long-term mutual fund flows fell into the red. For the week, outflows were led by redemptions in equity funds, with Domestic Equity shedding nearly $5.7 billion and World Equity experiencing $1.2 billion in net outflows. Taxable Bond funds gathered $3.9 billion followed by $1.1 billion in net inflows from Municipal Bond funds. Hybrid funds garnered $630 million in net inflows, representing a 15% decrease from its intake during the prior week.


Source: Investment Company Institute


Weekly Net Flows Report, 7/25 Data (8/3/12)
Total estimated inflows to long-term mutual funds were $3.81 billion for the week ended Wednesday, July 25, according to the Investment Company Institute (ICI). This estimated total is a sharp decrease from the $8.0 billion and $7.6 billion intakes during the prior two weeks, respectively. After posting net inflows during the prior week, both Domestic and World Equity suffered outflows of $2.1 billion and $568 million, respectively. Taxable Bond continues to lead sales with nearly $4.3 billion in net inflows, representing 16% decrease from the prior week’s intake. On the other hand, Municipal Bond gathered $1.5 billion—a 9% increase from its total during the prior week. Despite a 19% decrease from the prior week, Hybrid funds garnered $737 million.


Source: Investment Company Institute



Weekly Net Flows Report, 7/18 Data (7/27/12)
Total estimated inflows to long-term mutual funds were $8.01 billion for the week ended Wednesday, July 18, according to the Investment Company Institute (ICI). This total represents a significant turnabout from the $380 million in outflows suffered during the opening week of July. For the first time since February 15, all major objectives experienced inflows. Domestic Equity managed to gather $99 million in inflows, while World Equity collected $542 million in inflows. Despite suffering a 48% decrease from its intake during the prior week, Hybrid funds garnered a solid $905 million. Investors poured $5.1 billion into Taxable Bond and another $1.3 billion into Municipal Bond funds. The cumulative total for fixed income represents its highest intake since May 16, 2012.


Source: Investment Company Institute


Don't Miss This (7/24/12)
1) S&P Dow Jones Indices Launches S&P Target Date Style Index Series
    PR Newswire  |  7/19/2012

Because… S&P’s new target-date indices provide separate performance comparisons for "to" versus "through" glide paths. Since target-date providers employ different glide path designs and asset allocation models, selecting an appropriate benchmark to evaluate the fund performance is challenging for many plan sponsors and advisors. With the availability of separate index series, fund providers can offer their investors a better yardstick to measure the value they add.

2) SEC Extends Review Period on JPM's Copper ETF Plan
    Reuters  |  7/19/2012

Because… The SEC’s decision to extend the review period shows the level of scrutiny commodity ETFs are receiving currently. Investors are reviving their interest in commodity exchange-traded products, as evidenced by net inflows of $3.2 billion in the first half of the year, compared with a mere $472 million in the entire year of 2011. However, for asset managers that look to roll out commodity ETFs, especially physically backed funds, persuading regulators that these new introductions will not disrupt the global supply is essential.

3) KKR Plans to Offer Two Retail Funds to Pursue Debt Deals
    Bloomberg  |  7/19/2012

Because… The private equity giant is going retail with the launch of two debt funds. Like hedge fund managers, private equity firms are stepping into the retail fund market to diversify their business operations. Shrinking fee income and more difficult market conditions are driving private equity firms to seek new revenue opportunities. While KKR may leverage its brand in the retail space, it may lack experience and established relationships in retail distribution.


Asset Manager Usage of Social Media Up 240% Over Last Year (7/19/12)
FUSE Research Network and SwanDog Strategic Marketing are excited to announce that they have concluded the research and analysis phase for the 2012 version of their comprehensive marketing benchmark study of the asset management industry. The study is slated for release in August 2012.

Since social media is a hot-button topic among asset managers, the research report has placed emphasis on the subject. Overall, 58% of the respondent firms participate in social media in some capacity, which is up nearly 240% from the research FUSE and SwanDog conducted in 2011.

For the entire release, click here


Don't Miss This (7/17/12)
1) Vanguard Weighs Push into Banking
    Reuters  |  7/12/2012

Because… With yields of money market funds hitting an extremely low level and the SEC pushing for money market reform, mutual fund firms see the need to consider other business options to retain investors. Firms like Fidelity, Schwab, and TIAA-CREF have already offered banking services. Vanguard has provided some cash management services through a partnership with PNC. If Vanguard expands banking offerings, its scale and reputation for low costs, as well as the convenience of asset transfer, may encourage investors to stay with the firm.

2) FlexShares ETFs Top $1B in AUM
    Benzinga   |  7/12/2012

Because…With only four ETFs in the lineup, garnering $1 billion within a year is quite impressive. To ensure that history does not repeat itself, Northern Trust put a new team in place and more importantly, it developed a product strategy that is different from its first attempt. The inclusion of two TIPS funds, a natural resources fund, and an enhanced beta fund shows that focused, innovative products that provide unique portfolio solutions can be very appealing to retail and institutional investors.

3) OppenheimerFunds to Acquire SteelPath, a Leading Edge MLP Investment Manager
    PR Newswire   |  7/17/2012

Because… OppenheimerFunds is the latest firm that strengthens its alternative investment capabilities via an acquisition. We expect M&A activities in the alternatives space to continue to increase as a result of the growing demand for alternative investments and the need for fund firms to search more growth opportunities. In this case, the addition of SteelPath, known for its MLP funds, will give OppenheimerFunds' clients immediate access to the energy infrastructure sector.


Weekly Net Flows Report, 7/3 Data (7/13/12)
Total estimated inflows to long-term mutual funds were $1.68 billion for the period of June 28 through July 3, according to the Investment Company Institute (ICI). For the fourth consecutive week (less one trading day on July 4), all major objectives experienced inflows with the exception of Domestic Equity’s nearly $3.1 billion in outflows. This represents slightly more than double its $1.5 billion shed during the prior week. All other major objectives, with the exception of Hybrid funds, experienced decreased sales from the prior week. Despite leading sales, Taxable Bond garnered $2.5 billion in inflows, representing a 23% decrease from its $3.2 billion total during the prior week. With a 19% decrease, Municipal Bond gathered $870 million in net inflows. World Equity experienced a 17% decrease and only managed to collect $300 million in net inflows. Conversely, Hybrid funds experienced a significant increase from its mere $18 million in inflows during the prior week and garnered slightly more than $1.1 billion in net inflows.


Source: Investment Company Institute



Don't Miss This (7/10/12)
1) Pimco Hires Three as Bridwell's Alternatives Unit Grows
    Bloomberg  |  6/27/2012

Because… Firms like PIMCO are adding dedicated resources to expand their product development and distribution efforts in the alternative investments space. These teams have their work cut out for them as the trend toward alternatives has become more pronounced than ever and alternatives are playing an increasingly important role in asset allocation. Besides evaluating opportunities that can add value in different market environments, alternative teams also need to identify target markets and carve out effective market targeting strategies.

2) UBS Pushes Further into ETFs with London-listed Range
    Reuters  |  6/28/2012

Because…The listing of 64 ETFs, the largest single-day ETF launch in the London Stock Exchange’s history, shows UBS’ determination to become a bigger player in the European ETF market. Europe, with $273 billion in assets as of the end of June, has become a battlefield for ETF providers. The UK Financial Services Authority's commission ban for independent financial advisors and the European Union’s proposal for required reporting of all ETF trades will make ETFs a more attractive investment vehicle in Europe.

3) Goldman Plans to Liquidate Target Date Strategies
    SEC Filings  |  7/2/2012

Because… Goldman Sachs is joining Columbia and Oppenheimer in the closure of target-date funds. Target-date fund assets reached $406 billion as of the end of May, but about 75% of assets are held by Fidelity, Vanguard, and T. Rowe Price. Defined Contribution Investment-Only (DCIO) managers often find it tough to compete with firms with a proprietary recordkeeping platform. Only those with a sound glide path strategy, an appropriate asset class mix, strong performing underlying funds, and lower expense ratios will survive the competition.


Weekly Net Flows Report, 6/27 Data (7/6/12)
Total estimated inflows to long-term mutual funds were $3.26 billion for the week ended Wednesday, June 27, according to the Investment Company Institute (ICI). For the third consecutive week, all major objectives experienced inflows with the exception of the nearly $1.5 billion in outflows shed from Domestic Equity. Once again, World Equity only managed to capture $362 million (versus $327 million during the prior week), bringing equity’s overall total to nearly $1.1 billion in net outflows. Despite a 19% decrease from its intake during the prior week, Taxable Bond led sales with nearly $3.3 billion in net inflows. On the other hand, Municipal Bond experienced a 25% increase from the prior week, collecting nearly $1.1 billion in estimated inflows. Hybrid funds managed to stay in the black for its third consecutive week but only gathered $21 million in net inflows.


Source: Investment Company Institute


Weekly Net Flows Report, 6/20 Data (6/29/12)
Total estimated inflows to long-term mutual funds were $4.56 billion for the week ended Wednesday, June 20, according to the Investment Company Institute (ICI). Once again, all major objectives experienced inflows with the exception of the $1.8 billion in outflows shed from Domestic Equity. World Equity only managed to capture $327 million, bringing equity’s overall total to $1.5 billion in net outflows. Taxable Bond led sales with $4.0 billion in net inflows, representing a 39% increase from its intake during the prior week. With a 42% increase from the prior week, Municipal Bond collected $860 million in estimated inflows. Hybrid funds experienced its second consecutive week of inflows with nearly $1.2 billion in net inflows—its highest intake since April 18, 2012.


Source: Investment Company Institute


Don't Miss This (6/26/12)
1) AllianceBernstein L.P. Extends Employment Contract of Chairman & CEO Peter S. Kraus for an Additional Five Years
    PR Newswire  |  6/21/2012

Because… Ongoing net redemptions and lackluster performance have many in the industry questioning Mr. Kraus’ turnaround efforts. The extension of his contract indicates the board still has much confidence in him and believes in his vision and execution. The firm announced organizational changes last December that streamlined its management structure, aiming to “improve the execution of its long-term strategy of diversifying the mix of investment services it offers to clients, and increasing operating leverage.” We hope the board’s patience and trust will pay off.

2) Columbia Management Launches Risk Allocation Fund
    Columbia Management  |  6/21/2012

Because… We are seeing asset management firms pay more attention to the concept of risk allocation. A couple of asset managers have reaped the benefit of introducing such funds to the marketplace. By spreading portfolio risk equally across asset classes and levering up lower-risk assets, this type of fund has the potential of producing greater risk-adjusted returns. While these portfolios generally perform better during times of economic weakness, they may underperform during boom times.

3) MSSB Advisers Get Green Light for Social Media
    Investment News  |  6/25/2012

Because… By extending its pilot program that gave 600 advisors access to social media tools to the rest of its advisors, MSSB must have seen some promising results. The key to social media adoption is to develop a defined and thoughtful strategy and well laid-out plans to implement the strategy. Some challenges firms face may include: converting skeptical advisors into social media advocates, managing information flow, tracking data inputs on multiple platforms, and measuring return on investment.


Weekly Net Flows Report, 6/13 Data (6/22/12)
Total estimated inflows to long-term mutual funds were $5.46 billion for the week ended Wednesday, June 13, according to the Investment Company Institute (ICI). This marks a significant turnabout from the $1.55 billion in net outflows during the prior week. All major objectives experienced inflows with the exception of the $620 million in outflows shed from Domestic Equity. Despite these outflows, World Equity garnered $1.5 billion and managed to pull overall Equity into the black with $891 million in net inflows. Taxable Bond drove sales with nearly $3.0 billion in net inflows, an impressive uptick from the $408 million gathered during the prior week. Municipal Bond collected $604 million, a 49% decrease from its $1.2 billion intake during the prior week. Hybrid funds rebounded by gathering $966 million from $1.2 billion in net inflows during the prior week.


Source: Investment Company Institute


Don't Miss This (6/19/12)
1) AllianceBernstein Casts Doubt on Explosive ETF Growth
    Reuters  |  6/13/2012

Because… AllianceBernstein’s forecast seems to be throwing a wet blanket on ETF providers. Meanwhile, a P&I survey shows worldwide ETF assets grow at a slower rate in 2011. However, we still see ample opportunities for the industry to expand. With retail investors getting more educated about advantages of ETFs, advisors shifting their focus to client services from investment management, institutional investors increasing allocation to ETFs for various purposes, and large asset managers entering the fray, the industry will likely maintain its momentum in the near future.

2) American Funds to Allow Other Fund Firms On Its K Platform
    The Mutual Fund Wire  |  6/14/2012

Because… We believe the trend toward open architecture is taking shape as a result of advisor demand and regulatory pressure. With the need for best-in-class managers rising, it is more advantageous for a firm to retain clients by offering them more choices as opposed to seeing them leave for its competitors. Regulators may also push the use of non-proprietary funds, as the conflict-of-interest issue that comes with proprietary funds is increasingly being put under the legislative microscope.

3) Nationwide Introduces Simplified, No-Load Variable Annuity for Fee-Based Advisors at Wells Fargo
    Nationwide  |  6/14/2012

Because… An increasing number of firms are rolling out variable annuity options for fee-based advisors. While variable annuities are getting a fresh look amid growing concerns about insufficient retirement savings, the annuity industry has been associated with high costs, complex product structure, and a bad reputation which resulted from deceptive sales practices. If financial firms’ latest efforts can change investors’ views and win them over to VAs, it will be a turning point for the VA industry.


Weekly Net Flows Report, 6/6 Data (6/15/12)
Total estimated outflows from long-term mutual funds were $1.37 billion for the week ended Wednesday, June 6, according to the Investment Company Institute (ICI). This represents the second time this month and the third time this year that overall sales fell into negative territory. Domestic equity shifted from leading sales during the prior week to once again driving outflows, with nearly $3.1 billion in outflows. On the other hand, its World counterpart led sales this week by gathering nearly $1.4 billion. Municipal Bonds garnered nearly $1.2 billion, while Taxable Bond only managed to collect $411 million after suffering $816 million in outflows during the prior week. Hybrid funds fell into the red once again with $1.2 billion in net outflows.


Source: Investment Company Institute


Don't Miss This (6/12/12)
1) Plan Sponsors and Recordkeepers Agree That Retirement Income Will Be “The Biggest Trend” Over Next Five Years
    Business Wire  |  6/5/2012

Because… The MetLife study puts retirement income into the limelight. Many plan sponsors still focus more on asset accumulation than retirement income. Even though some have become aware of the importance of ensuring that their plan participants have adequate income, they have not been fully engaged in the effort. Plan sponsors’ reluctance to integrate retirement income options into their plans is mostly caused by their concern about fiduciary liability in selecting appropriate retirement income solutions and assessing product providers’ ability to offer steady income payments.

2) PIMCO Files for Three Fixed-Income ETFs
    SEC Filings  |  6/7/2012

Because… PIMCO is executing a market positioning strategy that has been working really well for the bond giant. By putting three existing mutual funds into an ETF wrapper, the firm will grow its roster of actively managed ETFs to nine. With its disciplined investment approach, rigorous investment process, and demonstrated management skills, PIMCO is sure to be a dominant player in the active ETF space.

3) Will More Retirement Plans Shift to ETFs?
    Financial Planning  |  6/8/2012

Because… While the report of Apple moving to an all ETF 401(k) plan may not be true (see “AAPL’s All-ETF 401(k) Plan? Not!”), low-cost ETFs can be a viable solution inside a retirement plan. Technology is no longer an obstacle for ETFs to make headway into 401(k) plans. The fee-cutting frenzy, regulatory requirement of fee disclosure, enhanced portfolio transparency compared to other investment vehicles, and distribution efforts on the part of ETF providers will help ETFs garner more attention from plan sponsors.


Weekly Net Flows Report, 5/30 Data (6/8/12)
Total estimated inflows from long-term mutual funds were $1.63 billion for the week ended Wednesday, May 30, according to the Investment Company Institute (ICI). This estimated total puts flows back into positive territory after suffering nearly $4.90 in outflows last week. In quite the reversal, Equity funds gathered nearly $1.5 billion in net inflows, while Bond funds experienced outflows of $317 million. Outflows were a result of the $920 million shed from Taxable Bond which has not experienced outflows since early October 2011. Meanwhile, Municipal Bond gathered $603 million. Domestic Equity drove sales with $807 million in net inflows followed by World Equity’s $678 million in net inflows. Hybrid funds reversed its outflows from the prior week by gathering $460 million in net inflows.


Source: Investment Company Institute


Don't Miss This (6/5/12)
1) Average IRA Balances a Third Higher When Multiple Accounts are Considered
    EBRI  |  5/30/2012

Because… Even though the average IRA balance is a third higher when multiple accounts are taken into account, the total of $91,864 is still far from being sufficient to cover retirement expenses. ICI reveals that 68% of households that own IRAs invest in mutual funds. As mutual funds are the top IRA choice for job changers and those without employer-sponsored plans, fund firms are in the best position to guide investors through the maze to ensure they are not overwhelmed by myriad investment choices.

2) Western Asset Funds to Drop Legg Mason Name in Sales Push
    Bloomberg  |  5/31/2012

Because… While competent portfolio managers and solid investment approaches are key factors to attract investors, having a strong brand differentiates a firm and helps foster the business growth. Western Asset is a reputable fixed-income manager in the institutional marketplace. But for Legg Mason, which is mired in net redemptions for 18 consecutive quarters, whether it can leverage the Western Asset name in the retail space and successfully stem outflows remains to be seen.

3) Invesco Shakes Up Its Distribution Team
    Investment News  |  6/4/2012

Because… Both asset managers and distributors are finding themselves at a crossroads where they have to realign business functions to deliver services in a more efficient and effective way. Other firms that are undergoing reorganization include UBS and Morgan Stanley Smith Barney (MSSB). UBS is integrating the investment advice and research of its wealth units into a single unit. MSSB will merge Investment Strategy and Client Solutions and MSSB Capital Markets to create a new Investment Products and Services division.

Special Alert: Transit of Venus
    NASA  |  6/5/2012

Because… This will be the last transit of Venus to occur in our lifetime. The next transit will occur in December 2117.


Weekly Net Flows Report, 5/23 Data (6/1/12)
Total estimated outflows from long-term mutual funds were $4.92 billion for the week ended Wednesday, May 23, according to the Investment Company Institute (ICI). This week marks the first time since the first week of 2012 that overall flows slipped into negative territory. Investor concern regarding the viability of Spanish banks and whether Greece will remain in the euro dragged on sentiment. Domestic Equity led outflows with $7.2 billion, while its World counterpart only managed to gather $184 million in net inflows. Bond funds garnered nearly $2.9 billion, but this significantly decreased total from recent months is the lowest intake since inflows of $2.7 billion during the first week of the year. Finally, Hybrid funds broke its 2012 streak of weekly inflows with $695 million in net outflows.


Source: Investment Company Institute


Don't Miss This (5/29/12)
1) Putnam’s Retirement Calculator Crunches Health Expense Data
    Registered Rep  |  5/24/2012

Because… Putnam’s tool will incorporate health care expenses into retirement planning. On one hand, the cost of health care is expected to continue rising significantly. This new feature may provide an incentive for people to save more in order to cover health care spending. On the other hand, medical cost is a variable that is hard to estimate. Whether the assumptions used for the projection, subject to substantial uncertainties, are realistic and practical will be a topic for debate.

2) Fidelity: Facebook Trading Issues Affected Clients
    The Wall Street Journal  |  5/24/2012

Because… Fidelity is not the only firm whose clients were affected by the Facebook trading issue. Investors are feeling frustrated by Nasdaq’s trading glitch. It is critical for brokerage firms to answer all client questions and alleviate their concerns. Firms need to show compassion, disclose in detail how they work with regulators and the exchange on behalf of their clients, and provide timely updates on what steps they have taken in an effort to minimize investor losses.

3) May 29 is '529 Day,' yet Edward Jones Survey Reveals that Nearly Two-Thirds of Americans Don't Know What They Are
    PR Newswire  |  5/24/2012

Because… Today is National 529 Day. Assets in 529 plans reached a record-high $145 billion at the end of 2011, up 5% from year-end 2010, according to the ICI. Although the education saving is considered an important financial goal, investors’ lack of familiarity with 529 plans has prevented the industry from growing faster. Some fund firms have enhanced product design or upgraded plan services, but it is more imperative for asset management firms to work with the states in order to raise investor awareness of 529 college savings options.


Weekly Net Flows Report, 5/16 Data (5/25/12)
Total estimated inflows to long-term mutual funds were $3.90 billion for the week ended Wednesday, May 16, according to the Investment Company Institute (ICI). In addition to the total intake, this week witnessed decreased flows across all objectives from the prior week. Equity funds experienced nearly $3.6 billion in outflows. Although Equity outflows were primarily driven by the $3.4 billion in outflows from Domestic Equity, World Equity funds posted $117 million in the red after six consecutive weeks of registering positive sales. Despite a 2% decrease from the prior week, Taxable Bond continued to lead sales with nearly $6.0 billion in net inflows, while Municipal Bond gathered $1.2 billion. With $243 million in net inflows, Hybrid Funds suffered a 61% decrease from its intake of $627 million during the prior week.


Source: Investment Company Institute


Don't Miss This (5/22/12)
1) Money Managers Note Heightened Interest in Low-volatility Strategies
    Pensions & Investments  |  5/14/2012

Because… Asset managers are paying more attention to helping investors cope with market volatility; however, volatility-themed funds have yet to be widely available in the retail market. Some funds have incorporated volatility-control mechanism into their investment strategies, but fund firms need to aggressively market such product features in order for investors to gain awareness of investment options that can combat volatility.

2) Facebook: Many Mutual Funds Already Have a Stake
    CNNMoney  |  5/18/2012

Because… Following one of the most highly anticipated IPOs on Friday, Facebook shares dropped 11% yesterday and fell another 9% today with a loss of 18% from their $38 IPO price. CNNMoney reported that nearly 70 mutual funds have snapped up pre-IPO shares on private markets. Shareholders of these funds may become worried about the bumpy ride and start to question the stock’s valuation. Portfolio managers who have invested in Facebook need to openly discuss their views and explain the rationale for owning the stock.

3) BlackRock Announces Secondary Offering of its Common Stock held by Barclays
    Business Wire  |  5/21/2012

Because…Barclay’s decision to dispose of its entire 19.6% stake in BlackRock, valued at $6.1 billion, is another example of banks responding to stricter regulations. The Basel III rules require banks to hold more capital against minority stakes in asset managers and other firms. This has forced Barclays to reassess its investments and withdraw from unprofitable positions in order to optimize its capital structure, bolster the return on equity, and maximize shareholder value.


Weekly Net Flows Report, 5/9 Data (5/18/12)
Total estimated inflows to long-term mutual funds were $6.91 billion for the week ended Wednesday, May 9, according to the Investment Company Institute (ICI). This intake is a dramatic increase from the $2.2 billion gathered during the prior week. Although Equity funds continued in the red, the $2.4 billion in net outflows among Domestic Equity funds was an improvement from the nearly $5.5 billion in outflows during the prior week. World Equity garnered $1.1 billion—another uptick from the $142 million gathered during the prior week. Taxable Bond continued to drive sales with nearly $6.1 billion, while Municipal Bond took in $1.5 billion. Hybrid funds posted $617 million in net inflows compared to $36 million during the prior week.


Source: Investment Company Institute


Don't Miss This (5/15/12)
1) Schwab Research Finds Gap Between Employer and Employee Views on Retirement Preparedness Through 401(k) Plans
    Business Wire  |  5/7/2012

Because… The two Schwab surveys again highlight the need for financial firms to make people aware of the urgency of retirement savings. Firms need to stress the importance of contributing to retirement plans regardless of market conditions. The fear for asset erosion has shaken investor confidence and deterred them from adding more to their retirement accounts. Firms should send the message to investors that bad market timing and impulsive decisions can really hurt their retirement portfolios.

2) Credit Suisse's Asset Management Division Launches Credit Suisse Liquid Alternative Fund
    PR Newswire  |  5/10/2012

Because… Investors who are turning to alternatives for diversification and risk management are placing increased emphasis on liquidity. While some insist illiquid investments can produce alpha in the long run, more investors seem to favor registered, liquid, transparent alternatives. The volatile market in recent years has heightened the need for liquidity. As a result, a growing number of fund managers are using liquid instruments to replicate risk and return profiles of hedge strategies.

3) Deutsche Bank and Guggenheim Partners Focus Their Discussions on a Potential Sale of RREEF
    Deutsche Bank |  5/11/2012

Because…Just as we thought DWS Investments would likely become a part of Guggenheim, the talks between Deutsche Bank and Guggenheim fell apart. The future has remained unclear for a firm that has already gone through a series of acquisitions in the past. This uncertainty will potentially have a negative impact on portfolio manager turnover, investment culture, and fund performance records, which in turn can affect the firm’s value on the market.


Weekly Net Flows Report, 5/2 Data (5/14/12)
Total estimated inflows to long-term mutual funds were $2.24 billion for the week ended Wednesday, May 2, according to the Investment Company Institute (ICI). Equity funds slipped back into negative territory with $5.3 billion in net outflows after posting inflows during the prior week. Domestic Equity experienced $6.6 billion in net outflows, while World Equity gathered $1.3 billion in net inflows. Taxable Bond continued to drive sales, with $6.4 billion in net inflows, representing a 37% increase from the prior week’s total. With nearly $1.1 billion in net inflows, Municipal Bond saw a 31% increase from its intake during the prior week. On the other hand, Hybrid funds stayed in the black with $36 million in net inflows, but it was a significant decline from the $945 million intake during the prior week.


Source: Investment Company Institute


Weekly Net Flows Report, 4/25 Data (5/4/12)
Total estimated inflows to long-term mutual funds were $7.60 billion for the week ended Wednesday, April 25, according to the Investment Company Institute (ICI). This total estimated intake represents a 25% increase from last week’s inflows of $6.10 billion. Equity funds experienced its second consecutive week in positive territory with $927 million. Domestic Equity suffered $1.6 billion in net outflows—a marked improvement from $8.7 billion in outflows during the prior week—while its World counterpart gathered $2.5 billion in net inflows. Taxable Bond continues to lead sales with nearly $4.9 billion in net inflows. Municipal Bond garnered $825 million, a dramatic uptick from $399 million during the prior week. With $995 million in net inflows, Hybrid funds experienced an 18% drop from the prior week’s intake of $1.2 billion.


Source: Investment Company Institute


Weekly Net Flows Report, 4/18 Data (4/27/12)
Total estimated inflows to long-term mutual funds were $6.48 billion for the week ended Wednesday, April 18, according to the Investment Company Institute (ICI). Equity funds managed to pull in $48 million during the week, but its two components represented opposite sides of the spectrum. While Domestic Equity bled $8.68 billion in net outflows, Foreign Equity garnered $8.73 billion in net inflows. With nearly $1.2 billion in inflows, Hybrid funds experienced an 87% increase from its intake during the prior week. Investors continue to remain conservative, putting nearly $4.9 billion and $399 million into Taxable and Municipal Bond funds, respectively.



Source: Investment Company Institute


Don't Miss This (4/24/12)
1) CITs Present Huge Opportunity for Investment Managers in Projected $7 Trillion DC Market
    SEI  |  4/17/2012

Because… The downward fee pressure has driven plan sponsors to look for investment managers that offer collective investment trusts (CITs). Fund firms that consider launching CITs need to assess opportunities and challenges, determine how the CIT fits into their overall business and investment management strategy, evaluate target markets, and develop fee structures and distribution strategies that would be least likely to cannibalize existing business.

2) ICI and U.S. Chamber of Commerce File Lawsuit Challenging CFTC Rule
    ICI  |  4/17/2012

Because… The lawsuit was filed with the belief that all funds would be affected by the CFTC rule. ICI and the Chamber of Commerce argue that “the CFTC’s new rule looks more like regulation for regulation’s sake. The new rule creates confusion, not clarity, by subjecting mutual funds to redundant, overlapping, and unnecessary regulatory requirements. The CFTC completely ignored its statutory duty to evaluate the costs this unnecessary regulation will undoubtedly impose on the economy.” We will monitor how this case will unfold.

3) ETF Providers Announce Creation of the National ETF Association, "NETFA", the First US-Based ETF Industry Trade Association
    PR Newswire  |  4/23/2012

Because…Although investors now have an easy access to ETFs, many of them still do not have adequate ETF knowledge. There are misunderstandings even among regulators, which will undoubtedly hurt ETF industry growth. If the newly-established METFA can play an active role in educating investors and regulators, help them separate myths from realities, and represent ETF sponsors in public debates and the rule-making process, it will benefit the industry in the long run.


Weekly Net Flows Report, 4/11 Data (4/23/12)
Total estimated inflows to long-term mutual funds were $3.87 billion for the week ended Wednesday, April 11, according to the Investment Company Institute (ICI), marking a 48% decrease from the prior week’s estimated inflows. All objectives witnessed decreases from the prior week with the exception of Domestic Equity despite experiencing outflows. Domestic Equity’s outflow of $1.5 billion was an improvement from $4.5 billion in outflows during the prior week. Foreign Equity gathered $617 million in net inflows, bringing Equity’s overall outflows to $918 million. With $630 million in net inflows, Hybrid funds witnessed a dramatic 42% decrease from the prior week. Taxable Bond funds drove sales with nearly $3.9 billion in inflows but suffered a 57% decrease from its intake during the prior week. Municipal Bond collected $267 million in net inflows—its lowest intake this year with the exception of falling into the red during the week ended March 21.



Source: Investment Company Institute


Don't Miss This (4/17/12)
1) Can Corporate Culture Predict Fund Performance?
    The Wall Street Journal  |  4/11/2012

Because… Even though the academic research found little correlation between Morningstar’s stewardship ratings and fund performance, we still believe Morningstar’s criteria which examine corporate culture, fund board quality, manager incentives, fund fees, and regulatory history can help investors evaluate asset managers and make informed decisions. These factors are not supposed to be the only measures in fund selection, but they can be valuable tools to complement quantitative analyses.

2) BlackRock's Street Shortcut
    The Wall Street Journal  |  4/12/2012

Because… This will be the first initiative by an asset manager to set up its own bond trading platform. BlackRock’s goal of launching such a platform is to reduce trading costs, but significant challenges may lie ahead. It remains unknown how many institutional investors will sign onto the platform, whether the platform can provide the necessary liquidity and tight bid/ask spreads, and how well it will perform with a limited number of users when markets become extremely volatile.

3) Commodities Funds Under Fire
    Investment News  |  4/15/2012

Because… The rule that requires the registration with the CFTC will impose a considerable burden on fund providers that already register with the SEC and add compliance costs to already expensive commodities funds. Commodities have been found to be more closely correlated to the broad stock market over the past three years. The increased correlation and heightened regulatory scrutiny will potentially slow down the development of commodities funds.


Weekly Net Flows Report, 4/4 Data (4/13/12)
Total estimated inflows to long-term mutual funds were $7.71 billion for the week ended Wednesday, April 4, according to the Investment Company Institute (ICI). This overall estimated total represents a 133% increase from the prior week’s total of $3.31 billion. Domestic equity bled its largest amount since the first week of January with nearly $4.3 billion in net outflows. However, Foreign Equity garnered $1.2 billion, bringing the overall Equity total to $3.1 billion in net outflows. Hybrid funds experienced its least amount of inflows since the first week of January despite gathering nearly $1.1 billion in net inflows. On the other hand, Taxable Bond gathered its largest inflows in 2012, pulling in nearly $9.1 billion while Municipal Bond captured $572 million in net flows.



Source: Investment Company Institute


Don't Miss This (4/10/12)
1) Touchstone Assets to Grow to $13 Billion with Acquisition of Certain Fund Assets of Fifth Third Asset Management
    Business Wire  |  4/2/2012

Because… With long-term fund assets transferred to Touchstone and money market assets reorganized into Federated money market funds, Fifth Third is exiting the retail mutual fund business (Fifth Third Asset Management will still sub-advise certain funds for Touchstone). We expect more banks to divest non-core operations in order to raise capital and improve their balance sheets. Spinoffs like this provide excellent opportunities for pure asset management firms to achieve economies of scale through acquisitions and enhance their competitive position.

2) Retirement Assets Total $17.9 Trillion in Fourth Quarter 2011
    ICI  |  4/2/2012

Because… Although total U.S. retirement assets were as high as $17.9 trillion, retirement savings accounted for only 36% of all household financial assets. Several recent studies have all pointed to the concern about retirement savings across different generations. IRI research found few boomers are optimistic in their financial future. A T. Rowe Price survey revealed that most younger investors don't believe they will have enough money for retirement. There should be a wealth of untapped opportunity in the retirement market for financial firms to pursue.

3) JOBS Act Provision Opens Door to Hedge Fund Advertising, Trade Group Urges Caution
    Reuters  |  4/10/2012

Because… The JOBS (Jumpstart Our Business Startups) Act will allow hedge funds to market their offerings to the public through mass media channels. For qualified institutional investors and accredited high-net-worth individuals, the exclusivity that comes with hedge fund investing will no longer exist as fund managers will likely provide more access to fund information in order to reach a broader audience. The lifting of the nearly 80-year-old advertising ban will particularly benefit smaller hedge funds if these managers feel comfortable openly discussing their strategies.


Don't Miss This (4/3/12)
1) SEC Signup Draws More Alternatives Managers Than Expected
    Pensions & Investments  |  3/29/2012

Because…The 1,300 registration applications the SEC expects to receive represent a 70% increase from the 750 advisors the agency estimated last July. Hedge funds have been drawing a growing backlash over high fees, lack of transparency, and lack of regulations. The registration requirement can improve transparency and promote accountability, which should help potential investors perform due diligence. Institutional investors, in particular, are keen to invest with registered managers.

2) RiverPark Introduces RiverPark Long/Short Opportunity Fund
    Business Wire  |  4/2/2012

Because…Converting an existing hedge fund to a ’40 Act mutual fund can make an investment strategy available to a broader range of investors, although the asset manager has to forgo the common 2/20 fee arrangement. More hedge fund conversions would mean a more competitive playing field for mutual fund firms planning to offer hedge-like strategies, as fund managers can cite the past performance of the hedge fund when marketing the new mutual fund.

3) Pimco’s Total Return Fund Attracts $1.7 Billion in First Quarter
    Bloomberg  |  4/2/2012

Because…Many people have been asking the question of whether ETFs are cannibalizing mutual funds. The substantial flows into the Total Return Fund, despite the launch of an ETF version, demonstrate that funds with a strong performance record and a reputable manager can still be appealing to investors. The worry that ETFs have posed a lethal threat to the mutual fund industry seems exaggerated at this stage. In addition, the daily disclosure of ETF holdings has not raised the risk of front-running as many have feared.


Weekly Net Flows Report, 3/21 Data (3/30/12)
Total estimated inflows to long-term mutual funds were $6.40 billion for the week ended Wednesday, March 21, according to the Investment Company Institute (ICI). With the exception of the first week of 2012, overall net flows have remained positive. Municipal Bonds had a bumpy ride and suffered $135 million in net outflows, marking the first time they have fallen into negative territory in 2012. Taxable Bond funds continued to lead sales with nearly $5.8 billion in net inflows, bringing cumulative fixed income inflows to approximately $5.7 billion—its second lowest intake in 2012. Domestic Equity remained in the red, with outflows of nearly $1.8 billion, while Foreign Equity gathered $713 million. Hybrid funds continued their positive run in 2012 with $1.2 billion in net inflows.



Source: Investment Company Institute


Don't Miss This (3/27/12)
1) The Hartford to Focus on Property and Casualty, Group Benefits and Mutual Funds Businesses
    The Hartford  |  3/21/2012

Because…The Hartford’s announcement to exit the annuity business and sell the retirement plan business was shocking to its employees, distribution partners, as well as industry observers. For a company with more than 200 years of history, shedding these business units must have been a tough decision. While difficult market conditions have forced The Hartford to reassess its business focus, the pressure from its largest shareholder, a hedge fund manager with an 8.5% stake, may have played a contributory role.

2) Merk to Launch a Hard Currency ETF
    SEC Filings  |  3/21/2012

Because… PIMCO is not the only manager to put an ETF wrapper onto an existing fund. Merk, a currency specialist, is also planning to launch an ETF version of its Hard Currency Fund. The new ETF (HRD), which will be actively managed, is joining a small, but growing group of currency ETFs, currently dominated by WisdomTree, Rydex|SGI, and PowerShares/Deutsche Bank. Since most currency ETFs are index-based single-currency ETFs, HRD may attract investor attention with its broad-based currency exposure.

3) TIAA-CREF Survey Reveals Majority of Americans Miss Opportunity to Contribute to IRAs for Retirement Savings
    TIAA-CREF  |  3/26/2012

Because… The survey result that shows only 22% of Americans are contributing to an IRA is truly alarming. Without the assistance of their employers, individual investors have to make investment decisions by themselves. Even when they rely on their advisor for investment choices, they may still want to make sure their advisor acts on their behalf. So fund firms should assume the responsibility of providing educational resources and sharing investment insight and advice to enhance investor knowledge.


Weekly Net Flows Report, 3/14 Data (3/23/12)
Total estimated inflows to long-term mutual funds were $7.76 billion for the week ended Wednesday, March 14, according to the Investment Company Institute (ICI). Domestic Equity remained in the black for the fourth consecutive week with nearly $2.9 billion in outflows with its foreign counterpart managed to collect $306 million. Despite a 14% decrease from its intake during the prior week, Taxable Bond enjoyed its second highest total in 2012 with nearly $7.8 billion in net inflows. Municipal Bonds garnered $1.3 billion, bringing the total bond inflows to approximately $9.1 billion. Hybrid funds experienced a 16% decrease, slipping to $1.2 billion from nearly $1.5 billion during the prior week.


Source: Investment Company Institute


Don't Miss This (3/20/12)
1) Fixation with Fixed-Income Funds Since 666 has Burned Investors
    Investment News  |  3/7/2012

Because…The fear of losing money has prevented traumatized investors from making sound decisions and getting back into the equity market, although S&P 500 has posted a strong 12.1% return this year and the DJIA reached multi-year highs, topping 13,000 at the end of February. There is an urgent need for asset management firms to talk about the consequences of putting all money into low-yielding bonds and money markets and to demonstrate why stocks should be an essential component of everyone’s portfolio.

2) Money Manager Profitability Growth Stays Flat in 2011, says Casey Quirk
    Pensions & Investments  |  3/8/2012

Because… The analysis is focused on the profitability of publicly-traded money management firms, but it reflects the state of the entire industry. Investors’ flight to safety, the demand for passively-managed funds, and infrastructure investment to keep up with competition have squeezed profit margins at asset management firms. To maintain the same rate of profit growth as in the past, firms may need to resort to the development of alternative investment products or expand through acquisition to generate economies of scale and lower overall costs.

3) American Funds Taking its Talent to YouTube Amid 'Difficult Time'
    Investment News  |  3/13/2012

Because… American Funds, known for keeping its low profile, has finally stepped into social media. The firm has been hit by net outflows for 34 consecutive months. It lost $10.3 billion in the first two months after bleeding $81.5 billion in 2011. The use of social media may not stem the outflows immediately, but the firm’s willingness to embrace new marketing tools can help bridge communication gaps between advisors and portfolio management teams, cultivate an investor community, and establish thought leadership to restore trust.


Weekly Net Flows Report, 3/7 Data (3/16/12)
Total estimated inflows to long-term mutual funds were $12.09 billion for the week ended Wednesday, March 7, according to the Investment Company Institute (ICI). This total, which more than doubled from the prior week, represents the second highest intake in 2012—during the week of February 8, total inflows reached $12.66 billion—and one of the best totals since 2010. As expected, Taxable Bond led sales with a record $9.1 billion, while Municipal Bond gathered nearly $1.7 billion. For the third consecutive week, Domestic Equity experienced outflows. However, this week’s $1.4 billion in outflows was a dramatic improvement from the $3.1 billion shed last week. Foreign Equity garnered nearly $1.3 billion during the week, pulling overall outflows to $126 million. Hybrid funds experienced a 10% decrease, slipping to $1.5 billion from nearly $1.7 billion during the prior week.


Source: Investment Company Institute


Weekly Net Flows Report, 2/29 Data (3/8/12)
Total estimated inflows to long-term mutual funds were $5.51 billion for the week ended Wednesday, February 29, according to the Investment Company Institute (ICI). This total represents nearly half the $10.46 intake from the prior week and marks the lowest figure in 2012 since the first week when overall fund flows fell into the red. Once again, all broad asset classes garnered inflows with the exception of Domestic Equity which experienced outflows of $3.1 billion, marking the fifth week in 2012 that it fell into the red. Foreign Equity managed to garner $226 million in net inflows, a sharp drop from its $1.1 billion intake during the prior week. Taxable Bond drove sales with $5.6 billion in net inflows; however, this represents a 17% decrease from last week’s total. Municipal Bond gathered $1.1 billion in net inflows, a slight decline from its $1.4 billion intake during the prior week. On the other hand, Hybrid funds managed to etch past last week’s intake of $1.55 billion by gathering $1.65 billion in net inflows.


Source: Investment Company Institute


Don't Miss This (3/6/12)
1) Deutsche Bank Enters Exclusive Negotiations with Guggenheim Partners
    Business Wire  |  2/28/2012

Because… DWS Investments had $45.6 billion in U.S. long-term open-end fund assets as of year-end 2011. The addition of DWS assets would turn Guggenheim into one of the top asset management firms if the deal goes through. The acquisition would also give Guggenheim access to DWS’ muni bond fund management team, which has generated attractive long-term returns. In addition, the purchase would expand Guggenheim’s presence in the retail market.

2) PIMCO Introduces the Total Return ETF
    PIMCO  |  3/1/2012

Because…PIMCO’s Total Return ETF (TRXT) has raised $134 million within four days of trading. Its asset-gathering ability can be attributed to the PIMCO Total Return Fund’s strong track record, fund manager’s reputation, as well as TRXT’s low cost and enhanced transparency. The launch of TRXT will invigorate the stagnant active ETF industry. More importantly, PIMCO is setting an example of providing vehicle-agnostic investment options so that all investors, large and small, can benefit from professional investment management.

3) Mass-Affluent An Untapped Market for Banks and Credit Unions
    Bank Investment Consultant  |  3/6/2012

Because… Though the study focuses on banks and credit unions, it has implications for asset management firms as well. Compared to high-net-worth individuals, the mass affluent are not wealthy enough to quality for high-touch services from private bankers. However, with more people joining the club and the revenue generation potential, the inability to tap into this market segment will prove to be a huge mistake. For financial services firms to broaden their reach to the mass affluent, striking a balance between offering high-quality services and maintaining profitability is crucial.


Weekly Net Flows Report, 2/22 Data (3/1/12)
Total estimated inflows to long-term mutual funds were $10.79 billion for the week ended Wednesday, February 22, according to the Investment Company Institute (ICI). All broad asset classes garnered inflows with the exception of Domestic Equity which experienced outflows of $322 million, marking the fourth week in 2012 that it fell into the red. However, inflows of $1.1 billion into Foreign Equity managed to compensate and pulled the overall Equity asset class into positive territory with $809 million. Taxable Bond drove sales, once again, with nearly $7.0 billion in net inflows—a record total for 2012 since garnering $6.5 billion during the week of January 25. Despite a 40% decrease from the previous week, Hybrid funds was the second leading asset class to generate inflows with $1.6 billion followed by Municipal Bond with $1.4 billion in net inflows.


Source: Investment Company Institute


Don't Miss This (2/27/12)
1) SEC Widens Probe of Exchange-Traded Funds
    Reuters  |  2/17/2012

Because… As many are wondering whether the increasing regulatory scrutiny would have a negative impact on the ETF industry growth, ICI published research results that point out that ETFs should not become a scapegoat of market volatility. The ICI analysis shows that episodes of heightened volatility predate the rapid growth of ETFs; volatility is a global phenomenon and occurs in markets where ETFs play a much smaller role than they do in the U.S.; and macroeconomic events offer far more plausible explanations for episodes of volatility.

2) New Retirement Realities and Longer Life Expectancy Cause Many to Rethink Their Approach to Planning for Later Years
    Business Wire  |  2/22/2012

Because… With more people approaching retirement, their concerns about outliving their savings have come to the forefront. They start to question whether their savings would meet their desired lifestyle, to what extent inflation would have a dampening effect on retirement investing, how much they could spend to make their savings last, and how they should balance growth, income, taxes, and liquidity needs within their portfolio. Financial services firms need to address these concerns and help people achieve their savings goals.

3) Fidelity Showcases Thought-Provoking Insights on Range of Global Themes from its Extensive Team of Investment Research Professionals
    Fidelity  |  2/27/2012

Because… In an age of information overload, people often feel overwhelmed by an excessive amount of information, so insights and perspectives from an industry leader that help sort out current marketplace issues are very valuable. Thought-provoking viewpoints on the pulse of the market or industry evolution can stimulate dialogue with clients as well as prospects. Thought leadership can also improve a firm’s visibility and credibility as well as help build a strong reputation.


Weekly Net Flows Report, 2/15 Data (2/24/12)
Total estimated inflows to long-term mutual funds were $11.90 billion for the week ended Wednesday, February 15, according to the Investment Company Institute (ICI). This marks the sixth consecutive week of overall inflows; however, the total represents a 10% decrease from last week’s $13.18 billion in net inflows. For the second consecutive week, all broad asset classes garnered inflows, led by Taxable Bond’s $6.5 billion—its largest intake throughout 2012. Municipal Bond gathered $1.7 billion in net flows, while Hybrid funds collected $2.6 billion. This is the second consecutive week that Equity funds remained in the black. Domestic Equity managed to garner $35 million in assets, a significant decrease from its $1.9 billion intake during the prior week. Foreign equity dropped slightly from $1.7 billion during the week of February 8 to $1.0 billion in net inflows.


Source: Investment Company Institute


Don't Miss This (2/21/12)
1) In India, a Tough Row to Hoe for T. Rowe
    Wall Street Journal  |  2/14/2012

Because… The challenges T. Rowe Price is facing highlight the difficulty for asset management firms that look to exploit fast-growing overseas markets. Expanding presence in developing markets carries special risks. Besides economic and market factors, uncertainty caused by government regulations, changing investor behavior, divergence in management philosophy as well as cultural differences, competition from local investment firms, and lack of brand recognition can all affect a firm’s ability to survive and thrive in a foreign market.

2) New Service Aids ETF Use in 401(k)s
    Investment News  |  2/14/2012

Because… For a long time, operational constraints prevented retirement plans from adding ETFs to their investment menu. With technological advances, accounting and recordkeeping systems have evolved to accommodate ETFs within a 401(k) framework. This will lead to greater acceptance of ETFs in 401(k) plans. Meanwhile, ETF providers will become more proactive in seeking distribution opportunities in the defined contribution space. We expect to see ETF sponsors allocate more resources to develop relationships with plan sponsors and advisors.

3) The Principal Enhances Retirement Business Building Resources for Financial Professionals
    The Principal  |  2/14/2012

Because…Firms that provide business building resources can compete more effectively with others that focus solely on investment products. Billions of dollars moving in and out of retirement accounts are luring more advisors into the retirement business, but advisors constantly grapple with how to build and grow their book of business. Actionable tips and techniques, targeted practice management tools, and materials specially designed for prospecting and marketing should help advisors enhance their practice and explore new ways to uncover hidden opportunities.


Don't Miss This (2/14/12)
1) Deloitte: 401(k) Plan Sponsors Less Confident that Employees Will be Financially Prepared for Retirement
    PR Newswire  |  2/6/2012

Because… The survey findings are strikingly similar to the results of an Aon Hewitt Survey published in January. Aon Hewitt reported that just 4% of employers are very confident that their workers will retire with adequate retirement assets, and 18% are confident that workers will be able to manage their income during retirement. These surveys underscore the urgency of helping plan sponsors enhance plan features and equipping plan participants with tools and educational resources to increase their plan participation.

2) Direxion Launches Managed Futures Strategy Mutual Fund Tied to Next Generation Index
    PR Newswire  |  2/13/2012

Because… Sales of managed futures funds picked up steam in 2011. The category garnered $3.5 billion, although the Barclay CTA Index dropped 3.05% in the year, representing the largest loss for managed futures in 32 years. With investor interest on the rise, we expect more asset managers to develop such strategies to satisfy the increasing demand. Since managed futures returns are highly dependent on manager skill, the selection of an experienced manager or a reliable index (for index-based funds) is critical.

3) Lord Abbett Launches Enhanced Individual Investor Website
    Lord Abbett  |  2/13/2012

Because… Many firms like Lord Abbett have realized that a Website can be a valuable weapon in their marketing arsenal. It is such an indispensable communication channel that firms which underestimate its power will be put at a competitive disadvantage. For a successful Website revamp, it is vital to stress the value delivered to investors. A firm’s unique investment approach or a distinctive business principle should be clearly conveyed to the public. The lack of emphasis would be particularly detrimental to small and mid-sized firms.


Weekly Net Flows Report, 2/1 Data (2/13/12)
Total estimated inflows to long-term mutual funds were $8.00 billion for the week ended Wednesday, February 1, according to the Investment Company Institute (ICI). This marks the fourth consecutive week of overall inflows; however, the total represents a 30% decrease from last week’s $11.46 billion in net inflows. For the second time this year, all broad asset classes garnered inflows with the exception of Domestic Equity, which experienced $1.8 billion in estimated outflows. Foreign equity’s $108 million intake was not able to compensate for the loss. Taxable Bond continues to drive sales and collected nearly $5.9 billion in net inflows, while Municipal Bond gathered $1.6 billion during the week. Hybrid funds experienced nearly $2.2 billion, representing a 16% decrease from last week’s intake of $2.6 billion.


Source: Investment Company Institute


Weekly Net Flows Report, 1/18 Data (1/27/12)
Total estimated inflows to long-term mutual funds were $6.34 billion for the week ended Wednesday, January 18, according to the Investment Company Institute (ICI). Domestic equity slipped back into the red by posting outflows of $804 million, while foreign equity managed to gather $330 million in net inflows. Despite posting a 38% decrease from its total inflows during the prior week, taxable bond continued to drive sales with inflows of $3.8 billion. Inflows from municipal bond remained static from the prior week, collecting approximately $1.7 billion. Also, hybrid funds have maintained their positive streak since late November, with nearly $1.3 billion in net inflows during the week.


Source: Investment Company Institute


Don't Miss This (1/25/12)
1) Study Quantifies Benefit of Retirement Advisor
    401khelpcenter.com  |  1/13/2012

Because…The more plan sponsors rely on plan advisors, the more help plan advisors will need from service providers. Working with retirement plan advisors requires a different set of skills than servicing advisors in other market segments. Firms should have dedicated resources to cultivate long-term relationships, share insights to help them stay abreast of industry trends, develop strategies to assist them in expanding business, and provide customizable tools for them to deliver better services to their clients.

2) SPY, The 1st US ETF, Now A $100 Billion Fund
    IndexUniverse.com  |  1/20/2012

Because… The rise of SPY assets to $100 billion indicates more investors are embracing ETFs for portfolio construction. SPY, one of the most widely held and heavily traded ETFs, has been used by investors for both strategic and tactical purposes. While its dominance will not be challenged in the near future, the competition from other similar offerings--such as iShares S&P 500 Index Fund, Vanguard S&P 500 ETF, and Rydex S&P 500 Equal Weight ETF--should not be shrugged off.

3) IRI Exclusive Report: The Retirement Readiness of Generation X
    IRI  |  1/23/2012

Because… The need for helping Gen Xers is pressing as the information overload, recent market crash, and lack of investment education have shaken their confidence about making sound financial decisions. Compared with Baby Boomers, Gen Xers face tougher financial realities because it may take longer for them to pay off all their debt, they are less likely to receive pension benefits, Social Security income cannot be counted on, their life expectancy will be increased, and medical costs will rise by the time they retire.


FUSE Trends for 2012 (1/23/12)
Click here for FUSE trends for 2012. 


Weekly Net Flows Report, 1/11 Data (1/19/12)
Total estimated inflows to long-term mutual funds were $11.25 billion for the week ended Wednesday, January 11, according to the Investment Company Institute (ICI). This intake reverses the red tide of three consecutive weeks of net outflows and marks the first time since the beginning half of 2011 we’ve seen such an impressive total. Most noteworthy are the positive net inflows of $753 million in domestic equity. Investors have not put their dollars in U.S. stock funds since August. Meanwhile, foreign equity also drew $681 million. Taxable bond drove sales with $6.1 billion, while municipal bond garnered $1.7 billion. Hybrid funds gathered nearly $2.0 billion, a record since collecting $2.3 billion in early November.


Source: Investment Company Institute


Don't Miss This (1/17/12)
1) Funds Trail S&P 500 Index by Most Since 1997
    Bloomberg  |  1/10/2012

Because… Improving fund performance is crucial for asset management firms to boost investor confidence and bring them back to the equity market. While telling investors to stay the course is absolutely necessary, the message won’t be effectively delivered if funds keep generating lackluster returns. It has become increasingly harder to outperform benchmarks. It is time for firms to reassess their models, revise investment strategies, and incorporate new factors that can better deal with market volatility.

2) Charles Schwab Launches Unique 401(k) Plan Solution Designed to Address Barriers to Retirement Saving and Investing
    Business Wire  |  1/10/2012

Because… The DOL’s rules on fee transparency, plan sponsors’ fiduciary concerns, and plan participants’ demand for low-cost options all drive a shift toward a greater use of passive investments. Though Schwab is not the only firm that offers an all-index option for 401(k) plans, its inclusion of both proprietary and non-proprietary funds, an independent advisory service, and an interest-bearing, FDIC-insured savings feature could make the new Schwab program popular among plan sponsors.

3) Transamerica Study Reveals Women Don’t Talk Enough About Retirement
    Transamerica  |  1/10/2012

Because… The research found only 8% of women surveyed believed they are building a large enough retirement nest egg. As more women enter the workforce, take managerial positions, or own small businesses, they have become wealthier than decades ago. On the other hand, women tend to live longer, spend more, and are less knowledgeable about financial matters. So they present a tremendous opportunity for advisors. Asset managers that can help advisors tap into this market segment will set them apart from the competition.


Weekly Net Flows Report, 1/4 Data (1/13/12)
Total estimated outflows from long-term mutual funds were $5.59 billion for the week ended Wednesday, January 4, according to the Investment Company Institute (ICI). The first week of the New Year marks more than double the amount of $2.6 billion in outflows experienced during the prior week. Domestic equity and foreign equity remained in the red, shedding $7.1 billion and $2.3 billion, respectively. On the other hand, taxable bond continued to drive sales with $2.1 billion in net inflows, while municipal bond gathered nearly $1.2 billion. Hybrid funds maintained its streak of inflows by garnering $457 million.

 
Source: Investment Company Institute


Don't Miss This (1/10/12)
1) Pimco Attracts $60 Billion as New Stock Funds Offset Total Return’s Woes
    Bloomberg  |  1/5/2012

Because… Fund firms could take a leaf out of PIMCO’s book. While investors’ flight to fixed-income instruments has certainly helped PIMCO raise assets, it is the firm’s product development effort that has contributed to its significant asset growth. From the introduction of go-anywhere funds to the expansion into stocks, PIMCO has built a solid, diversified product line that gives the firm the ability to weather various market environments without relying solely on its flagship fund.

2) ETF Growth Slows in 2011
    On Wall Street  |  1/5/2012

Because…Although numbers indicate a slowdown in 2011, we expect the ETF industry to continue its growth in a difficult market. The big three – iShares, SSgA, and Vanguard – will remain dominant, but there should be room for other players as well. The rise of alternative fund sponsors (e.g. IndexIQ and ETF Securities) and new entrants with enhanced-index offerings (e.g. Russell and Northern Trust) shows that true innovations that meet investor needs, rather than opportunistic attempts, will improve an ETF provider’s chance of success.

3) Wave of New Offerings Coming from Flagging American Funds
    Investment News  |  1/9/2012

Because… The headline that a firm which rarely launches funds will roll out new offerings evoked much enthusiasm, but the fledgling enthusiasm dissipated the minute we learned that each of eight funds will be a fund-of-funds that invests in existing American funds. Investors are already pulling money out. Would new funds composed of existing funds be able to stem massive outflows? Would new funds be closet indexers as the holdings overlap issue among American funds has become a growing concern? Questions like these need to be answered…


Weekly Net Flows Report, 12/28 Data (1/4/12)
Total estimated outflows from long-term mutual funds were $2.62 billion for the week ended Wednesday, December 28, according to the Investment Company Institute (ICI). This estimated total marks the third week of overall outflows suffered during the month of December. As was the case throughout the majority of the year, domestic equity drove outflows of nearly $4.0 billion, while foreign equity experienced $1.2 billion in outflows. Taxable bond led inflows, despite only capturing $1.2 billion—its lowest inflow throughout the month. Municipal bond gathered $977 million in net inflows. Throughout the month, hybrid funds remained in the black and gathered $389 million during the week. 


Source: Investment Company Institute


Don't Miss This (12/27/11)
1) M&A deals about the same, but dollars involved down
    Pensions & Investments  |  12/15/2011

Because… With such big firms as DWS and TCW on the block, the deal value could go up next year. However, whether the deals can go through will be determined by various factors, including whether these firms can get a premium valuation in the marketplace, what buyers are willing to pay for at this point of time, and how badly the selling parents want to divest their subsidiaries to get the much-needed capital.

2) Forward Plans More Alts Road Shows for 2012
    The Mutual Fund Wire  |  12/20/2011

Because…Allocations to alternatives will increase as the high level of market volatility continues into 2012. With alternatives expected to play a bigger role in investor portfolios, education is becoming indispensable. For advisors planning to invest in alternatives, just knowing what they are is not enough. Guidance from product providers on how to use different alternative strategies or asset classes to better manage risks would be more helpful.

3) ING U.S. Encourages More Consumers to Make Retirement Planning and Saving a Priority in the New Year
    PR Newswire  |  12/21/2011

Because… The New Year is a time to reflect on how we as an industry should help American people save for the future. By identifying five simple but practical resolutions, ING is raising public awareness on the importance of planning. Market volatility, economic slump, upcoming election, and regulatory changes could deter investors in 2012, so financial firms need to motivate and engage them so that more people know how to set long-term savings goals and put their financial priorities in order.


Weekly Net Flows Report, 12/14 Data (12/22/11)
Happy Holidays!

Total estimated inflows to long-term mutual funds were $823 million for the week ended Wednesday, December 14, according to the Investment Company Institute (ICI). This estimated total reverses two consecutive weeks of outflows. Domestic equity continued to drive outflows, with nearly $4.0 billion in outflows followed by $1.5 billion in outflows from foreign equity. On the other hand, taxable bond led inflows of $4.7 billion. Municipal bond gathered $868 million in net inflows; however, this estimated total represents a 40.4% decrease from last week’s intake of $1.5 billion in net inflows. Hybrid funds experienced its second consecutive week of net inflows with $745 million, representing a 31.6% decrease from the $1.1 billion garnered during the prior week.


Source: Investment Company Institute


Don't Miss This (12/20/11)

1) JPMorgan Fund CEO Woos Clients with Simplicity
    Reuters  |  12/13/2011

Because… JP Morgan is the fastest growing firm among the ten largest fund firms (including both long-term mutual fund and ETF assets), with assets rising 14% and 18% from year-end 2010 and a year ago, respectively. It has raked in $18 billion this year through November, becoming the industry’s 4th best-selling firm. While firms do not need to follow strategies implemented by industry leaders, benchmarking best practices should help them identify improvement options.

2) Nuveen Helps Advisors Build Strong Retirement Plan Practice
    Business Wire  |  12/14/2011

Because… The need for advice among plan sponsors has spurred the growth of retirement plan advisors. As more advisors enter the field and take market shares away from insurance advisors and benefit brokers, financial services firms targeting the retirement market cannot afford to overlook the needs of this group. Asset managers that have a better understanding of these advisors and develop value-added programs will gain a competitive advantage in the DCIO space.

3) Schwab Cuts Ribbon on First Franchise Branch
    Investment News  |  12/14/2011

Because… The opening of Schwab’s first franchise branch has drawn much attention to the firm’s Independent Branch Services program. Schwab is basically leveraging its strong brand to expand its presence. While it is too early to predict whether the franchise model will be successful, we believe many in the industry will watch closely to see how Schwab balances the needs of existing company affiliates, independent franchisees, and independent RIAs.


Weekly Net Flows Report, 12/7 Data (12/16/11)
Total estimated outflows from long-term mutual funds were $3.34 billion for the week ended Wednesday, December 7, according to the Investment Company Institute (ICI). This estimated total marks the second consecutive week of outflows; however, it is a dramatic improvement from the $9.25 billion in outflows during the prior week. Concerns regarding European debt led to nearly $5.8 billion in outflows from domestic equity and $2.2 billion for its foreign counterpart. On the other hand, hybrid funds reversed its three week streak of outflows and garnered $1.1 billion in net inflows for the week. Bond funds gathered $3.5 billion, with taxable bond funds contributing $2.1 billion and $1.5 billion from municipal bond funds.


Source: Investment Company Institute


Don't Miss This (12/13/11)
1) Vanguard Exchange-Traded Funds Begin Trading on Toronto Stock Exchange
    Business Wire  |  12/6/2011

Because…Expanding to foreign markets is a viable growth strategy for ETF providers, especially for large firms like Vanguard. High mutual fund fees, a burgeoning ETF industry, and dominance of top ETF issuers all suggest that Canada is a source of great market potential. With its scale, low-cost model, high-quality client services, and investor education initiatives, Vanguard should be well-positioned for asset gathering. Vanguard’s entry could also drive other Canadian ETF providers to reduce their management fees.

2) Morningstar Launches New Fixed-Income Sectors
    Morningstar  |  12/12/2011

Because… Fixed income markets are more complex than equity markets, so efforts to provide more detailed information that helps investors navigate the fixed income space should be commendable. However, the lack of domestic/foreign asset split, breakdown between developed and emerging markets, and transparency on currency exposure could frustrate investors’ attempt to optimize asset allocation. Morningstar will address some concerns in future rollouts, but problems related to inadequate disclosure by fund firms will not be easily fixed.

3) Goldman Sachs to Buy Mutual Fund Unit of Dividend Growth
    Bloomberg |  12/12/2011

Because…Goldman Sachs is joining the likes of John Hancock and American Beacon to shore up investment capabilities through fund adoptions. In this case, both parties will benefit from the deal. For Dividend Growth Advisors, its shareholders will be able to enjoy the economies of scale, as evidenced by the proposed drop of 45 basis points in the Rising Dividend Growth Fund's expense ratio. Meanwhile, Goldman immediately has a 5-star offering that can satisfy investor demand for dividend-paying products.


Weekly Net Flows Report, 11/30 Data (12/8/11)
Total estimated outflows from long-term mutual funds were $9.24 billion for the week ended Wednesday, November 30, according to the Investment Company Institute (ICI). This estimated total reverses six weeks of total inflows. Equity funds suffered its largest outflow since July 27, with nearly $6.7 billion in outflows from domestic equity and approximately $3.0 billion from foreign equity. Hybrid funds experienced its third consecutive week in the red with net outflows of $778 million. Taxable bond funds managed to garner $709 million in net inflows—a dramatic decrease from its $6.2 billion intake during the prior week. Municipal bond also gathered $449 million in net inflows, bringing the cumulative bond total to nearly $1.2 billion in net inflows.


Source: Investment Company Institute


Don't Miss This (12/6/11)
1) Study: Small Business Owners Say Number of Workers Financially Unprepared for Retirement at Crisis Level
    Nationwide  |  11/28/2011

Because… Helping millions of small business employees save for retirement has increasingly become a top priority for financial firms. Multiple Small Employer Plan (MSEP), not a new concept, has yet to be widely utilized. MSEPs could lower costs and simplify administrative procedures for plan sponsors and open up new market opportunities for financial firms; however, providing services to a MSEP requires operational know-how, legal expertise, technological capacity, and most importantly, commitment.

2) Fund Executives Can't Live without Consultants
    Pensions & Investments  |  11/28/2011

Because… As investment consultants play a greater role in helping institutional investors with manager selection and asset allocation, asset management firms need to commit more resources to build and deepen consultant relationships. It is essential to have a dedicated team to work with consultants, understand both the firm’s investment process and consultants’ requirements, submit portfolio updates in a timely fashion, and share market insight and outlook with consultants to become their trusted partner.

3) Fidelity Plans Head-First Dive into ETFs
    IndexUniverse.com  |  12/2/2011

Because… A mutual fund giant that stayed on the sidelines for years is finally warming to ETFs. Industry-wide mutual fund redemptions as well as the significant asset decline of its flagship Magellan Fund may have prompted Fidelity to re-evaluate its ETF strategies. Though it seems late to the party, strong distribution capabilities and marketing muscle could turn Fidelity into a powerful competitor. Product differentiation and the determination of the pricing model will also be crucial to the success of the firm in the crowded ETF market.


Weekly Net Flows Report, 11/22 Data (12/2/11)
Total estimated inflows to long-term mutual funds were $1.40 billion for the period November 17 through November 22, according to the Investment Company Institute (ICI). This estimated total represents an astonishing 124% increase from the $625 million intake during the prior week. For the second consecutive week, bonds were the only funds to post net inflows, with taxable bond garnering the lion’s share of $6.2 billion and municipal bond gathering $333 million. Hybrid funds suffered outflows of $1.4 billion, but this estimate is quite an improvement from the nearly $4.6 billion shed during the prior week. Domestic equity appeared to have revival during the prior week with only $135 million in net outflows. However, this was short-lived, and domestic equity experienced $3.7 billion in net outflows, while foreign equity posted $23 million in net outflows.

Source: Investment Company Institute


Don't Miss This (11/29/11)
1) TD Ameritrade Announces the Launch of Amerivest Supplemental Income Portfolios
    Business Wire  |  11/21/2011

Because… The launch of Amerivest Supplemental Income Portfolios indicates that more distributors are responding to investor demand for steady retirement income. However, income is generated through investing in bond mutual funds, which may turn away investors looking for guarantees. Also, with the minimum investment requirement of $25,000 and the fee schedule ranging from 0.75% to 0.30%, the service is not accessible to average investors with a small savings account.

2) Are Benefits of Investing in Alternatives Overstated?
    PLANSPONSOR  |  11/22/2011

Because… The Center for Retirement Research study may dampen the enthusiasm of investors who are eager to increase their allocation to alternative investments. The study found that alternatives exerted a positive influence on returns before the crisis, but plans with alternative allocations actually performed worse than those without during the crisis. Research findings like this may not change asset managers’ plan to expand into alternatives, but they may give them pause to reassess the viability of their effort.

3) Legg Mason Files for Western Asset Ultra-Short Duration ETF
    SEC Filings  |  11/23/2011

Because… The competition among actively managed fixed-income ETFs is sure to become more intense. Besides Legg Mason, Federated also filed for the Active UltraShort Fixed Income ETF in August. The space is dominated by PIMCO’s Enhanced Short Maturity Strategy Fund (MINT). The expertise in fixed-income management and more competitive expense ratios will help these newcomers strip market share from existing offerings, although they may not achieve the same level of success as MINT in a short time period.


Weekly Net Flows Report, 11/16 Data (11/23/11)
Total estimated inflows to long-term mutual funds were $625 million for
the week ended Wednesday, November 16, according to the Investment Company Institute (ICI). This estimated total continues on a downward trajectory,
representing a 27% decrease from the $857 million intake during the prior week.
For the first time in quite awhile, domestic equity funds were not primarily
responsible for driving outflows. Despite domestic equity shedding $135 million
in net outflows, foreign equity was responsible for $1.1 billion in net outflows.
Moreover, hybrid funds experienced nearly $4.9 billion in net outflows. Once
again, bond funds experienced sales this week with taxable bond garnering
nearly $5.6 billion and municipal funds capturing $911 million in net inflows.


Source: Investment Company Institute


Don't Miss This (11/22/11)
1) Retirement Plan Fees Driven by Many Factors: Deloitte/ICI Study
    ICI  |  11/15/2011

Because… Fee disclosure regulations, the need for cost reduction, and fiduciary responsibilities are putting tremendous pressure on plan sponsors to frequently review plan fees. As more sponsors are approaching investment managers to renegotiate their contracts, asset managers need to be ready for open and candid discussions. In today’s tough environment, firms may have to cut advisory fees to maintain relationships or expand services and improve product performance to justify fees charged.

2) Legg Mason’s Bill Miller Will Exit Main Fund After It Falls Behind Peers
    Bloomberg  |  11/17/2011

Because… While the media focus has been on how Bill Miller ended his 30-year run as portfolio manager of the Value Trust Fund and whether his past market-beating streak could be attributed to luck or skills, it is more imperative for the firm to communicate with both retail and institutional investors if the manager change will affect the investment style and discipline as well as what organizational resources will be tapped to assist the new management team in performance turnaround efforts.

3) More Large Employers Freeze Defined Benefit Plans — Analysis
    Pensions & Investments  |  11/17/2011

Because…The freeze of DB plans reduces unpredictability for plan sponsors and changes their risk perception. Sponsors of frozen plans are more likely to revamp their investment strategies and shift asset allocations, which could have considerable implications for asset managers serving the DB market. Firms that provide LDI (liability-driven investment) solutions, have strong risk management capabilities, and play a consultative role will be able to capture more market share in this market segment.


Weekly Net Flows Report, 11/9 Data (11/18/11)
Total estimated inflows to long-term mutual funds were $836 million for
the week ended Wednesday, November 9, according to the Investment Company
Institute (ICI). This estimated total represents a 60% decrease from the $2.1
billion intake during the prior week. This overall decrease was primarily
driven by the $4.6 billion in net outflows from equity funds—comprised of
nearly $3.7 billion shed from domestic equity and $948 million from foreign
equity. Although hybrid funds garnered nearly $1.3 billion in net inflows, it
was a dramatic slip from its $2.3 billion gathered during the prior week. Bond
funds continued on a positive streak and bested its total from the prior week.
Taxable bond funds gathered $3.2 billion and municipal bond $1.0 billion,
representing a 32% and 56% increase from the prior week, respectively.


Source: Investment Company Institute


Don't Miss This (11/15/11)
1) ETFs Mimic Stock Pickers' Strategies
    The Wall Street Journal  |  11/7/2011

Because… We’ll be seeing more of these so-called strategy-based ETFs, which are in fact rules-based, enhanced-indexing ETFs. This type of ETFs incorporates elements of active management into traditional indexing, providing the potential for alpha generation. However, the complexity of stock-picking algorithms, relatively higher costs than those of traditional index-based funds, and level of transparency of multi-factor models may deter investors in the retail market.

2) Seventh Annual AllianceBernstein Defined Contribution Survey Finds Most Investors Understand Target-Date Funds -- but Expect Them to Provide Sufficient Retirement Income
    PR Newswire  |  11/7/2011

Because… The survey confirms that target date funds (TDFs) have continued to gain popularity, despite skepticism from some critics. TDF providers, as well as plan sponsors, should be given credit for investors’ satisfaction of the product and understanding of its basic features; however, they should not rest on their laurels. Besides enhancing the product design to address heightened market risks, TDF managers need to work diligently on decumulation solutions to quench investors’ thirst for a steady stream of retirement income.

3) Morgan Looking to Quadruple Alternative Assets to $300B
    Money Management Executive  |  11/9/2011

Because…Morgan Stanley Smith Barney is not in the minority to go after alternative assets. With a wave of new alternative fund launches, wider media coverage, and alternative specialists foraying into the retail space, alternative investments are creeping stealthily into the mainstream. The use of alternatives has become prevalent among institutional investors, including pension funds and sovereign wealth funds. Investment consultants are also enhancing their alternative investment capabilities as they anticipate a boost in alternative mandates.


Weekly Net Flows Report, 11/2 Data (11/11/11)
Total estimated inflows to long-term mutual funds were $2.22 billion for
the week ended Wednesday, November 2, according to the Investment Company
Institute (ICI). This marks the third consecutive week in the black, quite the
reversal from the opening week of October when overall net outflows totaled
nearly $11.2 billion. Taxable bond funds continued to drive sales with $2.4
billion; however, this represents a significant decrease from its $4.1 billion
intake during the prior week. Its counterpart, municipal bond funds, garnered
$648 million in net inflows. Hybrid funds have been attracting sales at a steady
clip, with $2.3 billion in net inflows. Once again, domestic equity shed nearly
$3.4 billion while foreign equity managed to capture $174 million in net
inflows, bringing the cumulative equity total to nearly $3.2 billion in net
outflows.



Source: Investment Company Institute



Don't Miss This (11/8/11)
1) T. Rowe Price Funds Now Available Without Transactions Fees on Schwab Mutual Fund OneSource for Advisors
    T. Rowe Price  |  10/28/2011

Because…The T. Rowe-Schwab deal is a win-win for all the parties. T. Rowe Price can gain access to Schwab’s 6,600 RIAs with $700 billion of combined assets. For Schwab, the addition of T. Rowe Price funds makes its OneSource platform at least equally competitive as other major NTF platforms. Finally, advisors ultimately benefit the most since they can access one of the top managers without paying any transaction fees.

2) Vanguard to Further Expand Its Index Fund Roster with Introduction of Two International Bond Funds and ETFs
    Business Wire  |  10/31/2011

Because…New funds will fill a gap in Vanguard’s product line, satisfy investor demand for international diversification, and bring greater competition to the international bond fund space. However, there are some caveats. First, while strategies of hedging currency exposure or investing only in U.S.dollar-denominated international bonds shield investors from currency risk, investors will not benefit from local currencies’ appreciation. Second, although both funds carry significantly lower expense ratios than category averages, they charge purchase fees, which may dampen investor returns.

3) Small Retirement Plans are Big Opportunity for Financial Professionals
    Principal  |  11/1/2011

Because…The small plan market is often ignored by investment firms. With industry giants including BlackRock, Vanguard, and T. Rowe Price pursuing small plans, more firms may begin to target this market segment. To better serve small plans, investment firms need to help plan sponsors keep up with the latest regulatory updates, explain fiduciary responsibilities in a clear and easy-to-understand manner, improve fee transparency, and incorporate plan demographics into the development of educational programs.


Weekly Net Flows Report - 10/26 Data (11/4/11)
Total estimated inflows to long-term mutual funds were $3.79 billion for the week ended Wednesday, October 26, according to the Investment Company Institute (ICI). The closing week of October experienced an impressive turnabout from the opening week when total net outflows were $11.2 billion. Once again, taxable bond funds drove sales with $4.2 billion, despite an 18% decrease from its intake during the prior week. Municipal bonds remain on a positive streak with $850 million in net inflows. Hybrid funds experienced its third week of net inflows, with $2.6 billion, representing a record total since collecting $2.0 billion during the week of September 7, 2011. On the other hand, equity funds continue in the red with outflows of nearly $3.9 billion. Domestic equity suffered $3.2 billion in outflows, while foreign stock slipped into negative territory with $680 million in outflows.



Source: Investment Company Institute



Weekly Net Flows Report - 10/19 Data (10/27/11)
Total estimated inflows to long-term mutual funds were $3.93 billion for the week ended Wednesday, October 19, according to the Investment Company Institute (ICI). This week’s inflows turn the tide of three consecutive weeks of outflows. Once again, taxable bond funds drove sales with $5.1 billion, while municipal bonds—which have not experienced outflows since the week of August 24—collected $548 million. On the other hand, equity funds continue to be battered with outflows of nearly $3.3 billion. Domestic equity suffered slightly less than $3.5 billion in outflows, while foreign stock gathered $177 million which represents a significant change from the $1.6 billion in outflows last week. Hybrid fund flows have been inconsistent for quite some time, but this week’s $1.6 billion in net inflows represents its best intake since collecting $2.0 billion during the week of September 7, 2011.


Source: Investment Company Institute


Don't Miss This (10/25/11)
1) Hispanics Still Believe in the American Dream, but Say Competing Financial Priorities Stand in the Way
    MassMutual | 10/18/2011

Because… Ethnically diverse investor segments are underserved but present fast growing opportunities. Asset management firms have lagged behind banks and insurance companies in their multicultural efforts. Educational workshops with savings and investing tips, email newsletters with messages resonating with a particular group, collaboration with professional associations in ethnic communities, and support for ethnic group-focused financial advisors should help forge long-term relationships with people belonging to different cultural background.

2) ETF Congressional Hearing Testimonies
    IndexUniverse.com | 10/19/2011

Because… The one hour and a half hearing touched upon controversial issues such as ETFs’ role in market volatility and classification of ETFs with different structures. The presence of executives from BlackRock, Nasdaq, and Kauffman Foundation (a starch opponent of ETFs) made the discussion very interesting. However, the discussion would have gotten more stimulating and engaging if a representative from a leveraged/inverse ETF sponsor had also been on the panel.

3)