1) After Summer of Optimism, Worries over Future Market Crash Reach Highest Levels in 2021
Allianz Life | 10/4/2021
Because… Allianz Life’s Q3 Quarterly Market Perceptions Study, which shows investor worries about retirement risks, was conducted in September, when the stock market took a dive. The S&P 500 Index plunged 4.76% in the month, the worst since March 2020. October is historically one of the most feared months as the Bank Panic of 1907, the Stock Market Crash of 1929, and Black Monday 1987 all happened during October. Now is a good time for asset management firms to address investor concerns. Otherwise, emotions, such as the fear of another crisis that would wipe out their assets, can lead to irrational investment decisions. Fund firms should calm investors and introduce benefits of staying on course and taking advantage of the stock price swings. Letting numbers speak for themselves can be an effective way of convincing investors. Sharing portfolio managers’ perspectives and the near-term market outlook are also indispensable when investors become jittery about inflation, economic issues, COVID-19, and geopolitical uncertainties.
2) J.P. Morgan Asset Management Expands Active Equity ETF Suite with Launch of JPMorgan Active Value ETF
PR Newswire | 10/5/2021
Because… JP Morgan’s ETF asset ranking moved to #7 as of June 2021 from #9 at the end of 2020, which is quite impressive in a highly competitive industry. Its ETF assets reached $65.4 billion at the end of June, up 45% from year-end 2020 and 80% from a year ago. The firm, with $24.7 billion of active ETF assets, was the fourth largest active ETF provider. It was also the third best-selling active ETF sponsor in both 2020 and 1H21. However, its active ETF assets are concentrated in fixed-income ETFs. It had $20.7 billion of assets in active Taxable Bond ETFs, accounting for 84% of its active ETF asset total. Unlike ActiveBuilders U.S. Large Cap Equity ETF launched in July, which invests in Large Blend stocks, Active Value ETF is exposed to the Large Value market. There were only 20 actively managed Large Value ETFs as of June, offered by 16 ETF issuers. Their combined assets of a mere $1.3 billion, with the largest ETF having only $249 million, suggests that there are ample opportunities in this market segment.
3) DOL Proposes New Rule on ESG Investing in Retirement Plans
Plansponsor | 10/13/2021
Because… According to the Plan Sponsor Council of America, around 3% of 401(k) plans had an ESG fund, and less than 1% of plan assets were held in such funds. The DOL’s proposed rule would put a regulatory stamp of approval on ESG investing inside retirement plans, which could increase plan sponsors’ ESG adoption substantially. However, plan sponsors should tread carefully if they plan to add ESG funds to their investment menu. First, they need to ensure the majority of their participants embrace the ESG concept. Second, their primary fiduciary duty is to act in the best financial interests of their plan participants at all times. Since the jury is still out on the outperformance of ESG funds. plan sponsors need to assess risk and return implications of their ESG selections so that participants will not sacrifice financial gains. Third, ESG funds often come with higher fees because of additional screening and research. Plan sponsors have the fiduciary responsibility of keeping their plan expenses low to avoid litigation.