ETF.com | 9/17/2021
Because… While we do not usually pay attention to weekly flows, sales of $62.2 billion in the past week are nevertheless noteworthy. To put the number into context, last week’s inflows were 47% more than the average monthly flows of $42.3 billion in 2020 when ETFs generated record sales of $507.4 billion. U.S. Equity dominated with $52.7 billion, accounting for 85% of the weekly sales. International Equity and U.S. Fixed Income gathered $4.1 billion and $4.0 billion, respectively. These three asset classes represented 98% of the total. SPDR S&P 500 ETF led the pack with $10.6 billion, more than tripling the second best-seller’s $3.5 billion. Vanguard reigned supreme with seven ETFs on the top 10 best-seller list (#2-#8), while Invesco took two spots. BlackRock, the largest ETF provider, however, was noticeably absent among the top 10. Vanguard also enjoyed a massive lead in the year-to-date sales. It raked in $231.1 billion this year through August, almost doubling BlackRock’s $121.6 billion. SSGA was a distant third with $49.6 billion.
PR Newswire | 9/17/2021
Because… We believe a few factors could drive the trend toward increased adoption of custom target-date funds (TDFs). Compared with off-the-shelf TDFs, which tend to have limitations in terms of asset allocation, risk exposure, and the ability to provide retirement income, custom TDFs can be a better solution to address participants’ needs. Pre-packaged TDFs may not have a glide path that is best suited for plans with a unique workforce. Without taking the demographic profile of the workforce and employees’ benefit structure into consideration, those TDFs can be either too aggressive or too conservative, resulting in ineffectiveness in helping employees achieve their retirement savings goals. In addition, plan sponsors, under ERISA, have the fiduciary obligation to act in the best interest of participants. With off-the-shelf TDFs, underlying funds are packaged into one portfolio over which plan sponsors have no control. Custom TDFs, on the other hand, offer the flexibility of selecting managers with particular expertise in each asset class. The fact that plan sponsors engage in a prudent process to identify best-in-class investment options and qualified managers is strong evidence of plan sponsors assuming fiduciary responsibilities.
Standard and Poor’s | 9/21/2021
Because… According to the S&P’s SPIVA Scorecard, in 15 out of 18 categories of domestic equity funds, the majority of actively managed funds underperformed their benchmarks. Over the 12-month period, 58% of large-cap funds, 76% of mid-cap funds, and 78% of small-cap funds trailed the S&P 500, S&P MidCap 400, and S&P SmallCap 600, respectively. Active asset managers looking to retain fund shareholders and attract new investors should outperform their benchmarks. Many investors have switched to passive funds because they lack the confidence in portfolio managers’ ability to consistently beat the market. Since active funds have higher expense ratios than their passively managed counterparts, active funds would have to excel by a wide margin in order to justify their value. The fact that few fund managers can achieve this feat in the long term has driven investors to place their trust in passive funds. Many retail investors also lack the knowledge and dedication to conduct due diligence. High returns and low expense ratio are typically their main selection criteria. Therefore, improving fund performance and reducing fees should remain the primary focuses for active managers.