Vanguard | 5/19/2021
Because… Vanguard is known for providing low-cost, index-based funds. It moved into private equity last year by teaming up with HarbourVest to offer private equity strategies to institutional clients. The expansion of private equity access to qualified individual investors shows the firm’s commitment to strengthening its relationships with high-net-worth individuals. Meanwhile, private equity fees are much higher than those of publicly traded investment vehicles, which could help Vanguard with additional revenue generation. However, not all private equity strategies can outperform their public equity market counterparts consistently. Vanguard found that historically there has been significant dispersion in returns of leveraged buyout, growth equity, and venture capital, three primary sectors of the private equity market. With the uncertainty of achieving higher returns, significant illiquidity and other market risks, as well as limited transparency, it remains to be seen whether private equity can be an effective portfolio diversifier.
Reuters | 5/25/2021
Because… According to Goldman Sachs, investible assets held by Chinese households are set to surpass $70 trillion by 2030, with about 60% allocated to securities, mutual funds, and wealth management products. The increased Chinese household wealth is enticing foreign wealth management companies to establish or expand their presence in the country. Working with a local firm requires a deep understanding of local culture, regulatory issues, partners’ management philosophies and styles, and operational know-how. On the one hand, the joint venture with the largest bank in China will enable Goldman Sachs to leverage ICBC’s brand recognition and tap into China’s rising wealth. On the other hand, financial firms should understand navigating the Chinese regulatory environment may be harder than expected. The halt of Ant Group’s much anticipated IPO, which was reportedly to raise a record $37 billion, just days before it was set to begin trading, suggests the important role Chinese regulators play in the financial market.
Business Wire | 5/25/2021
Because… This is not the first time Hartford entered the semi-transparent ETF space. Global Impact NextShares Fund, which rolled out in December 2017, was liquidated in June 2019. Since the launch of three multifactor ETFs in February 2015, Hartford has amassed $3.8 billion in ETF assets at the end of March 2021. Its ETF assets increased 18% from a year ago, but they fell 9% from the 2019 peak of $4.2 billion. The firm’s ETFs experienced net redemptions of $389 million last year when the industry raked in $505.6 billion. Hartford’s ETF sales turned to a positive $61 million in 1Q21 thanks to flows of $205 million into its bond ETFs. Multifactor Developed Markets (ex-US) ETF, with assets of $2.0 billion, accounted for 51% of the firm’s ETF assets. The fund, which parted with $575 million in 2020 and $184 million in 1Q21, was largely responsible for the firm’s weak ETF sales. Hartford only offers two U.S. Equity ETFs with combined assets of $334 million. The new active semi-transparent ETFs should boost offerings in this asset class.