1) 2020 Investment Balance Trends in HSAs
Devenir | 4/5/2021
Because… The Devenir report shows that $23.8 billion in health savings accounts (HSAs) were invested in 2020, increasing from $4.2 billion at the end of 2015. The researcher projects that the HSA investments will grow to $40.9 billion by 2023. Despite the asset growth, the average total balance for HSA investment was $17,975, including both deposits and investments combined. Since 80% of HSA providers require a minimum balance of at least $1,000 to invest, as reported by PSCA, many account holders simply do not have sufficient money to put into any investment options. However, EBRI data published in February 2020 revealed that only 17% of accounts that opened for 15 years or more had investments other than cash, which means most account holders, including those with higher balances, have not taken advantage of the HSA benefits of tax-free investment gains and withdrawals. HSA providers should encourage account holders, especially younger individuals who may not need to use the money for medical purposes soon, to invest their HSA funds.
2) Vanguard Launches Ultra-Short Bond ETF
Vanguard | 4/7/2021
Because… Vanguard pulled $140.6 billion into its mutual funds and ETFs in 2020. The firm garnered $37.5 billion in the first two months of 2021. At the current pace, its 2021 inflows will surpass 2020’s total without question. Vanguard Ultra-Short Bond ETF (VUSB), which is the firm’s first active bond ETF, brings the total number of its Taxable Bond ETFs to 19. VUSB’s expense ratio of 0.10% is less than half of the average expense ratio of 0.25% for actively managed Ultrashort Bond ETFs in the Morningstar database, but it is not the cheapest in the category. Vanguard Ultra-Short-Term Bond Fund, VUSB’s mutual fund counterpart, raised $9.1 billion last year. The 4-star fund ranked in the top 18%, 15%, and 29% for 1-, 3-, and 5-year returns, respectively. If the mutual fund’s track records provide any reference for investors, VUSB can be a rising star in the Ultrashort Bond category, even though it will not pose an immediate threat to incumbents.
3) Amundi Enters into Exclusive Negotiations for the Acquisition of Lyxor
GlobeNewswire | 4/7/2021
Because… Amundi, Europe’s largest asset manager, is no stranger to M&A deals. It acquired Pioneer Investments in 2017 and Spain-based Sabadell Asset Management in 2020. Its purchase of Lyxor will make it more difficult for U.S.-based ETF managers with a European presence to compete. Amundi currently has about 6.2% of the ETF market share. Combined with Lyxor’s 7.4%, it will have 13.6% of the market with €142 billion of assets. In comparison, iShares had €466.3 billion of assets in Europe with a 44.3% market share, and DWS held €115.9 billion with a 11.0% market share. Although Amundi still falls behind iShares by a wide margin, it will overtake DWS to become the second largest ETF provider. Since there is significant overlap in Amundi and Lyxor’s ETF lineups, there will be fund mergers, which will lead to cost reduction. Their cheaper ETF offerings mean that the rivals will have to review their pricing structure and adjust their own funds’ expense ratios.