1) Putnam to Liquidate Two Alternative Strategy Funds
SEC Filings | 3/26/2021
Because… Alternative strategy funds are having a tough time. In addition to Putnam, John Hancock filed to terminate the Alternative Risk Premia Fund in May, and PIMCO will also liquidate its Multi-Strategy Alternative Fund in May. According to FUSE Research’s data, alternative strategy funds experienced net redemptions of $14.1 billion in 2020 after parting with $23.1 billion in 2019. Assets declined to $188.6 billion in 2020 from $198.5 billion a year ago. The investable HFRI 500 Fund Weighted Composite Index gained 9.8% last year, about half of the S&P 500 Index’s return of 18.40%. Investors seeking alpha expect their alternative strategy funds to beat the stock market. Lagging performance can be a key factor for them to bail out or shun this asset category. Alternative fund managers should ensure investors understand what their primary investment objective is – to reduce volatility, minimize risks, seek diversification, or pursue excess returns. Only with a clearly defined goal can investors stay the course without being swayed by market vagaries and return fluctuations.
GlobeNewswire | 3/29/2021
Because… Guinness Atkinson made history by becoming the industry’s first asset manager to convert mutual funds into ETFs, but the increased visibility may not necessarily translate into an immediate asset-gathering success. Since the new ETFs are actively managed, investors may want to review the performance records of their mutual fund originals. At the end of 2020, Guinness Atkinson Dividend Builder Fund ranked in the 57%, 34%, and 38% for 1-, 3-, and 5-year returns, respectively. Guinness Atkinson Asia Pacific Dividend Builder Fund ranked in the 85%, 84%, and 76% for the same respective periods. SmartETFs Dividend Builder ETF charges 0.65%, compared with an average 0.47% for passively managed World Large Stock ETFs. SmartETFs Asia Pacific Dividend Builder ETF has an expense ratio of 0.78%, compared with an average of 0.46% for passive Pacific/Asia ex-Japan Stock ETFs. Investors, who typically focus on returns and costs, may prefer index-based funds if active funds cannot generate stellar performance as expected, regardless of investment structure.
3) BlackRock Expands iShares Fixed Income ETF Range
etfexpress | 3/29/2021
Because… Besides BlackRock, Fidelity filed for Environmental Bond Fund last Friday. While more asset managers are introducing ESG-focused bond funds, fixed income has remained an asset class with slower ESG adoption than their equity counterparts. FUSE Research analysis shows that mutual funds and ETFs with ESG/Sustainable Investing strategies held assets of $28.8 billion in Taxable Bond and $1.6 billion in Municipal Bond, respectively, at the end of 2020, compared with $140.1 billion in U.S. Equity and $40.4 billion in International Equity. Taxable Bond ESG funds grew their assets at a compound annual rate of 22% during the three-year period from 2017 to 2020, compared with U.S. Equity’s 30% and International Equity’s 47%. Taxable Bond ESG funds gathered $5.7 billion, $10.7 billion, and $13.4 billion over the past 1-, 3-, and 5-years, compared with $23.5 billion, $33.8 billion, and $35.4 billion into U.S. Equity in the same respective periods. As of 2020, Taxable Bond accounted for 12% of the ESG/SI fund asset total, while U.S. Equity had a 59% market share.