1) Dimensional Fund Advisors Off to a Flying Start in the ETF Arena
ETF Trends | 2/12/2021
Because… Three DFA ETFs garnered $777.7 million as of February 18, 2021, with $446.8 million in U.S. Core Equity Market ETF (DFAU), $195.8 million in International Core Equity Market ETF (DFAI), and $135.1 million in Emerging Core Equity Market ETF (DFAE). The asset-gathering is quite remarkable for funds with such a short operating history (two were launched on November 17, 2020 with the third one introduced on December 1, 2020. Since these funds have yet to establish a long-term, meaningful performance record, their low cost likely is a main draw for investors. DFAU and DFAI charge 0.12% and 0.18%, respectively. They are both the cheapest active ETF in their respective Morningstar category. DFAE’s expense ratio of 0.35% is only three basis points higher than the lowest among actively managed Diversified Emerging Markets ETFs. Investors may also value portfolio transparency as manifested by daily disclosure of portfolio holdings. In comparison, American Century Focused Dynamic Growth ETF and American Century Focused Large Cap Value ETF, the industry’s first nontransparent active ETFs launched on March 31, 2020, had assets of $238.7 million and $181.6 million, respectively.
2) Goldman Sachs Unveils Marcus Invest Robo-Adviser in Consumer Push
Reuters | 2/16/2021
Because… Marcus has become very successful since it was introduced to the retail market in 2016. It boasts more than five million users of its personal loans and savings accounts, who could be targeted for cross-selling opportunities. The launch of Marcus Invest is another indication of Goldman Sachs’ effort to cater to the mass affluent market. Assets in its Asset Management division rose to $1.5 trillion in 2020 from $1.3 trillion in 2019, but its net revenues decreased to $8.0 billion from $9.0 billion. Meanwhile, revenues generated by the Consumer Banking unit grew 40% during the year. The new robo-advisory service will not only expand retail wealth management business, but also provide an additional platform for its proprietary investment products. Marcus Invest requires a minimum account balance of $1,000, which is much lower than Schwab Intelligent Portfolios’ $5,000 and Vanguard Personal Advisor Services’ $50,000. However, its annual fee of 0.35% is slightly higher than Vanguard’s 0.30%, whereas Schwab does not charge advisory fees.
3) Sustainable Investing Sees Record Flows, Outperforms Peers
NAPA | 2/17/2021
Because… How ESG funds fared against their non-ESG rivals during last year’s market downturn was an important yardstick for the industry because the ESG theme did not move into the mainstream during the previous financial crisis more than 10 years ago. Morningstar analysis that showed sustainable funds outperformed their peers in 2020 is a vote of confidence for many investors, especially those who question the validity of the ESG focus. Sustainable investing has become one of the most popular themes in the fund industry. DWS revealed that all its new product initiatives will by default be ESG, starting in 2021. Growing market demand for sustainable investing may bring more fund sponsors into the fold, but we advise fund providers to determine if their own clientele has a strong need, what challenges they will face in terms of product development, and whether they can make a commitment if they decide to take the plunge.