1) Walmart Announces Creation of New Fintech Startup
Business Wire | 1/12/2021
Because… As one of the largest retail stores with a market cap of $413 billion, Walmart can make anything it sets its sight on a reality. It boasts financial resources that can make a fintech startup stand out from peers. Its existing customer base and millions of associates nationwide are another advantage other fintech firms are envious of. Walmart is partnering with Ribbit Capital, which has already invested in such popular platforms as Robinhood and Credit Karma. Walmart’s scale, combined with Ribbit’s expertise in disruptive financial technologies, could make their collaboration a serious threat in the financial services arena. However, we do not expect the venture to have an immediate success because low cost, which Walmart has a reputation for, is not the only selection criterion in the financial solution field. When people have a wide choice of highly specialized brokerages where they can get both low-fee investment products and professional guidance, they are less likely to turn to a provider that is associated with household goods and groceries. Even if Walmart can hire experienced financial advisors, the company’s brand may not resonate well with the investing public in terms of delivering financial offerings.
2) Vanguard’s Assets Hit Record $7tn
Financial Times | 1/13/2021
Because… Vanguard had $6.2 trillion in the U.S. retail market, up 15.5% from a year ago. The firm was the best-selling asset manager in 2020 among all long-term mutual fund and ETF providers. It raked in $140.6 billion last year, slightly beating BlackRock’s $138.4 billion. However, Vanguard’s sales decreased 30% from its 2019 intake of $201.2 billion. Its mutual funds parted with $60.3 billion, with index funds actually shedding $74.9 billion after absorbing $85.8 billion in 2019. Morningstar data also shows that the firm’s target-date funds experienced the first annual net redemptions since the third-party data provider started tracking flows in 1994. In addition to outflows in some business areas, Vanguard has been battling against technical difficulties as a result of rapid growth, which has led to investor complaints about account access and customer service issues. The firm recently shared its plans of investing $1 billion in revamping its websites, upgrading retirement plan participant experience, and delivering new mobile apps. As a sales leader, Vanguard is likely to improve the client experience and satisfying investor needs.
3) American Century Investments Adds to Active ETF Lineup with Low-Volatility ETF
American Century | 1/14/2021
Because… Since entering the ETF arena in January 2018, American Century has become the 11th largest ETF sponsor in the active ETF space. At the end of 2020, the firm had 85% of its $3.8 billion assets in active ETFs. Its 14 active ETFs garnered $2.0 billion in 2020, while three passive ETFs collected a mere $51 million. Unlike many other active ETF sponsors that focus on the development of fixed-income products, American Century mainly targets equity strategies. It had $1.7 billion in U.S. Equity ETFs and $1.3 billion in International Equity ETFs. The firm is known as the first ETF manager that launched nontransparent active ETFs, but its top five ETF sellers in 2020 were all transparent active ETFs. The new ETF will also disclose its holdings daily. Its nontransparent active ETFs will celebrate their first anniversary in two months, which should be an important milestone for both investors and industry observers.