1) Does Size Matter when Selecting ETFs?
ETF Stream | 6/24/2020
Because… Theoretically, the answer is “no” as other factors need to be taken into consideration. In reality, size matters in eyes of many individual investors, which is why the big gets bigger. Industrywide, 90 out of 103 ETPs that garnered more than $1 billion during 2019 had over $1 billion of assets at year-end 2018, 31 of which held assets between $10 billion and $50 billion and 9 of which had more than $50 billion. These funds raised $331.5 billion during the year, more than the industry’s total of $328.8 billion. Economies of scale enable large funds to charge lower fees. Bigger funds generally have more liquidity and higher trading volumes too. Large fund sponsors also have financial resources to invest in technology, which can help improve fund performance. As a result, it becomes relatively easier for big funds to attract more assets and snowball into bigger funds, which poses threats to small funds, especially those offered by investment boutiques unknown to the investing public.
2) Empower Retirement to Acquire Personal Capital
Empower | 6/29/2020
Because… The fourth billion-dollar deal in the year after Franklin Templeton’s acquisition of Legg Mason, Morgan Stanley’s takeover of E*Trade, and Aon’s merger with Willis Towers Watson is sending shock waves through the industry. Compared with the $1 billion price tag, BlackRock’s purchase of another robo-advisor, FutureAdvisor, for $152 million was a steal. Personal Capital’s minimum investment requirements are much higher than many other robo-advisors, ranging from $100k to $200k for Investment Services to more than $1 million for Private Client treatment. Personal Capital has equipped itself with the technological infrastructure and capabilities to serve mass affluent and high-net-worth investors. The deal will benefit both parties. The addition of Personal Capital, a hybrid robo-advisor, will enable Empower to retain rollover assets and provide plan participants with digital and human advice without starting from scratch to build its own automated advice platform. Meanwhile, Personal Capital can leverage the second largest retirement service provider’s scale and resources to expand its advisory business.
3) Federated Hermes, Inc. Hires Executive to Launch New Global Actively Managed Exchange-traded Fund Business
PR Newswire | 7/1/2020
Because… Having an industry veteran spearhead a new business endeavor is pivotal, especially for a traditional mutual fund asset manager that has never stepped into the ETF field. While mutual fund marketing and distribution approaches may still be viable, successful ETF promoters incorporate strategies created specifically for this investment vehicle. They would also focus efforts on delivering education and training programs as levels of ETF knowledge vary widely among advisors and investors. In addition, experienced professionals know how to develop a strong product vision that differentiates a firm from the competition. Innovator Capital Management, for example, is led by two ETF pioneers, Bruce Bond and John Southard, who co-founded PowerShares. By introducing defined outcome ETFs to the market, they have built their firm into one with $2.7 billion as of March 2020. Christian Magoon and William Belden, formerly of Claymore/Guggenheim, have grown ETF assets at Amplify to more than $1 billion as of the end of May.