1) Morningstar Research Shows Record Flows to Target-Date Funds as Low-Cost, Passive Series Dominate Morningstar | 5/7/2018
Because… According to Morningstar’s 10th Annual Target-Date Landscape Report, target-date fund (TDF) assets hit the $1 trillion milestone in 2017 after raking in a record $70 billion of net flows during the year. Apparently, two correlated industry trends we are witnessing are also reflected in the TDF space. First, passive target-date series absorbed nearly 95% of the total flows. With this pace, we expect passive series to surpass the market share of active series in the next few years. Second, the average asset-weighted expense ratio dropped to 0.66% at the end of 2017 from 0.91% five years ago. Since flows were concentrated in TDFs with low or below-average expense ratios, we believe TDF providers will be impelled to reduce fees to make their products more competitive.
2) All that Smart Beta Can Obscure the Big Picture InvestmentNews | 5/8/2018
Because… FUSE’s analysis shows that smart beta ETFs had $334 billion of assets at the end of March 2018, representing a compound annual growth rate (CAGR) of 19% since 2014. In comparison, the CAGR of traditional market cap-weighted index funds was 18% during the same time period. Considering assets of $3 trillion in market cap-weighted index ETFs were almost 10 times the assets in smart beta ETFs, the asset growth of smart beta ETFs has not been particularly remarkable. As of end March, there were 652 smart beta ETFs, translating into an average $512 million in each fund, which was much smaller than an average of $3.3 billion in each market cap-weighted ETF.
3) Edward Jones' Seventh Annual Study Finds That Only One-Third of Americans Know What a 529 Plan Is PR Newswire | 5/14/2018
Because… With National 529 Day around the corner, the survey result that found 71% of Americans do not even know about the 529 plan is very disappointing. The College Board reported that published in-state tuition and fees at public four-year institutions increased at an average rate of 3.2% per year beyond inflation between 2007-2008 and 2017-2018. Meanwhile, 44.2 million Americans owe $1.48 trillion in total U.S. student loan debt. With college costs rising each year and a huge burden from student loan debt, we assume parents would explore every possible option to save for college education. The lack of awareness indicates that financial services companies need to make a greater effort to promote this tax-saving program.