Here's a roundup of interesting activity in the industry.
- Competition in Bond ETFs Pushes Fee Reductions
Competition is forcing ETF providers to cut fees on products. BlackRock announced significant fee reductions on five bond ETFs including iShares J.P. Morgan USD Emerging Markets Bond ETF, iShares Emerging Markets Local Currency Bond ETF, iShares Emerging Markets High Yield Bond ETF, iShares Emerging Markets Corporate Bond ETF and iShares B-Ca Rated Corporate Bond ETF. The announcement comes after BlackRock rival State Street reduced costs on 41 funds while Vanguard also cut prices on six offerings.
- State Street Chosen to Assist Hartford Funds
Mutual fund provider Hartford Funds selected State Street to assist in providing custody and accounting services for $93.6 billion in AUM, including $20.6 billion in mutual funds supporting variable annuity and investment products, according to the company.
"Industry wide, there is an appetite for change and focus on building strong technology foundations that can better serve portfolios," said Peter Thurmond, senior vice president of sector solutions.
- Corporate Bond ETFs Demonstrate Popularity
Corporate bond ETFs can help institutional investors manage investment flows, enhance returns and limit transaction costs in the current liquidity environment , a new report from TABB Group states, after it found that ETF AUM increased $90 billion from 2009 to 2014 at a compounded annual growth rate of 42%.
"A 5% to 10% liquidity sleeve in corporate bond ETFs that tracks to a diversified portfolio of bonds is becoming a popular tool among asset managers to efficiently manage their investment flows," said Colby Jenkins, co-author of the study.
Researchers also found that although 60% of corporate bond national trading activity in the second half of 2014 took place in just 8% of the CUSIPs traded, there are now over 260 bond ETFs available to investors, a 326% increase since 2008 when there were just 62 available.
While regulatory approval and entrenched pre-ETF investment mandates are the leading obstacles to an institutional corporate bond ETF adoption, "a larger pool of National Association of Insurance Commissioners credit-rated bond ETFs that have unique economic advantages over non-rated bond ETFs, such as more lenient risk-based capital requirements, will be a key stepping stone to the next threshold of institutional adoption," noted TABB principal Anthony Perrotta.
- Large Chinese Demand for Portfolio Managers
The demand for experienced portfolio managers is higher than ever in China after a new report from research firm Cerulli shows the size of wealth management products managed by banks, foreign multinational subsidiaries and securities houses topped US$2.1 trillion, up from $1.2 trillion in 2014.
Despite the country's strong growth in retail mutual funds and segregated accounts, the report shows that a total of 213 investment managers left the industry in 2014, up from 110 in 2012 and 137 in 2013. Meanwhile, Morningstar found that 45 of the country's fund managers managed or co-managed five or more funds at the same time in 2015. This is partly due to experienced portfolio managers leaving for private fund companies to operate with fewer restrictions and less monitoring from regulators, studies suggest.
- Confluence Selects Global Operations COO
After just a year with the firm, Salvatore Pent has been promoted by Confluence to chief operating officer of its global operations.
In addition to his new duties as COO, Pent will continue the role he had as managing director of global product delivery, overseeing global professional and client services, business process outsourcing, product development and IT infrastructure and enterprise operations from their London office.
Prior to joining Confluence as the managing director of global product delivery division in 2014, Pent was with JP Morgan Chase where he was responsible for sanction screening programs and international delivery in Europe and the Middle East. Before that, Pent held leadership positions with JP Morgan's Treasury and Security Services EMEA and Electronic Fund Services divisions.
