Our weekly roundup of industry highlights
Managers underweighting U.S. stocks highest since 2008
According to Bank of America Merrill Lynch's most recent fund manager survey, allocations to U.S. stocks have reached 20% underweight, Bloomberg reports. The last time that percentage was greater was in January of 2008, when the S&P 500 was near its previous peak before crashing during the financial crisis.
"A net 80% of investors think the U.S. is the most overvalued region," strategists, led by Michael Hartnett, wrote, down only slightly from the 84% that said the same thing in June's survey. The survey was conducted July 7 through July 13 and based on 207 participants overseeing $586 billion in assets.
Investors said the Nasdaq was the most crowded trade for the third straight month. Banks overtook tech stocks as the most overweighted sector in the survey. That suggests investors might be trying to lock in profits and find greater value elsewhere. The Nasdaq is up almost 20% this year, while the KBW Bank Index has risen 4%. It's the first time this year that money managers have favored banks over technology stocks.
BlackRock scores ETF flow record but misses revenue target
While BlackRock raked in $74 billion in ETF flows in the second quarter, that record was in part obscured by revenue that failed to beat estimates, Bloomberg reports. The revenue miss was largely driven by lower performance fees on two long-only funds that didn't beat their benchmarks by as much as they did a year earlier and weaker securities lending revenue hampered by less merger-and-acquisition activity, said BlackRock CEO Laurence D. Fink.
Revenue, while up, missed estimates for the fourth straight quarter, according to Bloomberg. BlackRock's second-quarter costs increased in almost every category including employee compensation and distribution and servicing costs. But assets under management increased about 5% from last quarter to $5.7 trillion.
Voya seeks to join digital advice race
Voya won't be left behind in the robo race, says Tom Halloran, president of its broker-dealer. "I don't have one yet, but I want one," Halloran says. "It's just a matter of how and when."
Voya Financial Advisors' Halloran says he wants the brokerage to join its competitors in the digital advice space, which is predicted to reach $400 billion by the end of next year.
Competing brokerages Charles Schwab and TD Ameritrade have already established digital advice platforms and found early success gathering assets online. Asset managers such as Vanguard have also made forays in the digital advice market.
Halloran says Voya is inclined to seek an acquisition in order to add a digital platform to its offerings. Invesco and BlackRock have pursued a similar strategy with their respective acquisitions of Jemstep and FutureAdvisor.
Top 100 alts managers now oversee $4 trillion
Globally, alternative asset AUM reached nearly $6.5 trillion, with the top 100 alternative asset managers holding $4 trillion, according to research from Willis Towers Watson.
Lead by Ray Dalio's Bridgewater Associates, which oversees $116 billion, the top mangers saw AUM increase by 10% in 2016. Illiquid credit saw the largest percentage increase in the group, with AUM rising from $178 billion to $360 billion in the last 12 months. Direct hedge fund strategies among the top 100 asset managers fell the most over the same period, from $755 billion to $675 billion.
The survey of institutional investors found that among alts categories, real estate managers have the largest share of assets (35% and over $1.4 trillion), followed by private equity fund managers (18% and $695 billion), hedge funds (17% and $675 billion), private equity funds of funds (12% and $492 billion), illiquid credit (9% and $360 billion), funds of hedge funds (6% and $228 billion), infrastructure (4% and $161 billion) and commodities (1%).
OppenheimerFunds launches 3 revenue-weighted ETFs
Adding to its smart beta fund offerings, OppenheimerFunds announced three new ETFs with an international focus.
The new funds are the Oppenheimer Emerging Markets Revenue ETF (REEM), Oppenheimer Global Revenue ETF (RGLB), and Oppenheimer International Revenue ETF (REFA).
The emerging makets fund seeks to outperform the MSCI Emerging Markets Index, with an expense ratio of 46 basis points. The global revenue fund seeks to outperform the MSCI All Country World Index, with an expense ratio of 43 basis points. And the international revenue fund seeks to outperform the MSCI EAFE Index, with an expense ratio of 42 basis points.
BlackRock lowers fees of mortage bond ETF
Seeking to provide a cheaper alternative to mortgage bonds, BlackRock announced a repricing of the iShares MBS ETF (MBB).
Launched in 2007, the fund will see its expense ratio lowered from 27 to nine basis points, the firm said.
The fund tracks an index of mortgages issued or guaranteed by U.S. government agencies, and has seen YTD total returns of 1.72%.
"By lowering the price to make the fund competitive with direct investment in mortgage securities, institutions will have a much more efficient, liquid option for dynamically managing mortgage-backed exposures," stated Martin Small, U.S. Head of iShares at BlackRock.
Direxion unveils Europe-focused ETF
Citing renewed investor interest in European equities, Direxion announced the launch of an ETF tracking an index covering 50 blue-chip stocks from 11 Eurozone countries.
The Direxion Daily EURO STOXX 50 Bull 3X Shares (EUXL) seeks to achieve 300% of the daily performance of the EURO STOXX 50 Index. The fund carries an expense ratio of 1.04%.
"The outlook for European equities has turned bullish, with growing interest from traders," said Sylvia Jablonski, managing director at Direxion.
Deutsche Asset Management offers real estate CIT
Deutsche Asset Management is offering real estate exposure within a new collective trust for institutional investors.
The Deutsche Real Assets Collective Investment Trust Fund, which launched in June, offers exposure to a variety of liquid real assets including global REITs, listed infrastructure, commodity futures, natural resource equities and treasury inflation-protected securities.
PGIM names chief economist
Nathan Sheets has joined PGIM Fixed Income as chief economist and head of global macroeconomic research, the firm announced.
Sheets will lead the formulation of the firm's global macroeconomic outlook, join the senior investment team and provide insight on global monetary and fiscal policy and macroeconomic trends.
He was most recently the undersecretary of the U.S. Treasury for international affairs, representing the U.S. government on international economic policy. Previously, he held positions with Citigroup, as global head of International Economics, and with the Federal Reserve Board, most recently as director of the Division of International Finance and FOMC Economist.
Northern Lights adds regulatory compliance officer
Brian Hourihan has been appointed regulatory compliance officer for Northern Lights Compliance Services, the firm said. Hourihan has several years as senior counsel in the SEC's Division of Investment Management. During his career, he has been responsible for providing legal and compliance advice on all aspects of services provided to mutual funds, ETFs and other investment solutions.