Our weekly roundup of industry highlights
Popular 401(k) funds are packed with tech stocks
Volatility among Apple, Google and Facebook is an opportunity to examine how tech heavy some of the most popular 401(k) funds are, Bloomberg reports.
The $114.5 billion Fidelity Contrafund is third by assets on a list of the most popular equity-focused funds in 401(k) plans, according to Brightscope. It was 36.7% tech in the latest monthly data, compared with April, according to Morningstar.
Comparatively, the S&P 500 was 20.1% in tech at the end of April (now about 22.5%).
Contrafund’s much smaller cousin, the $37.8 billion Fidelity Growth Company, also has about a quarter of its assets in its top five holdings. The stocks are Nvidia Corp. at 6.3%, Apple at 5.4, Amazon at 4.8, Alphabet at 3.8, and Facebook at 3.3. The fund is ninth on Brightscope’s list.
Vanguard Wellington, a $100 billion fund, was approaching peak tech at the end of April — but for Wellington that meant 9%. Wellington, which falls into Morningstar’s category of asset allocation funds, has about 31% in bonds. Top stock holding: Microsoft, at 2.1%. At the $53.9 billion Vanguard Primecap, Microsoft is also a top five holding, at 4.3%.
Managers are holding record levels of corporate debt
U.S. corporate debt holdings are at record highs among managers, according to Bloomberg.
Stone & McCarthy Research Associates’ weekly survey of fixed-income portfolio managers showed corporate debt allocations at an all-time high of 37%, matching levels last seen in August 2016.
Money managers’ holdings of corporate bonds as a share of assets have oscillated between 32% and 37% over the past five years.
Survey participants also reported reducing their allocation to Treasuries to 24.2%, their lowest levels since September, while also cutting back on duration.
Bank of America Merrill Lynch recently highlighted a near $10 billion flood into investment grade debt during the week ended June 8, positing that the fierce appetite for corporate credit helps explain the broader disconnect between Treasury yields and risk assets.
Complex instruments have disadvantages for mutual funds
Short selling and options create losses for mutual funds, according to a study.
Funds using these instruments had 0.1% — 0.2% higher annual fees than funds that did not use them, according to a study from the Smith School of Business at Queen’s University in Canada.
Of the 4,793 mutual funds studied, researchers found that the groups using these instruments had lower excess returns.
Funds using leveraging and buying options had lower excess returns and negative alpha. Complex instruments did not impact the returns of the mutual funds in high levels of institutional leadership, researchers found.
Concerns with short-term risk as high as retirement goals
Americans worry about how market volatility will impact their retirement goals as much as they do about reaching these goals, research shows.
A key factor that determined American tolerance to market risks was their families, according to a study conducted by Franklin Templeton Investments. Of the 2,013 adults surveyed, 62% said their family impacted their retirement planning, according to report. Nearly 16% expect that financing their children’s education will delay retirement.
BNY Mellon’s Lockwood Advisers announced new portfolio suite
BNY Mellon’s Lockwood Advisors, a provider of managed account solutions, has developed a suite of portfolios by combining American Funds mutual funds and ETFs.
The Lockwood/American Funds Core Portfolios, created by the investment team at Lockwood, is designed to provide the option to combine active and passive strategies by leveraging objective-based portfolios within a multi-vehicle, low cost investment solution, the firm said. The portfolios have an account minimum requirement of $10,000, according to BNY Mellon.
O’Brien Investment Group launches global macro fund
O’Brien Investment Group, an Atlanta-based futures brokerage and clearing firm, announced the launch of a new global macro fund.
The OBIG Discretionary Global Macro Fund, which has a $250,000 minimum investment, will be managed by Monica Fuentes, portfolio manager and chief investment officer of the firm. The fund is open to the public on July 1 and will offer a founders share class for the first $100 million, the firm said.
Multi-factor fund from Deutsche Asset Management
Deutsche Asset Management announced the launch of a U.S. multi-factor fund.
The Deutsche U.S. Multi-Factor R6 (DMFRX), which has an expense ratio of 0.35%, is designed to leverage the investment strategy and provide access to the Deutsche X-trackers Russell 1000 Comprehensive Factor ETF (DEUS), the firm said. DMFRX was launched with $2 million in net assets, according to Morningstar.
“Through deliberate, consistent and direct factor exposure, the Deutsche U.S. multi-factor fund’s objective is to potentially make a significant contribution to outperforming traditional market-capitalization weighted benchmark indices, while lowering risk possibilities and adding diversification to the portfolio,” said Brian Binder, president of Deutsche Funds.
American Century selects senior ETFs VP
American Century Investments appointed a former Northern Trust senior vice president to head its newly created ETF unit.
Edward Rosenberg is responsible for product development in his new role as senior vice president and head of ETFs at American Century, the firm said.
“We’ll leverage his expertise to develop an array of ETF solutions as we continue to invest in our capabilities that meet our clients’ needs,” said American Century CEO Jonathan Thomas.
Rosenberg has nearly two decades of experience working in the ETF industry for Russell Investments and Vanguard, according to American Century.
The company plans to enter the ETF market at the beginning of next year.
John Hancock Investments names West Coast ETFs head
John Hancock Investments appointed a managing director to lead its ETF expansion in the West Coast, according to the company.
Neil Kay joined John Hancock from Lattice Strategies that was acquired by Hartford Funds in 2016. He will report to the senior managing director of ETF distribution for John Hancock, Michelle Fuller.
“We are pleased to welcome Neil to the firm and look forward to his contributions as we continue building our momentum in the ETF marketplace,” Fuller said.
Prior to working for Lattice, Kay was an iShares ETF specialist for BlackRock and Fisher Investments, the firm said.
Former JPMorgan bankers rejoin the firm
Two senior private-credit investors who left JPMorgan Chase last year rejoined the bank to build a new private credit group, Bloomberg News reported.
Brad Demong and Leander Christofides will lead the global special situations team under JPMorgan Chase’s asset management division. The pair will report to Anton Pil and Chris Hayward, co-managing partners of the firm’s global alternatives unit.
“This move represents an immediate, significant expansion of our existing private credit offering in our alternatives business,” Pil said in the statement.
Before leaving the company, Demong and Christofides had worked at JPMorgan for over 15 years.