Our monthly roundup of industry highlights
Vanguard to streamline value fund lineup with merger
Vanguard plans to merge the $770 million Vanguard Capital Value Fund (VCVLX) into its $17.6 billion Vanguard Windsor Fund (VWNDX), according to the firm.
Following the merger, which is expected to be completed later this year, the combined fund will retain the Windsor name and continue to focus on large- and mid-cap value stocks, the firm says.
The combined fund will continue to be managed by Wellington Management Company — approximately 70% of assets — and Pzena Investment Management — approximately 30% of assets, the firm says.
"We believe this merger will benefit Capital Value Fund shareholders by providing them with exposure to the two outstanding investment advisors managing the Windsor Fund and will benefit the combined fund through improved economies of scale," says Matt Brancato, head of Vanguard's Portfolio Review Department.
SEC provides temporary flexibility amid coronavirus
The SEC says it has granted temporary flexibility for registered funds affected by market volatility from the coronavirus pandemic, allowing firms to borrow from affiliates and enter lending arrangements.
The relief measures are designed to provide funds with additional tools to manage their portfolios for the benefit of all shareholders as investors may seek to rebalance their investments, according to the regulator.
"This action provides funds with additional flexibility to navigate volatile markets while meeting their obligations to investors," says SEC Chairman Jay Clayton.
Innovator preps defined outcome ETF expansion
Innovator Capital Management announced the upside cap ranges for the April Series of S&P 500 Buffer ETFs, which reset at the end of the month. Innovator says the it also has plans to expand its Defined Outcome ETFTM suite with four additional Power Buffer ETFs, which began trading on April 1.
The new ETFs include domestic technology, small cap, international, developed and emerging markets exposures up to a cap, with 15% downside buffers over a one-year outcome period, according to the company.
"One of the benefits of defined outcome ETFs is that increased market volatility typically contributes positively to upside caps, providing investors with greater potential upside participation over the next one-year outcome period," says Bruce Bond, CEO of Innovator ETFs. "This unique feature is in stark contrast to most risk management strategies, which typically reduce market exposure as volatility increases."
RESEARCH
Hedge fund study finds shifting terms in early investors
Just 44% of new hedge funds offered founders' share classes last year, continuing a sharp downward trend from 68% in 2017 and 57% in 2018, according the Seward & Kissel study.
Approximately 47% of hedge funds using equity strategies and 38% of with non-equity strategies offered lower management fees or incentive allocation rates through their founders' classes — down from 63% and 45%, respectively, in 2018.
The number of seed deals fell moderately in 2019, but the size of those deals trended higher, according to the firm.
"The decrease in founders' classes was a bit surprising," says Seward & Kissel partner and the study's lead author, Steve Nade. "Factors at play here could include more side letters and bespoke products, as well as a rise in high-demand launches."
PRODUCTS
American Century launches semi-transparent active ETFs
American Century Investments launched two actively managed, semi-transparent ETFs utilizing Precidian Investments' ActiveShares methodology: American Century Focused Dynamic Growth ETF (FDG) and American Century Focused Large Cap Value ETF (FLV), according to the firm.
The semi-transparent structure will allow American Century to deliver its actively managed investment strategies in an ETF vehicle, without the daily holdings disclosure requirement of fully transparent ETFs, according to the firm.
"This new type of ETF gives American Century one of the most diverse platforms in the industry and allows us to introduce products with our unique insights," according to Ed Rosenberg, head of ETFs for the firm.
BNY Mellon expands its ETF relationship with USCF
BNY Mellon expanded its ETP relationship with United States Commodity Funds and completed the asset conversion onto BNY Mellon's ETF Servicing platform, according to the firm.
Even some of the industry’s cheapest products “may be overpriced” in that they’re “mirroring a passive index,” an expert says.
BNY was appointed by USCF to provide ETF services — including serving as its custodian, fund accountant and administrator and transfer agent, according to the firm.
Nottingham files exemptive relief forms for nontransparent ETFs
Nottingham and affiliate OBP Capital, along with Spinnaker ETFs, have filed short form exemptive relief applications with the SEC for Blue Tractor's Shielded Alpha ETF Structure and the NYSE AMS Non-Transparent ETF Structure, according to the firm.
"The ETF industry clearly has an interest in the adoption of non-transparent and semi-transparent ETF structures, preserving the portfolio manager's valuable intellectual property," observed Kip Meadows, founder and CEO of Nottingham. "We believe these new products will open the ETF landscape to active portfolio managers, at a time when analysis of which companies are best positioned for our new economic environment is so important."
Wasatch reopens core, international and small cap growth funds
Wasatch Global Investors has reopened the Wasatch Core Growth, International Growth and Small Cap Growth Funds and related institutional strategies to new investors, effective immediately, according to the firm.
The funds had previously been closed to new investors in an effort to ensure the firm could maintain its disciplined and focused investment approach.The reopening of the strategies reflects Wasatch's view that current market volatility and dislocations present attractive opportunities for long-term investors, according to the firm.
Precidian Investments adds to lineup with 8 ETFs
BNY Mellon expanded its investment solutions line-up with eight ETFs designed to cover the core exposures in a typical asset allocation strategy, according to the firm.The firm's ETF-fee range will be among the lowest-cost funds in the industry, it says.
The BNY Mellon US Large Cap Core Equity ETF (BKLC) and BNY Mellon Core Bond ETF (BKAG) will be the first zero-fee ETFs in the largest equity and fixed income U.S. market categories offered to investors without fee waivers or other restrictions, according to the firm.
ARRIVALS
Fengate appoints EVP of human resources
Fengate Asset Management has appointed Jennifer Brannon, the former vice president of human resources at technology company Financeit, to executive vice president of human resources, according to the firm.
Brannon will now lead the Fengate's people management and talent development division, as well as will serve as a member of its executive team, the firm says.
"We are delighted to welcome Jennifer to Fengate and look forward to working closely with her in driving our vision and ambitious objectives forward," says Lou Serafini Jr., president and CEO of Fengate.
"Her extensive experience leading and developing high performance teams and ensuring an enriching corporate culture will be of great benefit to Fengate and for our work to consistently deliver the very best service for our clients," he adds.
Penn Mutual expands investment team
The former senior portfolio managers at Chartwell Investment Partners, George Cipolloni and Mark Saylor, have both taken positions as portfolio managers at Penn Mutual Asset Management, according to the firm.
Both advisors will be primarily responsible for portfolio management, security research, trading and client communications surrounding the firm's new balanced income strategy, according to the firm.
"George and Mark will be critical as our investment team navigates these unprecedented markets to help our clients generate consistent income with a focus on downside protection," says Mark Heppenstall, chief investment officer of Penn Mutual Asset Management.
