Our weekly roundup of industry highlights
Venezuelan default divides investors
Venezuela is in default, says S&P Global Ratings, Moody's Investors and Fitch Ratings, Bloomberg reports.
The news has sent many investors to the exits. But some fund managers specializing in distressed debt smell an opportunity. Venezuela has a long history of paying high returns to fund managers, and officials are standing by statements to repay the debt. The country recently received a lifeline from Russia in the form of an agreement to restructure $3.15 billion worth of debt, according to Bloomberg.
Ray Zucaro, CIO of RVX Asset Management, said investors can either be patient or demand payment. "Now the ball is in the bondholders' court," he said.
Neither option is ideal, but most are opting to wait it out, per the report. Acceleration would likely lead to restructuring talks with the government — or lawsuits, according to Bloomberg.
Vanguard shareholders vote down genocide-free investing proposal
Vanguard will not adopt a proposal to avoid companies that contribute to genocide or crimes against humanity, following a shareholder vote.
Investors Against Genocide brought the request, citing concerns around Vanguard holdings in PetroChina, which has connections to the government of Sudan.
Prior to the vote, Vanguard's board of trustees asked investors to oppose the action. In a proxy statement, the company called for "political and diplomatic solutions" to humanitarian crises, arguing that voluntary divestment would harm the fund's performance and be "an ineffective means to implement social change."
None of the 48 funds that would have been affected approved the measure, according to Vanguard. The result was "a sign that investors agreed with management's position," a firm spokesman said.
Investors are driven to collect by passion, not profit
The majority of wealthy investors are inspired to collect because of passion rather than profit, according to a recent study. Many investors, the report finds, are unaware of what their collections are worth and have not insured them.
When these collections (cars, coins, fine art) are eventually passed to the next generation, the majority of heirs have no interest in keeping them, according to the latest UBS Wealth Management Americas' Investor Watch Report. Those who do hold onto collections do so out of obligation or guilt, UBS reports.
In fact, while 81% of investors would prefer to leave their goods to an heir rather than sell, 65% of heirs have no interest in keeping the collection. Over half (51%) of investors have never had their collections appraised, and 44% have not insured their collections. Forty-seven percent of wealthier investors (those with over $5 million in investable assets) collect fine art, while only 33% of investors with less than $5 million in assets do the same, the report says.
Managers vulnerable to tech threat
Amazon and PayPal are the latest threat to asset managers, according to a report.
Moody's analyst Stephen Tu said the tech giants won't come for the fees; instead, he foresees them entering asset management "to facilitate data collection and to keep clients within their company's ecosystem."
The companies to watch are those concentrated in the digital payment space, as well as robo advisors, per the report. To illustrate the threat, the Moody's report pointed to Alibaba's 2013 launch of a money market fund to accompany its payment system. The fund quickly became the largest in the world.
Managers answer regulation with automation
Eighty-three percent of asset managers foresee fundamental changes to their operations in the next two years due to regulation and tech, according to a survey.
To deal with changes, more than six in 10 asset managers said they are focusing on automating back-office operations, Confluence found. The majority are also rethinking how to manage reporting requirements. Data centralization came in third on the managers' list of priorities.
Confluence points to SEC Modernization and other rules in the U.S. and Europe that have managers racing to adapt. "Heightened regulatory requirements are turning a pent-up desire to automate into a need to automate," said Confluence COO Todd Moyer.
BNY Mellon to launch multi-asset investment manager in 2018
BNY Mellon Investment Management announced that it will launch a specialist multi-asset investment manager next year. The new business will combine BNY Mellon's three largest U.S. investment managers — Mellon Capital Management, Standish Mellon Asset Management and The Boston Company Asset Management — to offer institutional and intermediary clients investment strategies in both active and passive solutions.
With over $560 billion in AUM, the combined business will rank as a top 10 U.S. institutional asset manager and a top 50 manager globally.
American Century teams up with Precidian on ETF
American Century Investments has partnered with Precidian Investments to license the firm's ActiveShares methodology in support of the potential launch of actively managed, semi-transparent ETFs, American Century said.
The agreement is still subject to regulatory approvals, but Precidian's ActiveShares structure would 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 American Century.
Allianz Life unveils Index Precision Strategy
Allianz Life announced its new Index Precision Strategy, which will be available on the Allianz Index Advantage Variable Annuity suite.
Index Precision Strategy provides the option to allocate to four corresponding equity indexes. With this strategy, as long as the annual change in index value is zero or positive, the client will receive the entire annual credit of the precision rate.
Direxion launches leveraged pharma ETF
Direxion has put forth an ETF that offers 300% exposure to the Dynamic Pharmaceutical Intellidex Index. The Direxion Daily Pharmaceutical Bull 3X Shares (PILL) gives investors a leveraged position on the index of 30 U.S. drug companies. The fund's net expense ratio is 1.12%.
"The launch of PILL is timely, allowing traders to magnify their short-term bullish perspective on the popular sector," said Sylvia Jablonski, managing director at Direxion.
Legg Mason sets sights on debt ETF
Eager to expand its exchange-traded offerings, Legg Mason has petitioned the SEC for permission to start an actively managed fixed-income fund. The debt ETF would be able to hold 30% of its assets in junk debt and up to 20% in non-government asset-backed securities.
The $754 billion asset manager — which entered the ETF space in 2015 and currently has 11 funds — is also awaiting SEC approval for an equity ETF that would not disclose its daily holdings.
PPB Capital Partners hires new Chief Investment Strategist
PPB Capital Partners has hired a former lead portfolio manager for Hatters Fund, Frank Burke, as its new chief investment strategist.
In his new role, Burke will advise the firm's growing network of investment advisors on selecting best-in-class alternative investment products for clients, according to the firm.
"Frank's deep knowledge of alternative asset classes will provide our platform of private investments increased breadth and depth," PPB CEO Brendan Lake said in a statement. "As one of the lead portfolio managers of Hatteras Funds, Frank brings a wealth of experience sourcing and designing funds as well as advising wealth managers on the benefits of alternative investing."