From news of Charles Schwab ETF assets on the rise to why mangers should focus on the middle office, here's top news impacting mutual fund and ETF managers and providers.
Why Mangers Should Focus on Middle Office
Most asset managers have implemented simplistic cost-reduction initiatives aimed to reduce middle-office costs, according to new research by PwC. The problem? Most of these efforts have led to under-investment in middle-office functions, resulting in an infrastructure that is inflexible and unable to scale for increasing product complexity and regulatory requirements. In PwC's view, by failing to effectively transform the middle office into a bottom-line contributor, asset managers are likely to find themselves facing lagging margins and scarce resources at the very time that they are struggling to succeed in an increasingly competitive market.
Capital Group Says Heartbleed May Have Exposed Fund Clients
Capital Group Cos., the third- largest manager of U.S. mutual funds, urged 800,000 customers to change account passwords and other information to protect themselves from risk caused by the Heartbleed computer bug. The bug may have exposed some customers who accessed their accounts on the website for the firm's American Funds mutual funds between Dec. 12 and April 14.
Chuck Freadhoff, a spokesman for the Los Angeles-based firm, told Bloomberg. The company today recommended in an e-mail to those clients that they change their user information, password, security image and questions, and delete their browsing history and "cookies."
Charles Schwab ETF Assets on the Rise
ETF assets custodied at Charles Schwab reached $203 billion, up 21% year over year, the company announced. All data is as of March 31 and based on assets custodied at Charles Schwab.
Equity ETFs represented 25% of flows in Q1 '14 with two-thirds, one-third split between Domestic and International Equities, respectively, the company says.
Flows into Sector ETFs rebounded, representing 20% of the Q1 '14 flows, verses 7% in 2013, says Charles Schwab. Financial, health and technology stayed in favor, while there was an uptick in flows into real estate ETFs, the company says. Retail traders captured 10% of the 12-month ETF flows, up from just 5% the prior year, while RIA clients share of flows was slightly down, according to Charles Schwab.
Fidelity Move Dragged Down Inflows
Fidelity transferred $6.5 billion from equity mutual funds to collective investment trusts in March, according to Morningstar. This move dragged down inflows for U.S.-equity mutual funds, which totaled $2.8 billion for the month. But because of this transfer, these mild inflows do not necessarily reflect negative investor sentiment toward equities, Morningstar says. Excluding the transfer of Fidelity's mutual fund assets to collective investment trusts, PIMCO was the only fund provider among the top 10 to see net outflows in the first quarter, according to Morningstar. Intermediate-term bond funds collected inflows of $7.4 billion, excluding outflows of $3.1 billion from PIMCO Total Return.
Loan Participation Has Seen Serious Growth
Loan participation mutual funds have unprecedented growth since 2009, with $106.1 billion of net inflows entering the segment, excluding ETFs, since then, according to Lipper. As a consequence, the loan participation mutual fund asset base has grown over seven-fold-from $19.8 billion for December 2009 to $142.2 billion for April 2, 2014, the company says.
The attraction of the asset class has been at least partly driven by the extended low-yield environment that income-seeking investors have endured, Lipper says. Lipper also believes that because open-end mutual funds are a relatively new entrant to the loan participation asset class and now have greater influence on it, it bears watching to see how investors in these funds react should the longer end of the yield curve finally become more attractive.
Mutual Funds See Inflows
Long-term U.S.-domiciled mutual funds saw an inflow of $39 billion in March, driven by strong flows to developed international markets and a rebound in flows to intermediate-term bond funds, according to Morningstar.
Core intermediate-term bond funds attracted $4.3 billion in inflows, the first monthly inflow for the category in 11 months and the strongest since January 2013, the company says. Since then, Morningstar says, the 10-year U.S. Treasury rate has climbed to 2.70% and the S&P 500 Index is up 27%.With the U.S. equity market appearing fully valued, investors may be taking the opportunity to rebalance into bonds, according to Morningstar.
Fund Managers Play It Safe
Fund managers are being conservative when it comes to the assets they favor in recent years, according to Bank of America. "After two years of cyclical outperformance in Europe, some of the exuberance we see in investor sentiment and positing suggests a rotation into more defensive stocks and sectors may be imminent, says Obe Ejikeme, European equity and quantitate strategist.
The report also shows investor confidence in global economic growth remains high. This survey, which was taken between April 4 and April 10, shows that the number of investors believing the global economy will grow over the next year was 62%, which is unchanged from the company's findings in March, according to Bank of America. Additionally, in February 56% of investors surveyed believed the global economy would grow over the next 12 months, the company says.
Neuberger Berman Launches 15 New Funds in Asia
Neuberger Berman Group has announced the authorization of 11 of its UCITS funds in Hong Kong retail market and four in the Singapore market.
The company currently manages over $21 billion in assets for institutional and individual clients across its Ireland-based Neuberger Berman Investment Funds plc UCITS range, including over $1.5 billion raised from Taiwan, Neuberger Berman says.
"We are very pleased to continue our expansion into Asia by offering some of our most popular funds to retail investors in Singapore," says Nick Hoar, managing director and head of Asia Pacific for Neuberger Berman.
ON THE MOVE
New Position Filled at Deutsche Asset & Wealth Management
Dodd Kittsley will join Deutsche Asset & Wealth Management as a managing director and head of exchange traded products strategy in the Americas, the company announced. Kittsely will be based in New York and report to Fiona Basset, head of passive business in the Americas and Mick McLaughlin, head of passive distribution in the Americas.
In this newly created position, Kittsley will be responsible for Deutsche Asset & Wealth Management's ETP research in the Americas, the company says. He will also be responsible for generating new national account business and providing sophisticated solutions for both institutional and retail clients, according to Deutsche Asset & Wealth Management.
BMO Global Asset Management Expands
BMO Global Asset Management has announced three new hires, including Jerry Mauricio as chief compliance officer. Mauricio will have oversight for BMO Asset Management U.S. including two of its boutique investment firms, Monegy, Inc. and Taplin, Canida & Habacht. He brings nearly 25 years of investment industry experience, most recently as senior vice president and wealth management chief risk officer for Bank of the West, a subsidiary of BNP Paribas. Additionally, Dan Hoover joins BMO Asset Management U.S. as director of securities lending and relationship development. Susan Gibbs has also joined the firm as DCIO internal sales consultant.
$39.2B in long-term mutual funds added by investors in March.
$8.8B tin total estimated inflows to long-term mutual funds for the week ended April 9.
Source: Investment Company Institute