From FINRA fining two firms to U.S. listed ETFs seeing inflows of $27.94 billion, here's top news impacting mutual fund and ETF managers and providers.
INDUSTRY HIGHLIGHTS
ETFs Gain Steam
U.S. listed ETFs saw inflows last month of $21.2 billion, according to ConvergEx Market Commentary. Of the new money, all of it went into stock funds, the company says in a press release. To give a comparison, the company says that in all of 2014 only $8 billion of new money has gone to U.S. listed ETFs and all of it went to fixed income.
Vanguard Dominates in 2013
Nearly $1 out of every $4 invested went to Vanguard in 2013, which boasted the top three asset-gathering funds, according to Morningstar's 2013 Global Flows Report. The group points to several reasons for Vanguard's success in 2013, such as at-cost pricing. Morningstar also notes that Vanguard's ETFs have taken market share from iShares and State Street.
FINRA Sanctions Two Firms
The Financial Industry Regulatory Authority announced that it has sanctioned and fined two firms for 1) failing to supervise the use of consolidated reporting systems resulting in statements with inaccurate valuations being sent to customers and 2) for failing to retain the consolidated reports in accordance with securities laws.
FINRA has fined Triad Advisors $650,000 and Securities America $625,000, according to a press release issued by FINRA. The regulator says that in addition, Triad was ordered to pay $375,000 in restitution. For more than two years, Triad and Securities America failed to supervise hundreds of brokers, some of whom were creating and sending false and inaccurate consolidated reports to customers, stated FINRA.
The regulator says in a statement that, in concluding these settlements, Triad Advisors and Securities America neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
U.S. Mutual Fund Product Development Tripled in Second Half of 2013
U.S. mutual fund product launches tripled in the second half of 2013 compared to the first half of 2013, according to research from global analytics firm Cerulli Associates,
"We have seen an increase in development across stock, bond and international asset classes," says Pamela DeBolt, associate director at Cerulli. "More specifically, there was an increase in the number of launches in international strategies, including global equity, emerging markets equity and bond strategies, as well as U.S. equities including large blend and large value."
Mixed Flows for Funds in 2013
Fixed-income funds attracted $134 billion in 2013, which was down from 2012's $602 billion, according to Morningstar. The company says that the U.S. Federal Reserve's announcement of its intentions to taper promoted a sharp rise in interest rates and weak flows to fixed-income funds globally. Adversely, Morningstar points out that equity funds saw an inflow of $567 billion based on investor confidence in 2013. The group claims that this 6% organic growth is the fastest since the availability of worldwide data in 2007.
RESEARCH
Increase in Outsourcing by European Insurers
European insurance companies are outsourcing their assets as they seek to expand their investments outside core fixed income, according to Cerulli Associates. Low interest rates and high guarantees on traditional insurance contracts are pushing European insurance companies to diversify their investment portfolios away from core fixed-income strategies, Cerulli's report shows. The report says that 75% of managers based in Europe agree that insurers are outsourcing more of their assets.
"Being an expert in European credit is simply not enough," says David Walker, associate director at Cerulli. "Asset managers need to show insurers they know their business model inside out. Having a team dedicated to the insurance business greatly helps in achieving this kind of credibility in front of the client."
Transparency Is Lacking in Europe
Managers are not being transparent enough and investors are noticing, according to EDHEC research. The study says that only a third of respondents are very or somewhat satisfied with the current level of transparency in the indexing industry.
Ultimately, 85.2% of respondents identified transparency as the best mitigator of conflicts of investing and only 12% view good index governance as sufficient to deal with these conflicts, the study shows. Investors give very strong support (70.6% vs. 21.1%) to the proposal that ESMA's transparency rules should be extended to non-UCITS products and mandates, EDHEC-Risk Institute says.
ICI Reports Estimated Long-Term Mutual Fund Flows
Total estimated inflows to long-term mutual funds were $9.84 billion for the week ending March 12, the Investment Company Institute reports. Flow estimates are derived from data collected covering more than 95% of industry assets and are adjusted to represent industry totals. Equity funds had estimated inflows of $3.13 billion for the week, compared to estimated inflows of $5.38 billion in the previous week. Domestic equity funds had estimated inflows of $1.90 billion, while estimated inflows to world equity funds were $1.23 billion.
Hybrid funds, which can invest in stocks and fixed-income securities, had estimated inflows of $1.43 billion for the week, compared to estimated inflows of $1.20 billion in the previous week.
PRODUCTS
Two New Indices Aimed at PE
Two new indices that will be focused on the U.S. private equity buyout industry have been launched by Thomson Reuters. The company announced. the Thomson Reuters Private Equity Buyout Research Index and the Thomson Reuters Private Equity Buyout Index will utilize proprietary data to keep market participation informed about trends in the private equity universe, according to Thomson Reuters.
"We are pleased to introduce two unparalleled indices for private equity market participants," says Stephan Flagel, head of indices at Thomson Reuters. "These indices are a prime example of Thomson Reuters commitment to providing market leading benchmarks and investable indices in order to represent and provide access to illiquid asset classes such as private equity returns."
High Yield ETF Launches
State Street Global Advisors has launched a new product to provide access to high yield corporate bonds outside the U.S. The SPDR Barclays International High Yield Bond ETF aims to have lower correlations and default rates to comparable domestic options, states the company.
"Investors are unsure of how to replace the high-grade fixed income assets that were once the foundation of their portfolios," says James Ross, executive vice president and global head of SPDR Exchange Traded Funds at SSgA. "The SPDR Barclays International High Yield Bond ETF provides investors with another opportunity to diversify their high yield exposure, and is an important addition to our existing suite."
STATISTICS
$2.2B net inflows of taxable bond funds (including ETFs) for the week ending March 12.
Source: Lipper
$46B Estimated long-term mutual fund flows as of Feb. 28.
Source: Morningstar Direct
