Displaying items by tag: mutual funds

The Fidelity Trend Fund (FTRNX) is a top-rated global equity mutual fund, managed by Shilpa Mehra, with $3.25 billion in assets. Over the past five years, it has delivered strong returns, with an annualized rate of 18.98%, placing it in the top third of its category. 

Although slightly more volatile than its peers, with a 5-year beta of 1.13, it has consistently outperformed benchmarks, producing a positive alpha of 2.74. The fund's expense ratio of 0.55% is notably lower than the category average, making it cost-effective for investors. 

With 80.17% of its portfolio in stocks, primarily in the technology and retail sectors, the fund actively manages its assets with a 50% turnover rate. Overall, FTRNX offers strong performance, reasonable risk, and lower fees, making it an appealing choice for global equity investors.

Finsum: With the upcoming election, investors might consider the viability of international equity exposure in Trend funds such as these. 

Interval funds continue to gain popularity as investors become familiar with their benefits. New interval fund launches have increased since 2017, with 2024 on track for a record number. 

Assets under management have grown 40% annually, reaching $80 billion by April 2024. These funds offer daily NAV pricing and subscription, but limit redemptions to quarterly intervals. This structure allows for investments in higher-return assets, better alignment of assets and liabilities, opportunistic buying, longer investment horizons for catalyst realization, and greater visibility of redemption requests. 

Overall, interval funds combine traditional mutual fund features with unique advantages like a longer horizon allowing markets to less liquid investments. 

Finsum: Interval funds offer a goldilocks like solution for certain investors. 

A feature of separately managed accounts (SMAs) is that investors directly own securities, compared to an ETF or mutual fund. This makes them more tax-efficient, as investors have more opportunities to harvest tax losses and capitalize on volatility. In contrast, mutual funds, or ETFs, offer much more limited opportunities.  

With SMAs, tax losses can be harvested even in years with positive returns, as securities that are down can be sold. These losses can be used to offset gains and reduce an investor's overall tax bill. Positions can be rebought after 30 days to avoid wash sale restrictions, or stocks with similar factor scores can be purchased instead. 

Unlike mutual funds, SMAs are not subject to embedded capital gains. Embedded capital gains mean that an owner of a mutual fund is liable for capital gains depending on a position’s cost basis. This means that an investor in a mutual fund could be liable for capital gains, even if they have a loss on the position. 

In stressful markets, mutual funds can see distributions of capital gains if there is a surge of redemptions, adding to the risk of a capital gains tax bill in concert with a losing position. With SMAs, this risk is nonexistent since securities are directly purchased. Instead, there is more flexibility to pursue the most tax-efficient strategy.

Finsum: Separately managed accounts offer certain tax advantages to investors over investing in ETFs or mutual funds. Over time, the boost to after-tax returns can be quite significant, especially for high-net-worth investors. 

Grayscale has been a pioneer in terms of bringing crypto investments to a wider group of investors with the launch of Grayscale Bitcoin Trust (GBTC) in 2016. For some time, it was the primary vehicle to get exposure to the asset through traditional means. However, the SEC’s approval of bitcoin ETFs means that the landscape is more competitive, with offerings from leading asset managers at lower costs. 

Now, Grayscale is launching a spinoff version of GBTC, which will have a much lower fee of 0.15% vs. 1.5% for GBTC. The new ETF, Grayscale Bitcoin Mini Trust (BTC), will have the lowest fee among all spot bitcoin ETFs. At launch, about 10% of GBTC’s assets will be moved to BTC, which means GBTC shareholders can convert holdings into BTC without having to pay capital gains taxes. 

With the launch of several spot bitcoin ETFs, there were net outflows from GBTC despite bitcoin’s impressive gains over the past few months. Previously, gains in bitcoin would coincide with a surge in inflows into GBTC. 

The success of new bitcoin ETFs from Blackrock, Fidelity, Bitwise, and Ark also shows that there is strong demand for low-cost ETFs in the crypto space. In contrast, GBTC was structured more like a mutual fund. 

Finsum: Grayscale is launching a spinoff version of its Grayscale Bitcoin Trust (GBTC), which will come with significantly lower costs as the asset manager looks to compete with the launch of several bitcoin ETFs.

A major milestone occurred at the end of 2023 as assets in index funds exceeded assets held by active funds. The major factor behind this shift is an increasing preference for ETFs, while mutual funds are falling out of favor. While there has been much focus on the impressive growth rates of active ETFs, the larger narrative is that ETFs are displacing mutual funds, both active and passive. 

According to Cerulli Associates, active ETFs had $129 billion of inflows last year, while there were $65 billion of inflows into passive mutual funds. In contrast, passive ETFs had inflows of $463 billion, while active mutual funds had net outflows of $576 billion.

A major factor is that ETFs have lower costs while also offering more transparency and liquidity. They are also more tax-efficient than their mutual fund counterparts. Additionally, many advisors are now focusing more on asset allocation than security selection, which is also contributing to growth of ETFs. 

Cerulli also noted that more advisors are moving to independent firms from large broker-dealers. “Those advisors, according to our data, believe less in the merits of active investing,” remarked Matt Apkarian, Cerulli’s associate director of product development.

Another trend is that some portion of outflows from active mutual funds are going into active ETFs. Some new issues in the category have been gaining traction, and more asset managers are jumping on the trend. 

Finsum: Last year, there were net inflows into active and passive ETFs and passive mutual funds. But there were huge outflows from passive mutual funds. A major factor is that ETFs are increasingly in favor due to lower costs and more transparency and liquidity.