(New York)

Over the last couple of years there has been a movement on the fringes of the active management space. That movement was towards funds that only charge investors full and/or rising fees if they outperform a given benchmark. If they underperform, their fees would fall back to ETF levels. Well, that idea has taken a big step recently as major fund provider AllianceBernstein has a handful of so-called “fulcrum funds”. The largest is the AB FlexFee Large Cap Growth Advisor Fund, with $106m under management. A top figure at AB put the goals most clearly, saying “The big impact of this will be if we can take money from passive, or money that would’ve gone there … That’s the ultimate goal here”.

FINSUM: Fulcrum funds make a lot of sense for active managers and clients. If the fund managers do their job and seriously outperform a benchmark, then higher fees make sense. If they don’t, then fees stay low.

(New York)

Housing stocks are in a real slump right now. Many homebuilders are in a full bear market following months of slowing home sales and new construction. For instance, the iShares U.S. Home Construction ETF is down 26% this year. That said, take a look at two stocks that seem like they have strong upside—Ingersoll-Rand (IR) and Lennox International (LII). Both companies are in the HVAC sector of housing, which is a strong niche.

FINSUM: What is so strong about the air conditioning and heating (HVAC) sector is that it is at the start of a big replacement cycle. These machines typically last 12 to 15 years, so there is an ongoing boom in replacement of the huge amounts of these systems installed in the 2003 to 2006 housing surge.

(New York)

Barron’s has made an argument to investors. Despite all the turmoil recently, and the potential threat of the midterm elections, it says you should stick with stocks. Part of the reason is historical—stocks have usually continued to do well even when Congress flips (though the sample size historically is small). For instance, the stock market continued to perform well when Congress turned against Obama. On a policy front, the outcome looks positive too, as Democrats could limit some of the less popular policies of the Republicans, like a trade war, which would help US corporates.

FINSUM: We think the election is going to be positive for shares if everything goes as it is forecasted to. Any change from the blue House-red Senate prediction might shake markets.

(Washington)

One of the big questions financial advisors may have about the midterms has not been discussed much. That question is how the midterm outcome may affect regulation, specifically regarding the SEC rule or forthcoming fiduciary rule 2.0. The answer is that in the most likely scenario—Democrats taking the House and Republicans holding onto the Senate—regulations would get tougher for the wealth management industry. Staunch fiduciary advocate Rep Maxine Waters (D-Calif.) would become the chair of the House Financial Services Committee, and would likely push for much tougher regulation. She has already railed against the new SEC rule for what she sees as a lack of strength.

FINSUM: Democrats taking the house could change the regulatory picture considerably. This seems likely to be one of the biggest risks to a Democrat victory for advisors.

(New York)

The world may be on the verge of a recession and a bear market, or maybe not. But either way, investors need to think about the possibility and have a plan for how to handle it if it comes. With that in mind, some experts have weighed in on the topic. T. Rowe Price says that in a downturn, investors need to buy more emerging markets and hold less bank loans. Charles Schwab thinks investors need to get more defensive, moving out of growth stocks and into defensive sectors, like healthcare. Northern Trust is more benign and does not see big changes coming to the market or economy.

FINSUM: If the economy really goes south, we think the market will go with it, which means defensive sectors would be a good bet. We imagine the Dollar would stay strong and yields would be lower, so income investments could shine(which also happen to be quite defensive).