Displaying items by tag: funds

(New York)

If you are like most advisors, you probably have some difficulty in identifying which funds you want for your clients. Alongside the sheer proliferation of funds has been a massive near duplication of them. Dozens of funds now seemingly look exactly the same and it is very difficult to choose one from another—even asset managers create cheaper versions of their own funds. Between these incredibly overlapped offerings and thousands of new funds, it also becomes very challenging to find niche funds that exactly fulfill the role you’d like them to in client portfolios. Well, here is the good news—a new company with a hyper-useful tool is solving the issue. Check out Magnifi, they are bringing investment selection into the 21st century. Magnifi uses patented technology focused on natural language search to seek out exactly the funds you need. No more checking endless boxes and drop-down menus, just type exactly what you want and the perfectly matched funds appear. For example, imagine you wanted ESG funds that did not include oil and gas companies. Just search “ESG no oil” and bang, you have ten perfectly matched funds, including the stocks that comprise them, their fees, and performance against one another.

Magnifi also integrates FI360’s fiduciary risk score for every fund, allowing advisors peace-of-mind on the regulatory front when choosing client investments.

FINSUM: Magnifi is nothing short of a revolution for finding and choosing investments. They bring the easy exploration and selection of e-commerce to the world of investment management. Check them out, there is a reason they are being called the “Google for investors”.

(New York)

The Charles Schwab-TDA acquisition will likely have a host of implications for advisors. While it will take time to figure out and explore all of those, one of the immediately negative effects will likely be less funds available on the platform. As advisors will know, TDA did not have its own suite of ETFs, while Schwab does. This meant that TDA did not favor its own funds on its platforms and there was plenty of room for everyone. Schwab openly favors its funds. With the platforms now combining, smaller funds of all varieties are going to be more challenged to find buyers and survive. Even large fund houses like BlackRock might be at a disadvantage because of how the deal will help Schwab grow its ETF offerings.

FINSUM: this is going to lead to further consolidation in the fund business and will likely allow Schwab’s ETFs to grab even more market share. They are currently in 5th place.

(New York)

Investors likely already know that low cost index funds tend to greatly outperform high fee actively managed funds (to the tune of 1.5% or more annually). That comes as no surprise. However, what was surprising to us is that in fixed income, the tables are greatly turned. While passive funds do have a slight edge over active ones on average (0.18% per year), in many cases high fee actively managed fixed income funds outperform passive ones. This holds true over long time periods, including ten-year horizons.

FINSUM: This is an interesting finding and one that makes intuitive sense. The bond market is vast, hard to access, and full of intricacies. That kind of environment lends itself to specialism in a way that large cap equities does not, and the performance metrics show it.

(New York)
So across the wealth management industry there has been a gnawing and anxious debate that may be keeping advisors up at night—does the fiduciary rule mean that advisors need to always offer the lowest cost funds to clients? Well, one lawyer’s opinion is a resounding “no”. Citing the rule itself, the DOL says “Adviser and Financial Institution do not have to recommend the transaction that is the lowest cost or that generates the lowest fees without regard to other relevant factors”. That other relevant factor could be a myriad of things, such as the other holdings in a portfolio or whether one fund has higher performance than another or a different fee structure and so on.

FINSUM: We have personally seen a lot of debate on this issue, and while many do realize that they do not have to offer the lowest cost investments, fear of regulatory trouble pushes them to do so.

(New York)

Anyone on the lookout for signs of a correction might want to pay attention to this. New data shows that US investors are avoiding US stock funds. Of the $4.1 bn poured into mutual funds and ETFs in the week ending December 27th, around 70% of the money flowed overseas. The trend is nothing new though, as US stock funds saw their third straight year of net outflows despite the market rising strongly. Taxable bond funds and international stock funds have seen 56 straight weeks of inflows.

FINSUM: We don’t think this is a warning sign of anything other than good times to come. US investors tend to put more money overseas when they are bullish, so this is not a negative sign.