Institutional Investors Double “Smart Beta’ Exposure

Institutional investment clients of Towers Watson doubled their allocation to smart beta strategies over the past two years to $40 billion.  The firm sees the continued strong demand for smart beta strategies broadening beyond equities, particularly in the bond market. Towers Watson’s clients include pension funds, sovereign wealth funds, endowments, foundations and insurance companies.    

How does your 401(k) balance compare?

Average 401(k) Account Balance by plan member’s age and years of work (as of 12/31/2013) Age Years worked Average 401k Balance (in $) 20s 5-10 $18,351 30s 10-20 $66,139 40s 20-30 $154,228 50s Greater than 30 $252,418 60s Greater than 30 $248.397 Source: Employee Benefits Research Institute  

Institutional Plan Sponsors Investment Decisions

  A recent study using a dataset of 80,000 yearly observations of institutional investment product assets, accounts, and returns for  24 years (1984−2007) indicate that that plan sponsors may not be acting in their stakeholders’ best interests when they make rebalancing or reallocation decisions. Investment products that receive contributions subsequently underperform products experiencing withdrawals over one, three, and five years. For investment decisions among equity, fixed-income, and balanced products, most of...

White House Memo Makes Case for Fiduciary Standards for Brokers Advising 401(k) Plans

If a White House memo from Jason Furman, Chairman of President Obama’s Council of Economic Advisors is any indication, brokers advising 401(k) plans will soon be under a fiduciary standard, which would require them to act in the Plan’s best interest, and not a “suitability” standard, which currently exists.  If such a plan were implemented, then revenue sharing or payments received for selling certain funds will no longer be permissible. ...

Algorithmic Hedge Strategies Outperform Human Managers in 2014

According to an article on CNBC this morning, systematic hedge strategies outperformed their human counterparts in 2014.  The best performing category within the segment was managed futures strategies, which gained 15.2% for 2014.  Falling oil prices, the climbing U.S. Dollar, and declining U.S. government bond prices were cited as trends that these funds were able to capitalize upon.  The entire article can be read here.

ETF Investor Psychology

To be successful at anything, requires discipline.  In athletics, you must train your body to make certain movements at certain times so that during competition, those movements become second nature and you can perform them without thinking.  To be healthy, one must be disciplined to eat right and get proper exercise.  And to be successful, or to reach your financial goals, one must have a sound plan and the...

Flex Shares posts preliminary list of ETFs with capital gains distributions for 2014

According to a PDF on the FlexShares website, only two of their ETFs will distribute a capital gains payment for 2014, based on an October 31, 2014 estimate.  The FlexShares Disciplined Duration MBS Index Fund (MBSD) will pay a $.01 per share short-term gain, and the FlexShares Ready Acces Variable Income Fund (RAVI) will pay an $0.11 per shareshort-term gain and a $0.01 per share long-term capital gain. ETF...

Pimco ETFs with Capital Gains distributions for 2014

While ETFs are mostly tax efficient, especially compared to most mutual funds, there are some ETFs that do incur capital gains distributions annually.  Pimco recently announced the ETFs that will be subject to a distribution for 2014. 0-5 Year High Yield Corporate Bond Index Exchange-Traded Fund (HYS) 1-3 Year U.S. Treasury Index Exchange-Traded Fund (TUZ) 1-5 Year U.S. TIPS Index Exchange-Traded Fund (STPZ) 15+ Year U.S. TIPS Index Exchange-Traded...

First Trust estimates no L-T capital gains distributions for its ETFs for 2014

A statement on the First Trust’s website indicates that the firm does not anticipate any  long-term capital gains distributions for its ETFs for the 2014 tax year.  Any short-term capital gains distributions are expected to be nominal.  The statement reads, as follows : 2014 Estimated Capital Gain Distributions The First Trust Exchange-Traded Funds are not expecting to pay long-term capital gain distributions during the remainder of 2014.  Short-term capital gain...

Whitepaper Provides Understanding into Various Alternative Asset Categories

A new whitepaper from Invesco discusses the difficulties in managing risk with strictly a 60-40 stock-bond portfolio and highlights some of the new alternative asset classes that advisors can use to help reduce risk in client portfolios. This is especially important for advisors, since 44% of advisors see managing risk for client portfolios as their #1 priority.  The paper discusses the weaknesses of MPT, how alternatives help with portfolio...