Blog

CalPERs Size Restricts its Alternative Asset Exposure

CalPERs $402 billion pension fund (as of 2/7/20) relies more heavily on traditional equity and fixed income than many of its U.S. pension plan peers.  Less than 20% of CalPERS portfolio is held in alternative investments.  This is not necessarily by choice, as CalPERs staff has indicated that the fund’s extreme size makes it difficult for them to invest at scale in private asset classes such as private equity...

Invesco Closing 42 ETFs

Invesco recently announced that they will be closing 42 ETFs, representing $1.3 billion in assets.  The closures are scheduled to occur in February of 2020.Over the past few years, Invesco has aquired a number of ETF issuers, and as a result, some redundancy has been built into their lineup. You can see the full list of ETFs that are closing, as well as the mutual fund changes on Invesco’s...

Exchange-Traded Notes (ETNs): Know What You Own

Clients should always understand what their adviser has placed into their portfolios, why the investments are being used, and what are the particular risks.  A recent Bloomberg report highlighted that Ken Fisher Investments has made a significant bet on Exchange-Traded Notes (ETNs) accounting for approximately $6.2 billion of the $22 billion of issued ETNs, and about 5% of the total assets that he manages for clients. Its important to...

It’s capital gains distribution season -check your ETFs (and mutual funds)

Mutual funds and even some ETFs typically distribute taxable capital gains to shareholders in December of each year.  ETFs are commonly more tax efficient and thus less likely than mutual funds to have an annual capital gains payout.  However, there are some ETFs that may have capital gains distributions, and you should confirm the distribution status annually to avoid an unexpected tax liability. Some fund groups are better than...

Custodians Move to $0 Commissions Impacts Advisory Firms

Over the past month, large custodians including Schwab, Fidelity and others have eliminated commissions for both retail clients and RIA custody clients.  For some RIAs, especially those that offer services via wrap fees that previously were absorbing these costs, these RIAs need to evaluate whether or not their Form ADV disclosures need to be updated. Since trading costs no longer need to be considered in factoring in investment allocations,...

Model Expense Disclosure

The Model Weighted Average Net Expense Ratio applies only to the portion of the model that is comprised of mutual funds and/or ETFs. It reflects expense waivers or reimbursements from the fund companies, which may not be permanent. The data used to calculate the Model Weighted Average Net Expense Ratio is obtained from a third-party data provider and is believed to be accurate, but has not been verified by...

Factors to consider before adding a thematic ETF to your portfolio

In the quest to launch successful products, ETF sponsors have ventured into thematic segments of the financial markets. Think robotics, artificial intelligence, fintech, online retail, cyber security, etc. There has been mixed success among issuers, as some of these products have rapidly grown to $1 billion in AUM such as ETFMG’s Prime Cyber Security ETF (symbol: HACK), while others never gained traction and were closed within a year. Thematic...

SEC Modernizes Regulations of Exchange Traded Funds–Eases Regulatory Burdens, Reduces Cost, Time to Market for New ETFs

On Thursday, September 26th, the SEC passed a long-awaiting ruling that differentiates ETFs from mutual funds from a regulatory perspective. The new regulations will reduce costs and substantially decrease the time in which new ETFs can be approved. The rule is expected to facilitate greater competition and innovation in the ETF marketplace, leading to more choices for investors. Rule 6c-11 will permit ETFs that satisfy certain conditions to operate...

China A Shares weight increases to 15% in MSCI Indexes

MSCI announced today that they have increased the inclusion factor of all China A Large Cap shares from 10% to 15% in the MSCI Indexes notably MSCI Emerging Markets Index and MSCI ACWI Index, coinciding with the recent Quarterly Index Review, effective August 28, 2019. MSCI’s previously announced decision to increase the weight of China A shares in the MSCI Indexes using a 3-step inclusion process beginning with the...

Turnkey Asset Management Platforms (TAMPs) Help Advisors With Outsourced Investment Management

Many consumers believe that an advisor’s job is to pick investments and manage portfolios. A recent article by Morey Stettner highlights that outsourcing trends indicate that more advisors are outsourcing their investment management so they can spend more time providing their clients with a broader scope of services, including retirement, taxes, insurance, household finances and life events such as divorce or charitable giving strategies. TAMPs, or turnkey asset management...