(New York)

One of the things the growing ETF markets lacks is many options regarding private equity, and with good reason. The returns of the sector are hard to reproduce with publicly traded stocks. But getting private equity returns can be difficult to attain anyway because of the challenges of investing in the sector, especially for investors who are not at the wealthiest end of the spectrum. However, there are two newish ETFs on the market, BUYN and BUY, which use an investing methodology developed at Harvard to try to replicate the returns of the private equity sector. The provider is SummerHaven, who comments about their funds that “We believe that these ETFs based on our private equity strategy indexes will provide investors with an opportunity to access returns comparable to an asset class that has traditionally only been available through private markets, with the added benefit of liquidity and transparent and without lockups, vintage risk, investment minimums or takeover premiums. These ETFs will allow both retail and institutional investors an opportunity to access private equity strategy returns at substantially lower fees”.

FINSUM: On paper these sound like an interesting option, but only time will tell if the strategy actually achieves what it says. The ETFs are especially unproven because the Harvard paper which underpins the strategy was only published last year.

(New York)

Don’t worry, this is a not a story about DOL rule resurrection. The rule remains all-but-dead. This article is about how despite the rule being effectively gone, it has succeeded in completely changing the industry. The famed Michael Kitces summarized the DOL rule’s effect this way, saying “The DOL fiduciary rule really made the discussion of fiduciary for consumers mainstream … You can’t un-ring that bell”. Barron’s focuses on the material changes to offerings in their view, saying “The short-lived standard spurred the industry to lower fees, and prompted brokerages to prune their product lineups and remove conflicts of interest from their compensation structures. These changes are expected to outlive the rule”.

FINSUM: The DOL rule may be gone, but it will certainly never be forgotten.

(New York)

Are you on the look out for income stocks? While their position in one’s portfolio is changing given rising rates, good income stocks, especially safe ones, are always of value. The S&P 500 is currently only yielding about 2%, which is now less than two-year Treasuries. However, one can find very strong stocks with 3-4% yields. Those include Target and Qualcomm, the latter of which is yielding 4.2% and is a very well-covered stock. Also check out Seagate, CenturyLink, Pitney Bowes, and Navient.

FINSUM: These picks come from what seems to be a very diligent dividend-focused manager that was recently profiled in Barron’s. Our big question is how much dividend stocks might suffer in a rising rate period.

(New York)

Fidelity appears to be on the verge of making one of the most important adoptions of cryptocurrencies by a major financial player to-date. According to Business Insider, Fidelity has just posted jobs on its site looking to hire people “to help engineer, create, and deploy a Digital Asset exchange to both a public and private cloud”. According to BI, “If Fidelity does launch a crypto exchange offering, it would arguably be among the biggest moves by a large Wall Street firm into the nascent crypto market, which stands at about $350 billion”. Fidelity already allows clients to see their crypto holdings alongside their conventional assets.

FINSUM: It sounds like Fidelity is planning to opening a crypto trading exchange. That would be a very important move to legitimate the asset class.

(New York)

Most advisors will be familiar with CITs, or collective investment trusts, but outside of wealth management, they are little discussed. Therefore, it may be interesting to learn that the industry has been growing strongly and is approaching $3 tn. A lot of the growth has been through 401(k) sponsors adding CITs to their menus. However, the products may have benefits for many, as they essentially use a mutual fund structure, but have significantly lower fees and distribution costs because they are not subject to SEC rules. According to one money manager, “CITs have always been an option for the retirement market, but once a manager sees that they can offer a CIT cost-effectively, it’s a no-brainer”.

FINSUM: This seems like a poorly understood, but potentially value option for many.

(Washington)

The DOL rule took years, seemingly millennia, to be completely worked out (and it still wasn’t good ha), and many advisors are wondering how long it might take the SEC to get to a final iteration of its pseudo-fiduciary rule. Well, the SEC has not laid out a formal schedule yet, but SEC chief Clayton said this week that he will make sure the SEC is “not going to take forever”. Many have called for the SEC to extend the comment period on the new rule past its August 7th closing date, but the SEC has not said whether it will do so.

FINSUM: We are pleased with how quickly the SEC got its first iteration of its new rule out. We hope they keep the pace up to eliminate all the regulatory limbo in which the industry might find itself.

(New York)

Think about the financial advisor as you conceive it: an entrepreneurial professional driven by an eat-what-you-kill paradigm. For decades that has been the model, but it appears to be changing quickly. In what Barron’s calls the rise of the “advisor zombie”, many advisors are being moved to basic salary and bonus models. Since firms are exiting the broker protocol, it is becoming easier for them to lock advisors in place, and thus constrain their pay, leaving more margin for firms. The model attempts to make clients loyal to firms rather than advisors, much like a branch banker.

FINSUM: This is certainly a dystopian viewpoint, but if you take a look at changes going on in the industry, it looks like a pretty reasonable view.

(Washington)

Earlier this week it was former NYC mayor, and current Trump lawyer, Rudy Giuliani saying it. Now it is the president himself. Earlier this week, Trump confirmed on Twitter that “he has the absolute right to pardon himself”. However, after affirming his right, he followed up by saying “but why would I do that when I have done nothing wrong?”.

FINSUM: The amazing thing about that statement is it may very well be true given the broad pardoning powers of the US presidential office. However, doing so would go against the fabric of the American checks and balances system and would almost certainly get Trump impeached. We understand he is frustrated by the investigation, but he needs to walk a fine line.

(San Francisco)

Investors in Facebook, and possibly tech more broadly, need to be worried. New news has broke which says that Facebook has been sharing its data with China. The company has been sharing data with device makers like Huawei, among others. The news comes just at a time when fury over Facebook’s data policies have caused a global uproar among the public. According to the Financial Times, “Facebook shared user data including information on religious and political leanings with the device makers, and personal data collected from users who had asked for it not to be shared with third parties”.

FINSUM: We don’t know if there are legal ramifications for this, but it will certainly only add weight to the current push to subject the tech industry to greater regulation.

(Houston)

Oil has been doing very well of late. All of our readers have probably noticed it at the pump. Brent crude is currently trading around the $80 per barrel market, and all parts of the oil sector are excited after a multi-year slump. However, the market has two big problems on its hands. The first is China’s secretive oil reserves, which could be used to push prices down if the Chinese start pushing their oil into the market. Secondly, The US oil industry wants to increase output significantly and has asked OPEC for a 1mbd hike, which would once again lead to an oversupplied market.

FINSUM: We acknowledge that oil is doing well, but we are worried it will be hard to maintain current pricing because it basically relies on an oligopoly structure (cooperation on price) which we don’t think is ultimately tenable.