Displaying items by tag: fees

Friday, 25 March 2022 19:55

Regulator Changes Driving Bond ETF Creation

A small but substantial change may be shaking the bond ETF infrastructure to its core. The New York State Department Financial services is allowing insurers to label bond ETFs as individual bonds rather than as equity risk. Companies have issued lots of new debt setting records as record low interest rates have made it appealing. This regulation could change the way the Fed and other regulators interact with bond markets, and could lead to the sort of efforts that saved the bond market in 2020. These will allow more bond products and increase inflows, but for insurers bond ETFs have more complications than a traditional single fixed income security and could provide difficulties in the future.


Finsum: Small changes to regulator practices like this can lead to massive swings in credit creation, keep an eye on bond ETFs.

Published in Bonds: Total Market
Thursday, 10 March 2022 22:50

How is Direct Indexing Handling Russia

Russia’s invasion of Ukraine has triggered tons of sanctions from the west and many of those cut off Russian companies or Russian financers. Direct indexing has been put in one of the best positions of many financial products as they had some of the tiniest exposure to ADRs. With a meager 1% exposure, these portfolios have been left in a fairly healthy position all things considered. Meanwhile, major index companies like MSCI and FTSE Russel have raced to remove any Russian securities. Moreover, Vanguard and BlackRock as well as other major mutual funds were given until May 25 by the Treasury to find an off-shore buyer for Russian stocks. Direct index company dimensional funds have added Russia to a DNP list and have committed to rid of all their Russian stocks.


Finsum: Many funds were able to quickly dump Russian stocks, however, energy prices could be a more difficult problem to navigate.

Published in Wealth Management
Tuesday, 01 February 2022 19:25

Model Portfolio Blowback Overhyped

Model Portfolios got some widespread skepticism thrown their direction when a group of academics wrote a paper criticizing their usage. The points centered around conflicts of interests and the fee structure. However, model portfolios are templates for investing and so their optimization might not be the ‘perfect’ formula for everyone. Additionally, of course funds are going to include their own products in model portfolios (even if they have higher fees), because they believe their products are superior. In fact, funds would be violating their fiduciary duty if they didn’t honestly think their own ETF was a better product at a slightly higher fee structure.


FINSUM: Cherry picking better-performing portfolios after the fact is an unfair advantage; many model portfolios have different risk factors.

Published in Eq: Tech
Wednesday, 19 January 2022 19:28

Two New Managers Join Custom-Indexing Craze

The direct/custom indexing firm GAMMA Investing got two new investors, riverFront Investment Holdings and Baird. Lorraine Wang is the CEO of GAMMA and supplies custom index-based accounts specifically for financial advisors. Before leading, GAMMA Wang was the head of ETF products and research at Invesco PowerShares. Now GAMMA specializes in custom indexing that tailors to the social, tax, and investment goals of its clients. As part of the investment RiverFront’s COO, Karrie Southall, and executive Director, Laura Thurow from Baird.


FINSUM: The number of firms getting bolstering their custom/direct indexing platforms is growing rapidly, and ESG’s growing prominence is a big part of that.

Published in Wealth Management
Thursday, 23 December 2021 17:38

Investors Want Custom Indexing Answers

A new generation of technology is at our fingertips, and whether that's Netflix or Amazon people want the technology to service them now more than ever. Index tracking funds are really the cable box in the modern world and investors want a more tailored experience that only custom indexing can offer. Partners at Fidelity are saying that a hyper-customized multi asset portfolio is really the future, and given how popular trends like ESG are becoming, advisors are really needing better tools to attract and maintain clientele. Custom indexing can hit a multitude of demands investors want and also drive home a better fee for their workload as compared to traditional ETFs.


FINSUM: The world of a custom index, where stocks can be added and dropped for any reason is here, and it's probably on a mobile platform soon.

Published in Eq: Total Market
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