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BREAKING NEWS: SEC to allow derivatives in active ETFs (AETFs) as predicted by Rob Ivanoff in the ETF Business Review for nearly 5 years; the fund industry is now on a NEW course in terms of distribution, economics, investing in ETF know-how

12/6/2012

The big news are out: SEC will allow derivatives in active ETFs. This is a revolutionary development and it will serve as a catalyst behind the most amazing transformation of the fund business. (to read SEC's speech click here)

What does this mean for the fund industry?

It means that the 30+ open-minded fund companies which have filed for active ETFs, are now free to launch active ETFs (AETFs) that can closely resemble their original strategies with derivatives, and transition managers into this new distribution wrapper/channel. Possibly, fund firms can elect to partner with a firm like AdvisorShares, which is interested in hiring sub-advisors.
It means that traditional fund companies, whom we begged to stay open-minded in terms of AETFs, will NOW have to invest in new distribution technology, ETFs know-how, and be part of economics that will revolutionize how fund products are bought, used, and managed.

For subscribers of the ETF Business Review, these news are nothing new. For the past two years, we at the leading authority in the fund industry, have been prepping for this moment, advising clients to consider active ETFs as yet another distribution channel for their existing strategies. We highlighted three key success factors: ability to deliver alpha, marketing scale, and human-based talent development (over indistinguishable shelf-products).
Last, consult your attorneys. The race is on, and this is a historical decision.

Atlas has un-shrugged. To join the ETF Business Review and sign here or contact me at [email protected]

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ETF firms continue to utilize Twitter

8/2/2012

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ETF firms continue to utilize Twitter, although growth is slowing down. Our subscribers last month benefited from the latest analysis on this important topic, which we have maintained since the early days of Twitter. And while only 30% of the ETF industry is utilizing Twitter, that number is 62% for Fortune 500 companies. Subscribe for our ETF Business Review weekly to learn more and get our great ideas for using Twitter more effectively.

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Rob Ivanoff: State of the ETN market

6/29/2011

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The ETN market continues to grow. ETNs grew faster than both, mutual fund and ETF offerings in 2011 (see chart below), as of June 23rd, YTD. Earlier this year, we projected ETN assets to reach $23 billion by the end of 2011. However, we have been too optimistic. ETNs are now growing at a slower rate: total ETN universe grew 14% since end of 2010, as of June 23rd. ETNs hold $16 billion, which is up from $14 billion at the end of 2010. Amongst the colorful array of ETNs, more than 50% of them are in commodity-tracking offerings, ($8.6 bill), and volatility-related ETNs hold $2.1 bill. Another $3 bill is in energy-related MLP offerings. Agriculture related products hold close to $1.6 billion. Out of the 189 new ETP products launched in 2011, 36 were ETNs. Going forward, much of the growth in ETNs is expected to come from trader-oriented and alternatives-targeting products, areas that are challenging to package in ETF wrappers. Despite the credit risk associated with these products, ETNs serve as ideal instruments for placing precise bets on hard-to-reach areas of the marketplace.
(extracted from this week's ETF Business Review, issue 76)

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FUND MARKETING: The three principles of social media

6/20/2011

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Much of what is written about social media is questionable. Much of what is sold as advice is truly useless. It is often full of excellent diagrams, but really, just a noise. To prevent expensive consultants from stealing your hard-won budget you need to simplify. You need to invent engaging ways of adding value. For that purpose, FPR offers you three ideas we extracted from understanding how Visa thinks about their social media engagement strategy:

1) Sharing is the new giving

2) Participation is the new engagement

3) Recommendations are the new advertising

There's a process VISA (the credit card firm) observes in the online path to the purchase of a "something" that has been influenced by social media. It starts with 1) Advocate, 2) Consider, 3) Evaluate, then 4) Buy.

Are people talking favorably about your brand and products? They should.

Drop the endless analytics conversations around the drawing board. Go back to fundamentals that work. Start simple, on a small budget and build by contributing to your end-users.

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The Winning Formula for US Asset Managers

3/22/2011

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Big success is often a matter of science and diligence.

It is possible that people working within the financial services, have no true understanding of how mutual funds work. It is also possible, that many do not understand why mutual funds have become the investment vehicle of choice for investors around the world.

But it is absolutely certain - only a handful of people in the world, grasp the science behind what makes an asset manager win over its competitors.

For that purpose, I want to tell you about a brand new book - The Fund Industry: How Your Money is Managed (Wiley Finance).The book is written by Robert Pozen, Senior Lecturer at Harvard Business School, and Theresa Hamacher, President of NICSA. It is highly appointed, in our industry circles, as the ultimate fund industry companion -  a book that will not be surpassed, not until its next edition - by the very same authors.

The great thing about The Fund Industry is that it clarifies a lot of difficult subjects in the mutual fund area. The book is comprehensive and it covers areas such as history and growth of mutual funds, how funds are sold through brokers, banks, insurance agents and the roles of independent directors and boards. It even goes into the challenges of gathering assets internationally, and the limitations of some alternative products.

And because of the power of internet, which has brought our (networked) personalities together, I asked Bob and Theresa to write a short post for our readers. It pertains to the winning formula for US Asset Managers.

Enter BOB POZEN and THERESA HAMACHER, authors of THE FUND INDUSTRY:

The Winning Formula for US Asset Managers

"During the late 1990s through 2001, US asset managers were frequently acquired by outsiders – Europeans and other types of financial firms such as banks, insurers and broker dealers. For example, Unicredito Bank bought Pioneer and Morgan Stanley bought Van Kampen. However, by 2010, most of the outsiders had left the fund management business and the dedicated fund managers were once again ascendant.

    Why did industry insiders win out over industry outsiders?   Banks , insurers and brokers generally bought asset managers as part of a financial supermarket strategy.

Under that strategy, if the financial firm had customers buying financial product X, it could distribute to those same customers financial products y and z. So it made sense to build an array of affiliated managers who could provide more financial products to the same customer base.

    But the financial supermarket strategy was not effective for several reasons. First, and most important, was the move toward open architecture. High net worth customers wanted the best manager of a fund, not an affiliated one. Second, the SEC began to scrutinize much more closely practices like paying special compensation to brokers who sold affiliated funds.   Third, some portfolio managers did not like the bureaucratic culture of a large financial institutions; they also wanted to be paid on the basis of the performance of the asset management unit, not the performance of the larger institution.

    In 2003-2005, Citigroup and Merrill Lynch both decided to sell their asset management units and to concentrate on distribution of all financial products. These sales in turn reinforced the positions of BlackRock and Legg Mason as asset managers. Between 2007 and 2009, a number of large institutions chose to sell their asset management units in order to raise capital in response to the financial crisis.   These included sales by AIG, Bank of America, Lincoln Life and Barclays.

   Now the asset management industry is again dominated by two groups of dedicated asset management firms. One is the big private firms – Capital Research, Fidelity and Vanguard – which have continued to top the ranks of mutual fund managers. All three are organized effectively as partnerships, though the technical legal format may vary. The second group is the private-public firms like BlackRock, Franklin and T Rowe Price.   While these firms have publicly held shares, they are effectively controlled by their own investment managers.

   Thus, the winning formula seems to be clear – a firm primarily dedicated to asset management that either is privately held or controlled by insiders. These firms have the focus on asset management, the long-term perspective and the informal cultures that are critical to success in asset management."

Note: The statistics on all acquisitions and mergers in the asset management industry are detailed in chapter 15 of The Fund Industry: How Your Money is Managed (Wiley Finance). The celebrated book is out today. To become a member of NICSA- visit their website.

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BREAKING NEWS: SEC to allow derivatives in active ETFs (AETFs) as predicted by Rob Ivanoff in the ETF Business Review for nearly 5 years; the fund industry is now on a NEW course in terms of distribution, economics, investing in ETF know-how

ETF firms continue to utilize Twitter

Rob Ivanoff: State of the ETN market

FUND MARKETING: The three principles of social media

The Winning Formula for US Asset Managers

THE ETF BUSINESS REVIEW BLOG

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