Investing November 9, 2012

ETF Assets Decrease in October

November 9, 2012 (PLANSPONSOR.com) – Exchange-traded fund (ETF) assets decreased $11.9 billion, or 0.9%, in October.
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According to the State Street Global Advisors (SSgA) ETF Snapshot report, 1,240 ETFs, with assets totaling $1.3 trillion, were managed by 37 ETF managers as of October 31. During the month, the S&P 500 Index dropped 1.8%, while the MSCI EAFE Index increased 0.8%.Bonds were mixed.  

ETF flows topped $2.7 billion in October, with the fixed-income category contributing $5 billion of inflows. The large-cap size category had the most significant outflows—$9.2 billion.  

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By asset class, international developed ETFs earned 0.8% while emerging markets lost 0.6%. Domestic large-cap, mid-cap and small-cap were all negative, losing 1.8%, 0.8% and 2%, respectively. The U.S. aggregate and U.S. Treasury markets were relatively flat, while the U.S. corporate bond market returned 1.1% and commodities dropped 4.1%.  

BlackRock, State Street and Vanguard remain the top three ETF managers, accounting for 83% of the U.S.-listed ETF market.
Administration November 9, 2012

Risk Management Major Focus for Nonprofits

November 9, 2012 (PLANSPONSOR.com) - The largest single investment risk cited by nonprofit representatives surveyed was overreaction to short-term events, cited by 58%.
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A Mercer Hammond survey of 80 U.S. fiduciaries and board members, representing endowments and foundations, nonprofit health care and large private wealth funds, found the next highest risk was assuming that the future will be much like the past—the so-called “Black Swan” event—cited by nearly 20% of those surveyed. Overestimating the ability to gauge risk was cited by 10%, while relatively few respondents felt that misalignment of incentives for investment managers or career risk associated with not following the pack represented a serious risk.       

Nonprofit organizations place a high value on capital preservation. Nearly half the respondents said their largest concern, when thinking about investment risk, was fear of losing money. Overall market volatility ranked second, cited by about one-quarter of the respondents, with an overheated market and high valuations, along with event uncertainty, cited by remaining respondents.  

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Those surveyed identified the continued political and fiscal gridlock in the U.S. as the No. 1 concern in the global markets, outranking the European debt crisis or slowing economic growth in China.  

Survey respondents had an ambivalent attitude toward investment in Europe. On the one hand, one-third of the fiduciaries surveyed feel that equity valuations in Europe are simply too attractive to ignore. On the other hand, 40% of those surveyed by Mercer Hammond want their global equity managers to tactically reduce their exposure to the euro, either through asset allocation or the use of currency hedging.  

Mercer acquired Hammond Associates, an investment consultant for endowments, foundations and the private wealth and health care markets, in 2010 (see “Mercer to Acquire Foundations and Endowments Consultant”). 

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