The Securities and Exchange Commission (SEC) voted to adopt changes to modernize and enhance the reporting and disclosure of information by registered investment companies and to enhance liquidity risk management by open-end funds, including mutual funds and exchange-traded funds (ETFs).
Previously, John Hollyer, global head of Vanguard’s Investment Risk Management Group in Malvern, Pennsylvania, told PLANSPONSOR mutual funds have a very strong track record of managing risk and liquidity. “So you could argue that plan sponsors have been well-served by regulations so far, and … sponsors could benefit from knowing firms have higher standards for risk management,” he said.
However, “If mutual funds were less fully invested in the market because of liquidity requirements, that could be a detriment, particularly to long-term investors,” Hollyer added. And, there could be the potential for increased costs passed to investors by mutual funds.
In order to provide funds with an additional tool to mitigate potential dilution and to manage fund liquidity, the SEC proposed amendments to rule 22c–1 under the Investment Company Act to permit funds—except money market funds and exchange-traded funds (ETFs)—to use ‘‘swing pricing,’’ a process of adjusting the net asset value of a fund’s shares to pass on to purchasing or redeeming shareholders more of the costs associated with their trading activity. Those amendments were adopted by the SEC as well.
Hollyer explained that this means when cash flows in or out rise above a certain threshold, the mutual fund could choose to adjust the cost of the fund that day to account for the number of investors who bought or sold on that day. Long-term investors, such as retirement plan participants, would benefit from this because they would not bear the cost of frequent traders.
NEXT: The changes
According to the SEC, the reporting modernization rules will enhance data reporting for mutual funds, ETFs and other registered investment companies. With these rules, registered funds will be required to file a new monthly portfolio reporting form (Form N-PORT) and a new annual reporting form (Form N-CEN) that will require census-type information.
The information will be reported in a structured data format, which will allow the Commission and the public to better analyze the information. The rules also will require enhanced and standardized disclosures in financial statements and will add new disclosures in fund registration statements relating to a fund’s securities lending activities.
The liquidity risk management rules are designed to promote effective liquidity risk management for mutual funds and ETFs, reducing the risk that funds will not be able to meet shareholder redemptions and mitigating potential dilution of the interests of fund shareholders. They will require mutual funds and ETFs to establish liquidity risk management programs that address multiple elements, including classification of the liquidity of fund portfolio investments and a highly liquid investment minimum. The rules also strengthen the 15% limit on illiquid investments and will require enhanced disclosure regarding fund liquidity and redemption practices.
Mercer Brings
Analytics Service to FactSet Clients
Global consulting
firm Mercer has partnered with FactSet, a provider
of integrated financial information and analytical applications. The collaboration will allow Mercer
to offer its MercerInsight services to FactSet’s North American clients on the
FactSet platform.
MercerInsight is a
cloud-based platform that provides asset managers with performance data and
analytics on more than 29,000 strategies across traditional and alternative
asset classes. It acts as an evaluation tool that
enables comprehensive analysis of institutional track records versus
competitors’ track records or market indices. FacSet customers in the
United States and Canada now can subscribe to MercerInisght and integrate this
data into local databases or analytics tools already
available in their workflow.
“We
are excited to offer our clients the same performance data and analytics
available to MercerInsight subscribers, leveraging Mercer’s extensive
investment consulting experience to enhance FactSet’s offering in the institutional
market,” says Drew Cronin, vice president and director of Analytics Strategy at
FactSet. “This partnership expands on our multi-asset class solution,
providing broad coverage of both traditional and alternative asset
managers.”
Markov Process
International (MPI) has released its MPI Target-Date Radar, an interactive
search and selection tool designed for fiduciaries seeking to match defined
contribution (DC) plan participants’ demographics, behaviors and preferences
with appropriate target-date fund (TDF) families.
The MPI TDF
analysis process, which was designed to help advisers address DOL guidelines for selecting TDFs, also includes detailed reporting
features for qualitative, quantitative, and suitability comparisons, the firm
says.
By
combining holdings-based data with its patented Dynamic Style Analysis (DSA)
modeling, MPI measures TDF glide paths to uncover exposures that manage
longevity, volatility, and inflationary risks. The firm says, “This unique
approach also allows users of the tool to dial-in their risk management
preferences across three critical retirement zones—before, near, and in
retirement—to shape their ideal glide path.”
MPI stresses that
its independent ownership ensures its Target-Date Radar plan questionnaire and
the resulting custom TDF recommendations are based on unbiased and objective
analysis matching the attributes of a plan to a subset of the most appropriate
TDF families.
"Although
there are other TDF decision tools on the market, most of these come from asset
management firms or wealth management firms that have an interest in directing
plan sponsors to a particular fund family,” says Chas Mansfield, CIO of Compass
Financial Partners. “As it stands, the
market desperately needs unbiased, analytics-based TDF guidance that helps DC
plans identify the right products for their participants, as well as why a
particular offering might be a poor fit. MPI's Target-Date Radar incorporates
the methods and approach that I have found to be most effective in working with
DC plans. This tool has no hidden agenda, empowering the adviser, the plan and
the participants."
MPI is a fintech company providing custom plan analysis and reporting
solutions to DC-focused firms. For more information on the MPI Target-Date Radar, visit the Markov Processes website.
NEXT: Fidelity ETFs
See Another Price Reduction
Fidelity ETFs See
Another Price Reduction
Fidelity Investments’
price-reduced US iShares Core Exchange-Traded Funds (ETFs) are now
available commission-free on Fidelity.com, the firm
announced.
This move builds on Fidelity’s alliance with ETF provider BlackRockto include all 18 iShares Core ETFs in its
commission-free offering. Fidelity says it’s the only provider that offers all
18 of these ETFs commission-free to advisers and investors.
This price reduction follows Fidelity's expense reductions for
27 of its leading equity and bond index mutual funds and sector ETFs. Expenses
start at .045% for Fidelity’s 16
index mutual funds and .084% for Fidelity’s 11 sector ETFs, and all are
available commission-free.
“We want customers to receive the best value possible,
whether that means offering a Fidelity solution or one from a third-party
leader,” says Ram Subramaniam, president of Fidelity Brokerage Services. “At
Fidelity, investors can now build an even lower-cost, diversified equity and
bond portfolio in the industry using both index mutual funds and ETFs.”
NEXT: Ardian Launches
North American Investment Business
Ardian Launches North
American Investment Business
Ardian, a private investment company, has partnered with
Seven Mile Capital Partners (SMCP) to establish Ardian’s North American direct
investment business.
Currently led by Vincent Fandozzi and Kevin Kruse, the
entire SMCP team has agreed to join the company with a continued investment
focus on middle market businesses that operate within or serve the industrial
and related business-services sectors. Fandozzi and Kruse will be spearheading
Ardian’s North American direct investment effort as the company looks to grow
its activities in each region around the globe.
Fandozzi will lead a seven-person team with experience investing
in North American mid-market companies. SMCP, founded in 2011, previously
managed a portfolio of middle market investments on behalf of Ardian’s funds of
funds team and other investors.
Fandozzi has more than twenty years of financial and
investment experience, most recently as the founder and managing partner of
SMCP. Prior to this, Fandozzi was the global head of private equity and
alternative assets at Citi Holdings, where he oversaw approximately $6 billion
in assets. Kruse has more than twenty years of private equity experience, most
recently as a partner at SMCP and previously as a managing director at Warburg
Pincus, where he was responsible for sourcing and executing transactions in the
North American Consumer and Industrials Group.
Ardian manages funds worth $60 billion for 550 investors
across the world including pension funds sovereign wealth funds, family offices
and high-net-worth individuals in Europe, North America and Asia.
“Ardian has
long dominated the secondaries space in North America and its expansion into
direct middle market activities is a natural extension of its capabilities,
especially given that many of our relationships are based in the North American
market,” says Benoît Verbrugghe, member of the Executive Committee, and head of Ardian USA.
NEXT: New TDF Index Released
New TDF Index Released
Hand Benefits & Trust (HB&T) has partnered with
Target Date Solutions to release the SMART Funds Target-Date Index, which
tracks performance expectations for prudent target-date funds (TDFs). It would
be the first and only index of its kind, according to HB&T.
This index follows the patented Safe Landing Glide Path that
seeks to preserve the purchasing power of accumulated assets at the target date,
and to provide for the growth of assets during accumulation. It is managed
using two Nobel Prize winning theories in a three-phase process that invests in
nine passive asset classes. The index emphasizes broad diversification at long
dates, and safety at the target date, with less than 10% in equities. Also,
performance of the Index is net of fees.
The Index is investable as a collective investment fund for
eligible qualified retirement plans through the NSCC Fund/SERV, and has a live
track record that starts in 2014, back-tested to 1998.
HB&T, a Benefit Plans Administrative Services (BPAS)
Company, and its affiliates are national providers of administrative,
actuarial, consulting, and institutional trust services. HB&T also serves
as sponsor and trustee of collective investment funds.