Tue, Apr. 5, 1:23 PM
- The Department of Labor this week is expected to release final regulations requiring brokers to act with a fiduciary standard - that is act solely in the best interest of their client. Previously, recommendations only had to be "suitable" for clients - a less rigorous standard allowing excessive fees, and investments with hidden commissions.
- Investors now paying trading commissions will likely be moved into accounts where brokers collect fees based on AUM. Popular, but costly products like variable annuities, commodity pools and non-tradable REITs might no longer find a home in retirement accounts. They'll be replaced with low-cost index funds.
- Whether it all works out for the little guy remains to be seen, but one thing is sure: Regulatory costs will be on the rise, something larger shops - think Merrill Lynch (NYSE:BAC) and Morgan Stanley (NYSE:MS) - are going to be able to absorb better than smaller players who are more reliant on commissions - think LPL Financial (NASDAQ:LPLA) and Raymond James (NYSE:RF).
- Big providers of index mutual funds and ETFs are winners as well - BlackRock (NYSE:BLK), T. Rowe Price (NASDAQ:TROW), and WisdomTree (NASDAQ:WETF) fit the bill. Active mutual fund houses like Franklin Resources (NYSE:BEN), Legg Mason (NYSE:LM), and Waddell & Reed (NYSE:WDR), not so much.
- Insurers who are big providers are variable annuities could also be pressured - Ameriprise (NYSE:AMP), Lincoln National (NYSE:LNC), MetLife (NYSE:MET), Prudential (NYSE:PRU).
- Now read: Congratulations To All The New Fiduciary FAs Out There: Financial Advisors' Daily Digest (April 4)
Thu, Mar. 31, 2:56 PM
- Fixed-income ETF net inflows of $32.5B in Q1 were nearly triple the average of the prior 12 quarters according to Marketfield Asset Management. A notable beneficiary of the trend was the iShares Core. U.S. Aggregate Bond ETF (NYSEARCA:AGG) with about 10% of that $32.5B. This BlackRock (NYSE:BLK) stalwart has pulled in a "remarkable" 14% of all fixed-income ETF flows over the last three years and now has AUM of $34.8B.
- The Vanguard Total Bond Market ETF (NYSEARCA:BND) is growing more slowly, but has the 2nd-fastest 3-year growth rate and AUM of $28.4B.
- The cash, says Marketfield's Michael Shaoul, doesn't appear to be coming from other fixed-income ETFs, but instead continues a shift from actively-managed to passive funds. Shaoul also notes that flows weren't limited to those benchmark ETFs, but also included strong moves into Treasury, investment-grade, and high-yield ETFs.
- ETFs: AGG, BND, BOND, PTY, RCS, DBL, BTZ, HTR, SCHZ, PCM, JHI, BHK, BNDS, JMM, TAI, ICB, FBND, VBF, PAI, IUSB, SAGG, GBF, VBND, UBND
Thu, Mar. 31, 1:26 PM
- BlackRock (NYSE:BLK) has more than $4T in AUM, but its iShares unit - now with nearly $1.1T of that - continues to garner a larger share of that, and ETFs don't require the manpower of actively-managed funds.
- The trend is likely at least part of the reason for yesterday's news of 400 coming layoffs, or 3% of the company workforce.
- "BlackRock is a microcosm of the disintermediation of the entire financial industry that ETFs are causing," says Bloomberg's Eric Balchunas.
- Now read: BlackRock Inc.: The Largest Player In The Market
Wed, Mar. 30, 2:27 PM
- BlackRock (BLK +0.4%) plans to lay off about 400 jobs in what would be the largest round of cuts ever at the company, reports Bloomberg. The firm has about 13K employees globally.
- Despite these cuts, a Bloomberg source says the company will continue to invest and hire in key areas and expects to end the year with a higher headcount.
Mon, Mar. 14, 11:03 AM
- While February trends were mixed, says Citigroup's William Katz, they did improve on a month-to-month basis, particularly for active funds. Though ETFs continue to gain market share, some equity funds were hit with sizable outflows.
- Affiliated Managers Group (AMG -2.5%) saw 28% annualized organic growth in February, says Katz, with AllianceBernstein (AB +0.8%), 26% growth, Federated Investors (FII -1.2%), 8% growth, BlackRock (BLK -1%), 5% growth, Schwab (SCHW -1.6%), 4% growth, T. Rowe Price (TROW -1.2%), 3% growth also posting solid long-term inflows.
- Vanguard had a solid month, with 9% growth.
- Meanwhile WisdomTree (WETF -1.5%) at 50%, Waddell & Reed (WDR +1.9%) at 37%, Invesco (IVZ -0.8%) at 11%, and Franklin Resources (BEN -0.9%) at 10% all saw deeply negative annualized loss rates.
- Katz reiterates Buy ratings on AB, Legg Mason (LM -2.1%), and OM Asset Management (OMAM -2.2%), but still sees "outsized downside" for WisdomTree and Waddell & Reed.
Fri, Mar. 11, 12:49 PM
- While the big Wall Street banks are struggling with slides in fixed-income revenues, business is booming at BlackRock (NYSE:BLK) and other ETF providers offering credit-related products.
- The banks, writes Lisa Abramowicz, want some of that business back.
- The issue for banks are new regulatory and capital rules which make it harder to hold big inventories are paper investors want to trade. Meanwhile, the ease of moving in and out of vehicles like BlackRock's $25B IG bond fund (NYSEARCA:LQD) or its $16B junk-bond fund (NYSEARCA:HYG) have led to surging volumes, even as the individual securities underlying those ETFs are more difficult to trade.
- Banks are responding with the total-return swap in which an investor pays a fee to a counterparty who promises delivery of the total gain on a basket of certain debt. These instruments are not only quickly traded without having to deal with the underlying securities, but are pegged to some of the same indexes as the biggest credit ETFs. Citigroup (NYSE:C) just became the eight dealer in these derivatives (joining GS, BAC, JPM, MS, CS, DB and OTCQX:BNPQY), which are being pitched by banks as an alternative to ETFs.
Fri, Mar. 11, 8:34 AM
- The analyst team lead by Brian Bedell is altering its valuation methodology for private-equity players from multiples of distributable earnings to a sum-of-the-parts model. The "volatile backdrop" makes one-two year distributable earnings estimates "highly uncertain," they say.
- Thanks to its higher sensitivity to real estate than peers, Blackstone (NYSE:BX) is cut to Hold from Buy.
- Within the subsector, Bedell and team like in order: Exchanges, online brokers, large-cap asset managers, trust banks, and at the end of list alternative asset managers (private-equity).
- Their top pick in exchanges is CME Group (NASDAQ:CME), thanks to its leverage to uncertainty on global rate policy, economic growth, oil, and equity markets.
- In online brokerage, Schwab (NYSE:SCHW) is a "solid play" on more Fed tightening.
- In custodial names, the team continues to like a pair trade of long BNY Mellon (NYSE:BK) and short State Street (NYSE:STT).
- For traditional asset managers, Affiliated Managers (NYSE:AMG) is especially undervalued, followed by Invesco (NYSE:IVZ), BlackRock (NYSE:BLK), and T.Rowe Price (NASDAQ:TROW).
- In alternatives, Oaktree (NYSE:OAK) is best-positioned thanks to its ability to put money to work in distressed credit opportunities.
Mon, Feb. 29, 2:54 PM
- The expense ratio on the $2.9B Vanguard Global ex-U.S. Real Estate Index ETF (NASDAQ:VNQI) is cut to 0.18% from 0.24%. The $4.7B Vanguard Total International Bond Index ETF (NASDAQ:BNDX) is cut to 0.15% from 0.19%. The $5.2B Vanguard Total World Stock Index ETF (NYSEARCA:VT) is cut to 0.14% from 0.17%.
- Also seeing reductions are the Vanguard High Dividend Yield Index ETF (NYSEARCA:VYM), the Vanguard FTSE All-World ex-U.S. Index ETF (NYSEARCA:VEU), the Vanguard FTSE All-World ex-U.S. Small-Cap Index ETF (NYSEARCA:VSS), and the Vanguard Total International Stock Index ETF (NASDAQ:VXUS).
- Forty-two mutual funds also had fee cuts, including the $42.5B Vanguard Windsor II Fund (VWNFX, VWNAX), and the $10B Vanguard Explorer Fund (VEXPX, VEXRX).
- The full list is here
- BlackRock (NYSE:BLK) and Schwab (NYSE:SCHW) ... the ball's back in your court.
Wed, Feb. 3, 8:02 AM
- BlackRock (NYSE:BLK) CEO Larry Fink pens an open letter to corporate CEOs here and in Europe urging them to focus on long-term value creation.
- Echoing many of the points made by a certain presidential candidate, Fink notes S&P 500 dividends last year amounted to the highest proportion of earnings since 2009, and buybacks through the end of Q3 were 27% above year-ago levels. While supporting the return of excess cash to shareholders (they are the owners of the company, after all), Fink asks companies to adopt "balanced capital plans."
- "We are asking that every CEO lay out for shareholders each year a strategic framework for long-term value creation. Additionally, because boards have a critical role to play in strategic planning, we believe CEOs should explicitly affirm that their boards have reviewed those plans."
- As for quarterly earnings "hysteria," Fink isn't a fan. While still supporting the reporting of quarterly results, Fink asks companies to do away with forward guidance, and instead focus on demonstrating progress made toward fulfilling strategic plans.
- Previously: Dimon and Buffett convene secret meetings on promoting long-termism (Feb. 2)
- ETFs: SPY, SH, SSO, SDS, VOO, IVV, UPRO, SPXU, SPXL, RSP, SPXS, RWL, EPS, VFINX, BXUB, SPLX, SFLA, BXUC, SPUU, LLSP, RYARX
Wed, Jan. 27, 12:36 PM
- Bill Ackman spends a considerable portion of Pershing Square's annual letter decrying the rise of indexing. He notes index funds accounted for nearly 20% of all dollars invested in the market last year, up from 10% fifteen years ago. A check of the registry of corporate America finds Vanguard, BlackRock (NYSE:BLK), and State Street (NYSE:STT) as nearly always the top three shareholders.
- Index managers, of course, are compensated not on performance, but on AUM, and they're judged on how well they track the index and the size of their fees. This creates a governance issue, says Ackman, It's an impossibility for fund managers to keep a close eye on the companies they own, and even further, what would be the point? Their job is to track an index and keep costs down.
- Should the trend continue, the U.S. system risks becoming like that of Japan's keiretsu (cross corporate ownership) which has been blamed for being a large part of that country's decades of economic malaise.
Wed, Jan. 27, 9:23 AM
- Executives at Goldman Sachs gasped at a meeting last fall when the bank's asset management unit presented to them a new ETF with annual fees of just 0.09%.
- Story from the WSJ's Jason Zweig and Sarah Krouse
- It's not just the booming ETF industry where price wars abound, but mutual funds are getting less costly as well. The average fund tracked by Morningstar charges 1.07%, down from 1.22% in 2005.
- It's not all bad for mutual fund providers, who say they offer bargain prices on some products as "loss leaders" to get investors in the door where they can then be pitched more expensive funds and strategies. Still fund industry profit margins are slipping - 22% in Q3 from 25% a year earlier, according to DST Kasina.
- Industry comments: "We’re not surprised at all to see passive managers compete on fees because that’s their only differentiator,” says AlianceBernstein's (NYSE:AB) Chris Thompson, whose company has boosted marketing efforts for its actively-managed strategies.
- "We are in the business of increasing earnings,” says BlackRock's (NYSE:BLK) Mark Wiedman, whose firm's total stock market ETF now charges a barely-visible 0.03%. “Over time, the revenue growth from volume will outstrip the price cuts in these products.”
- Other interested parties: BEN, LM, GBL, JNS, IVZ, TROW, AMG, FII
Fri, Jan. 15, 7:35 AM
- Alongside today's results, the company boosts the quarterly dividend by 5% to $2.29 per share.
- Q4 adjusted operating income of $1.143B slips 1% from a year ago. Diluted EPS of $4.75 also down 1%. Operating margin of 41.6% down 200 basis points.
- Total AUM of $4.645T flat Y/Y. $152B of long-term net inflows across all platforms for the year. The iShares unit had $60B of net inflows in Q4, and accounted for 25% of total AUM and 35% of all base fees. Retail inflows of $7B, and accounted for 13% of total AUM and 34% of base fees.
- 69% of actively managed fixed income funds outperformed the benchmark/peer median for one-year; 92% for five years. 76% of fundamental actively managed equity funds beat for one year; 71% over five years.
- Conference call at 8:30 ET
- Previously: BlackRock misses by $0.06, beats on revenue (Jan. 15)
- BLK flat premarket
Fri, Jan. 15, 5:50 AM
- BlackRock (NYSE:BLK): Q4 EPS of $4.75 misses by $0.06.
- Revenue of $2.86B (+2.9% Y/Y) beats by $20M.
Thu, Jan. 14, 5:30 PM
Tue, Jan. 12, 3:56 PM
- According to an internal memo, BlackRock (BLK +1.9%) will unify its global fixed-income business under longtime manger Tim Webb and Rick Rieder, who will become CIO of global fixed income.
- The company is also combining its two stock-picking businesses - a traditional fundamental team and a scientific (quant) team - into one unit reporting directly to President Rob Kapito. Ken Kroner, who had overseen multi-asset strategies and the "scientific active equity" group, will retire this year.
Mon, Jan. 11, 1:03 PM
- The $372B in net inflows last year is up 10% from 2014, according to ETFGI, with December's $55B in net inflows the best month in 2015, and the 23rd consecutive month of additions.
- Equity ETPs saw net inflows of $258B, followed by fixed-income with $81.5B, and commodity funds with $2.4B.
- BlackRock's (NYSE:BLK) iShares is the largest ETP provider with $1.11T of AUM (37.1% market share); Vanguard is second with $509.6B (17% market shares), and State Street's (NYSE:STT) SSga with $443.2B (14.8% market share).
BlackRock, Inc. provides investment management, risk management and advisory services for institutional and retail clients worldwide. The company's platform enables it to offer active (alpha) investments with index (beta) products and risk management to develop tailored solutions for clients.... More
Industry: Asset Management
Country: United States
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