Inside SID: It’s All About the Rules

By John Randall

July 12, 2017

Second in a series of ICI Viewpoints posts focusing on how to enhance operational efficiency using existing tools and practices.

One of the benefits of mutual funds is that they can be designed to meet the specific needs of investors’ purchasing preferences. However, this same flexibility to tailor a product can present challenges, because it results in a wide variety of operational rules.

Yet mutual fund processing—trading, paying dividends, calculating net asset value (NAV), etc.—is a rule-driven operation. And the industry’s evolution into an intermediary-distributed model, where omnibus accounts are used, has shifted the application of these rules away from the fund’s transfer agent to intermediary partners: custodians, brokers, dealers, retirement plan administrators, and trust companies. To ensure that shareholders are treated equally, and that all operational and compliance obligations are met, it is essential that fund rules be applied properly, regardless of whether shareholder accounts are held directly by a fund or indirectly by an intermediary.

Help Is Available

The Depository Trust & Clearing Corporation (DTCC) offers several data services to help apply fund rules. This ICI Viewpoints post will focus on reference data in the Security Issue Database (SID) of the DTCC’s Mutual Fund Profile Service II, which contains an immense and dynamic range of critical information. There are more than 26,000 unique fund identifiers in SID, each with 225 data points, totaling more than 5 million pieces of important information, including:

Breakpoint schedule(s)
Symbol—NASDAQ
Security long name
Security short name
Short-term redemption (STR) defined contribution waiver code
Security issue ID

Dividend type code
Investment class code
NAV strike time
Letter of intent (LOI) minimum investment
12b-1 record date
12b-1 payment frequency code

Working with fund providers, the DTCC has created an effective and efficient process for depositing this monumental amount of data into the repository—and for accessing it. This includes pulling mutual fund prospectus information from the SEC EDGAR database, creating a rule-based routine for comparing profile data to prospectus information, providing workflow tools that enable funds to manage their quality-assurance process, and benchmarking the effectiveness of each fund’s data management.

Operational professionals at intermediaries understand the need to harness and even add to these data to feed their rules-based processes. Beyond the 5 million data points available in the database, an intermediary will need to add other data points (such as selling-agreement provisions, and program restrictions and exceptions) into a data management tool, potentially doubling the size of the data set.

When looking to manage such a large data set, there typically are two alternatives: do it yourself, or hire someone else to do it for you. Either can be the right choice, and many firms do a little of both, but neither is easy. Regardless of the choice, stakeholders need to consider the scope and power of SID as part of a solution.

Successful data strategies for “fund security masters” (the main system tables that drive processing) involve the use of multiple sources of fund data. These sources of data can then be tiered into levels, based on an intermediary firm’s comfort level with the data supplied by each source.

In this strategy, the intermediary parses the data by field and source. For example, the “fund name” field could be pulled from a commercial source like Morningstar rather than SID because the Morningstar information is in line with end-client expectations and experience. Information about the “dividend accrual rules” field could be pulled from SID because it’s been provided to SID from the same agent that will pay the dividend, so the firm sees this as a more reliable source.

Information also can be obtained through a lookup tool available as part of DTCC Web Portal Services. Both access points should be part of an intermediary’s data strategy.

As discussed earlier, this process is large and complex—but SID can make things easier. There are times, for example, where an end user at an intermediary might need to confirm a rule on a single fund. Perhaps what is in the security master or internal tool does not square with what the user is seeing happen in the real world, for example, when attempting to verify the sales charge schedule applied to a trade. To verify the fund’s published sales charge schedule, the user can simply use SID rather than searching a prospectus to verify information.

Making It Even Better

As a result of ICI members and intermediary firms working with the DTCC to architect solutions, SID has benefitted from significant improvements in both content and usability over the last 10 years. The industry continues to leverage existing and emerging technology to automate, lower costs, and enhance the shareholder experience. In this drive to a more automated and rule-based environment, SID will become an even more critical data source.

Enhancements and improvements to SID have been driven by the efforts of the ICI Mutual Fund Profile Steering Committee, which includes industry participants and staff from ICI and the DTCC. Guided by industry feedback on how stakeholders are using SID, the steering committee is continuing to assess how the tool can be made more useful to current and future fund distribution activities.

Find Out More

Contact DTCC Wealth Management at 212-855-8877
Contact ICI at john.randall@ici.org or jeff.naylor@ici.org

John Randall is director of operations and distribution at ICI.

TOPICS: Mutual Fund Operations and Technology

Americans Trust in Their 401(k) Plans

By Sarah Holden

July 7, 2017

Defined contribution (DC) plans have long been a key component of Americans’ retirement savings. And with more than $5 trillion in assets and about 54 million active participants, 401(k) plans are the most common type.

Funds Actively Seek Companies’ Sound Management

By Paul Schott Stevens

July 3, 2017

The following ICI Viewpoints is a letter to the Wall Street Journal by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an editorial published on June 22, 2017.

Industry Leaders Highlight Opportunities Presented by Industry Change

By Miriam Bridges

June 1, 2017

Shifts in demographics, regulation, investor preferences, and new product offerings are creating a range of opportunities for the asset management industry. In conversations exploring these evolving trends, industry leaders offered their perspectives on how to succeed in these new environments during two insightful sessions on the second day of ICI’s 59th General Membership Meeting, held May 3–5 in Washington, DC.

Geopolitics and Global Business: What the Future Holds

By Jeanne C. Arnold

May 31, 2017

The challenges of navigating geopolitical developments while operating a global business took center stage during two key sessions at ICI’s 59th General Member Meeting (GMM), held in Washington, DC, from May 3 to 5.

Read more…

TOPICS: GMM ICI Global Mutual Fund

A Tech-Enabled Future—and Present—for Investment Advice

By Rob Elson

May 30, 2017

The future of investment advice will lie at the intersection of technology and humanity, said panelists at ICI’s 2017 General Membership Meeting. But those panelists—Eli Broverman, cofounder of Betterment; Kelly Coffey, CEO at JP Morgan’s US Private Bank; and Ben Huneke, head of investment solutions at Morgan Stanley Wealth Management—offered differing views on how much of a role people will play.

A 529 Day Primer: Do You Know What State Your College Savings Plans Are In?

By Christina Kilroy

May 26, 2017

You might not know that May 29 is 529 College Savings Day, or even what a Section 529 plan is. But if you’re a parent or grandparent concerned about future college costs, the day presents an opportunity to learn how 529 savings plans can help you plan for—and pay for—your loved ones’ postsecondary education expenses.

Cybersecurity at Work: I Know What You Know!

Peter Salmon

May 26, 2017

Part of a series of ICI Viewpoints covering cybersecurity issues.

In the previous installment of this series I mentioned that this post would address steps that you should take if your computer is hacked. Well, in light of the WannaCry/WannaCrypt ransomware outbreak, it seems appropriate to address not only what to do, but how to think about the threats facing us.

Top Investment Strategists Sound Optimistic Notes amid Headwinds

By Rob Elson

May 25, 2017

Opportunities abound in today’s market and macroeconomic environment, and it’s up to fund managers to help their investors capitalize on them. That’s the outlook from a panel of world-class investment strategists sharing their insights at ICI’s 59th annual General Membership Meeting, held earlier this month in Washington, DC.

Average Expense Ratios for Index ETFs Have Declined

By Shelly Antoniewicz, Sean Collins, James Duvall, and Morris Mitler

May 24, 2017

In yesterday’s ICI Viewpoints post, we noted that our annual report on the asset-weighted average expense ratios of funds—“Trends in the Expenses and Fees of Funds, 2016”—showed that expenses for long-term mutual funds continued to decline in 2016.

Average Expense Ratios for Long-Term Mutual Funds Continued to Decrease in 2016

By Morris Mitler and Sean Collins

May 23, 2017

ICI recently released its report on the expense ratios of mutual funds: “Trends in the Expenses and Fees of Funds, 2016.” This is ICI's first report that also summarizes expense ratios for exchange-traded funds (ETFs).

Solving for Data Transparency in the Retirement World

By John Randall

May 19, 2017

First in a series of ICI Viewpoints posts focusing on how to enhance operational efficiency using existing tools and practices.

One of the most important functions performed by ICI involves its role in bringing together members, who participate in a wide array of standing and advisory committees that focus on initiatives affecting the fund industry as well as the broader financial markets. This series will focus on the work of the operations and distribution advisory committees

ICI Study: Closed-End Fund Assets Were $262 Billion at Year-End 2016

By Shelly Antoniewicz

May 12, 2017

ICI recently released its annual report on the closed-end fund market, which analyzes data on closed-end funds, a type of registered investment company that issues a fixed number of shares that are traded on a stock exchange in the over-the-counter market.

Stevens Calls for Measures to Enhance Economic Growth

By Rachel McTague

May 5, 2017

With America striving to achieve greater economic growth, Paul Schott Stevens, ICI president and CEO, called on the Securities and Exchange Commission (SEC) to enhance funds’ essential role in the capital markets by proposing new rules to govern funds’ use of derivatives and by creating a harmonized best-interest standard for advisers providing investment advice to retail and retirement investors. The ICI chief also urged the SEC to adopt a fund disclosure regime for the 21st century.

Jeff Immelt and GE’s Bid to Own the Future

By Rob Elson

May 4, 2017

“I just couldn’t explain why we owned NBC.”

In only eight words, GE’s Jeff Immelt summed up one of the major catalysts for his transformation of the company during his nearly 16 years as president and CEO. His enlightening, lighthearted conversation with ICI President and CEO Paul Schott Stevens at ICI’s 59th Annual General Membership Meeting—which began yesterday in Washington, DC—dove deep into Immelt’s thinking behind this transformation, the company’s major decisions during his tenure, and his big plans for the company’s future.

Read more…

TOPICS: Events GMM International

Retired General Stanley McChrystal: Service, Connection, and Flexibility

By Todd Bernhardt

May 3, 2017

When General Stanley McChrystal took over the Joint Special Operations Command (JSOC) in 2003, he was fully steeped in the US Army’s command-and-control philosophy. But he soon learned the need for adaptation. At the 59th annual General Membership Meeting, the retired general spoke of the importance of service, connection, and flexibility.

Read more…

TOPICS: GMM International Mutual Fund

2017 Investment Company Fact Book: Letter from the Chief Economist

By Brian Reid

April 27, 2017

Have you ever tried to put a jigsaw puzzle together without knowing what the finished work should look like? It’s difficult—even with help from family and friends. Are those blue pieces part of a peaceful lake or a cloudless sky? Are those dark pieces a forest floor or storm clouds brewing on the horizon? Without the completed picture on the puzzle box as a guide, everyone has their own idea of what the completed work will look like and how to put it together.

Scratch That: Why Arguments of a Broken Retirement System Are Misguided

By Peter J. Brady

April 6, 2017

What if you were given the task of designing a retirement system from scratch? In a recent paper, New York University law professor David Kamin proposes a retirement system that combines a mandatory savings floor with tax incentives to encourage savings above the mandated minimum. He is not the first to propose a new mandatory retirement plan, with others proposing that either employers be required to offer a plan or workers be required to contribute to a plan.

ICI Staff Take Local Students on an “Investing Road Trip”

By Christina Kilroy

March 31, 2017

Among the eighth graders who walked into Junior Achievement’s Finance Park were an aspiring filmmaker, a model, and a sports agent. But for their daylong budgeting simulation—where each student is assigned an age, family, debt, credit score, job, and salary—they would transform into an auto mechanic, an insurance agent, and a bus driver.

Exemptions from Investor Protections Put California Savers at Risk

By Paul Schott Stevens

March 22, 2017

The following ICI Viewpoints is a letter to the editor by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an editorial published on March 8, 2017, in the Los Angeles Times.

ICI Study: 55 Million US Households Own Mutual Funds

By Sarah Holden

February 24, 2017

Gathering and analyzing data about how shareholders purchase and use mutual funds are critical to ICI’s work to facilitate sound, well-informed public policies affecting funds, their investors, and the retirement markets.

Cybersecurity at Work: Keeping Secure When Away from the Office

By Peter Salmon

February 17, 2017

Part of a series of ICI Viewpoints covering cybersecurity issues.

In the previous installment of this series, we discussed the risks associated with information sharing. One aspect we did not touch on is the inadvertent sharing of information, or data, when traveling for business or pleasure. For example, anyone who has flown lately can clearly observe that planes are full with business travelers, often made obvious by their black ballistic-nylon laptop bags.

What's the “Exposure” of Money Market Funds to Europe?

By Sean Collins

January 26, 2017

At the American Economic Association (AEA) meetings in Chicago early this month, speakers and attendees at several sessions asked: do money market funds pose systemic risks?

Mutual Funds and ETFs’ Share of the Corporate Bond Market: What’s the Right Answer?

By Shelly Antoniewicz

January 19, 2017

Participation by mutual funds and exchange-traded funds (ETFs) in US corporate bond markets was a topic of discussion during several sessions held at the American Economic Association Meetings in Chicago earlier this month. Panelists and presenters alike cited “statistics” on the share of corporate bonds held by funds. The funny thing was, they all cited different numbers, running the gamut from 18 to 35 percent.

Education, Outreach, Advocacy: A Big 2016 for IDC and Fund Independent Directors

By Amy B. R. Lancellotta

January 17, 2017

The Independent Directors Council (IDC) just wrapped up another year of vigorous support for the fund director community—educating directors, bringing them together to share ideas and experiences, and advocating on their behalf in policy debates. This brief post, adapted from IDC’s 2016 Annual Review, highlights some of IDC’s more notable work over the course of the year.

For “401(k) Pioneers,” No Reason for Regrets

By Paul Schott Stevens

January 10, 2017

The following ICI Viewpoints is a letter to the Wall Street Journal by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an article published on January 3, 2017.

Dear Editor:

It may be, as you report, that “401(k) Pioneers Lament What They Started” (Page A1, Jan. 3). But the facts are clear: America’s retirement system is stronger today, in the expanding 401(k) era, than it was when defined benefit pensions were the primary vehicle for retirement savings.

A Proposal that Should Be Popped

By Paul Schott Stevens

December 15, 2016

The following ICI Viewpoints is a letter to the editor by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an op-ed published on December 7, 2016, in the New York Times, “A Monopoly Donald Trump Can Pop.”

Millions of Americans could lose the low costs and broad diversification of fund investing under the dangerous proposal outlined in the op-ed by Posner, Weyl, and Morton.

The Taper Tantrum—Take II

By Shelly Antoniewicz

December 13, 2016

Long-term interest rates in the United States have been on the rise since summer 2016—slowly creeping up from July through October, and then jumping after the presidential election. Thus far, the response from bond mutual fund investors has been subdued. Nevertheless, various commentators—from the vice chairman of the Federal Reserve Board to the multinational Financial Stability Board—have expressed concerns that bond fund investors may rush to redeem shares to avoid portfolio losses stemming from unexpected increases in interest rates.

Investor Protection Priorities for the New Year

By David Blass

December 12, 2016

The following ICI Viewpoints is adapted from a presentation that ICI General Counsel David Blass gave to the Investor Advisory Committee of the US Securities and Exchange Commission on December 8, 2016. Visit this page to read the entire presentation.

If I were to poll ICI members about next year’s priorities, I am sure we would receive consistent feedback: give us an opportunity to implement all the rules that have been imposed on us. New rules from the Securities and Exchange Commission (SEC) covering data reporting, swing pricing, and liquidity risk management will require huge expenditures and years of work to implement fully. And they were adopted in the aftermath of two rounds of money market fund reform, as well as many other rules applicable to the fund industry adopted by other regulatory agencies.

Fund Fees Have Been Falling for Two Decades

By Paul Schott Stevens

October 19, 2016

The following ICI Viewpoints is a letter to the editor by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an editorial published on October 9, 2016, in InvestmentNews, “DOL fiduciary rule may finally spark lower fund fees for mutual funds.” It appeared in the print edition of the publication on October 17, 2016.

Money Market Fund Reforms Combine with Bank Regulations to Boost Interest Rates

By Sean Collins

September 28, 2016

As detailed in the previous ICI Viewpoints in this series, the Securities and Exchange Commission’s (SEC) new rules for money market funds induced a drop in the assets of prime and tax-exempt money market funds of $910 billion since January 2015 and a roughly comparable $872 billion rise in the assets of government money market funds.

As Money Market Fund Investors Adjust, Funds Have Managed Flows

By Sean Collins

September 27, 2016

The Securities and Exchange Commission’s new rules for money market funds, which must be fully implemented by October 14, largely center around two key reforms.

For Money Market Funds, Massive Preparation Has Paid Off in Smooth Transition

By Marty Burns

September 26, 2016

First in a series on money market funds.

By October 14, the money market fund industry must fully implement the 2014 money market fund reforms passed by the Securities and Exchange Commission (SEC), cementing major changes for investors and fund complexes. ICI has been in close constant contact with members since the rules were enacted in 2014 and has been working with operations and other professionals throughout the industry to ensure an orderly transition—including fully informing investors—to the new regime in October.

US T+2 Is Coming—and Bringing Many Benefits with It

By Ahmed Elghazaly

September 6, 2016

On September 5, 2017, equities, municipal and corporate bonds, and unit investment trusts will reduce the amount of time it takes to settle trades from trade date plus three days (T+3) to trade date plus two days (T+2).

Revised Fed Data Show Mutual Funds’ Share of Corporate Bond Market Is Small and Stable

By Shelly Antoniewicz

August 26, 2016

Discussions among regulators and the financial press about the role of bond mutual funds in financial stability risks have been fueled by concerns about the size and apparent growth in bond funds’ participation in corporate bond markets. But what if that role and its growth have been largely overstated?

Cybersecurity at Work: The Risks of Information Sharing

By Peter Salmon

August 23, 2016

In the last installment of this series, we wrote about the importance of information sharing. Though important, there is a balance to be struck; you don’t want to share too much information. Growing up in New York City, for example, my friends and I would poke fun at drivers with personalized license plates. “Why would anyone want everyone to know where they were all the time?” was our usual comment.

Ten Years After the PPA, the Path to Retirement Saving Is Easier

By Sarah Holden and Elena Barone Chism

August 22, 2016

Ten years ago, on August 17, 2006, President George W. Bush signed the Pension Protection Act (PPA) into law, with the goal of ensuring greater retirement security for American workers. With regard to defined contribution (DC) plans, such as 401(k) plans, PPA further encouraged automatic enrollment while paving the way for diversified default investments and the creation of Roth accounts inside DC plans. PPA also made permanent previously legislated contribution-limit increases and the saver’s credit.

Secure Choice Is Risky for Workers and for the State

By Paul Schott Stevens

August 17, 2016

Millions of Americans save for retirement using employer-sponsored plans that offer tax advantages and excellent investment options.

Matching Models to Reality: Bond Market Investors Don’t Follow the “First-Mover” Script

By Brian Reid

July 18, 2016

Fourth in a series of ICI Viewpoints testing the hypotheses of academics and regulators about mutual fund and investor behavior during times of market stress.

Regulators and researchers have put forward a common narrative that fund investors can destabilize markets during a period of market stress. They have advanced several hypotheses—including the concept of a first-mover advantage—to support their narrative. These hypotheses produce testable predictions about how fund investors behave in troubled markets: not only will investors redeem their fund shares but they also will stop purchasing new fund shares, thus creating large destabilizing net outflows from funds.

Matching Models to Reality: In a Falling Market, the Real “Movers” May Be...the Buyers

By Brian Reid

July 15, 2016

Third in a series of ICI Viewpoints testing the hypotheses of academics and regulators about mutual fund and investor behavior during times of market stress.

Matching Models to Reality: The Real-World Challenges to Regulators’ “First-Mover” Hypothesis

By Sean Collins

July 14, 2016

Commentators have long predicted that, one of these days, a market downturn will send U.S. mutual fund investors racing for the exits.

Matching Models to Reality: Doomsayers Are Disappointed—Again—as Funds Weather Brexit Shock

By Paul Schott Stevens

July 13, 2016

On Thursday, June 23, the electorate of the United Kingdom voted in a referendum on the country’s membership in the European Union. The result—51.9 percent in favor of “Brexit,” 48.1 percent in favor of “Remain”—went against pollsters’ and pundits’ expectations and surprised the world.

Building on the Success of the Private-Sector Retirement System Is the Real “Secure Choice”

By David Blass

July 8, 2016

Retirement assets in the United States totaled $24 trillion at the end of 2015, bolstered by investments through employer-sponsored plans and individual retirement accounts (IRAs).

It’s Time: SEC Proposals Show the Need to Reexamine the Role of Fund Boards

By Amy B. R. Lancellotta

July 7, 2016

The proper role for fund independent directors—the role where they are best-positioned to represent shareholder interests—is to oversee the work of fund management. The sharp distinction between directors’ oversight role and management’s on-the-ground, day-to-day responsibilities has been a major factor in the modern fund industry’s 75-plus years of success.

The Liquidity Provided by ETFs Is No Mirage

By Todd Bernhardt

June 20, 2016

The article above ignores fundamental information about ETFs, the behavior of investors, and the effects of market structure on the ETF product.

Cybersecurity at Work: The Benefits of Information Sharing Networks

By Peter Salmon

June 16, 2016

In the last installment of this blog series, we wrote about the need for training—specifically, cyber tabletop exercises.

When Investor Protection Becomes Protectionism

By Patrice Bergé-Vincent

June 14, 2016

Today, Europe is facing two related needs: to provide its citizens with efficient, lower-cost vehicles for savings and investment, and to bolster economic growth.

Industry Operations Leaders Address Needs of Investors and Advisers

By Candice Gullett

June 6, 2016

In conversations exploring regulation, demographics, and technology, industry leaders offered their perspectives on serving investors and advisers in an evolving world at ICI’s annual Operations and Technology Conference, held concurrently with the General Membership Meeting on May 18–20 in Washington, DC.

Industry Leaders Address Changing Industry Terrain

By Miriam Bridges

June 3, 2016

Will fund industry leaders need to rethink their traditional operating models? Experts shared their views on this question and others, as well as the opportunities presented by a rapidly changing industry, in a candid discussion on the second day of ICI’s 58th General Membership Meeting, held May 18–20 in Washington, DC.

Conducting Business in a Rapidly Changing World

By Jeanne Arnold

June 1, 2016

The global operating environment is evolving and it is critical for corporations to understand the changes afoot if they are to succeed in the 21st century, said Kevin Kajiwara, co-president of Teneo Intelligence, a division of global advisory firm Teneo. Speaking on the final day at ICI’s 58th General Membership Meeting (GMM), Kajiwara gave an overview of the economic and political shifts taking place around the world during his session, “Geopolitical Risks and the Global Economy.” After the overview, he engaged in an insightful question-and-answer session with Tom Faust, chairman and CEO of Eaton Vance Corp.

A Changing Landscape for the Fund Industry—and Fund Investors

By Rob Elson

May 27, 2016

Continue to expect change in the investment landscape, with the Federal Reserve, the Millennial generation, and technological evolution all playing major roles.

Ops Leaders Extol the Transformational Power of Data and Analytics

By Todd Bernhardt

May 26, 2016

The evolution of fund companies’ ability to gather and analyze data is creating a revolution in the way that those companies serve their customers, said panelists at “Big Data Initiatives and the Power of the Cloud,” the session that kicked off ICI’s Operations and Technology Conference on May 19 in Washington, DC.

The SEC’s Historic Success: Six Key Ingredients

By Paul Schott Stevens

May 20, 2016

This ICI Viewpoints is adapted from ICI President and CEO Paul Schott Stevens’s introduction for SEC Chair Mary Jo White at the 2016 ICI General Membership Meeting on May 20.

More than 80 years have passed since Congress—looking to restore public confidence in markets at the height of the Great Depression—established the U.S. Securities and Exchange Commission (SEC) to administer the federal securities laws enacted as part of President Franklin D. Roosevelt’s New Deal.

SEC Chair White Expects Continued ‘Bright Spotlight’ on Asset Management

By Rachel McTague

May 20, 2016

The U.S. Securities and Exchange Commission (SEC) is contemplating several new initiatives governing registered funds, in addition to adopting rules this year on reporting modernization, liquidity management, and the use of derivatives, SEC Chair Mary Jo White announced at the opening session on the final day of ICI’s annual General Membership Meeting (GMM).

Walter Isaacson: Where Art Meets Science

By Rob Elson

May 19, 2016

Our world’s greatest innovations, according to Walter Isaacson, can be traced to “people who truly have a sense of what it is to be human…but also feel very comfortable with science and technology, and can make the connection.” And he’s got the evidence to back this belief up.

Read more…

TOPICS: Cybersecurity Events GMM

GMM Policy Forum: Michael Bloomberg and the Focus on Value

By Todd Bernhardt

May 18, 2016

Businesses and people can both prosper if they focus on providing a service that is unique and that has real value, said Michael R. Bloomberg at ICI’s 58th Annual General Membership Meeting (GMM) today. The noted entrepreneur, philanthropist, and three-term mayor of New York City covered a wide range of topics in a lively back-and-forth with ICI President and CEO Paul Schott Stevens during the meeting’s opening Policy Forum, attended by about 1,500 fund industry leaders.

To the SEC and FINRA: It’s Your Move

By David W. Blass

April 21, 2016

Earlier this month, I wrote about the wide-ranging benefits of the proposed Securities and Exchange Commission (SEC) rule to give U.S. regulated funds the option of making online access to shareholder reports their default method for informing their shareholders.

Cybersecurity at Work: Exercise Is Important

By Peter Salmon

April 20, 2016

In this installment of our series focusing on cybersecurity, we are going to look at exercising—not the type of exercising that many of us do to stay in shape, though that is a good place to start.

The SEC’s Online-Delivery Gift to Fund Shareholders

By David W. Blass

April 4, 2016

A recent SEC rulemaking proposal presages good news for America’s 90 million mutual fund shareholders. Proposed Rule 30e-3 under the Investment Company Act of 1940, introduced last year as part of a larger initiative to enhance and modernize fund data reporting, would give funds the option of flipping their default mechanism for delivering shareholder reports from U.S. mail to online access.

Factors Contributing to the Decline of Expense Ratios in 2015

By Sean Collins and James Duvall

March 31, 2016

ICI recently released its annual update on the expense ratios of mutual funds, showing expense ratios to be at their lowest levels in at least 20 years.

Cybersecurity at Work: Incident Response Plans and What They Entail

By Peter Salmon

March 21, 2016

In this second posting in our series, I’d like to focus on computer incident response planning. In last month’s post, I mentioned that there are many more data breaches that take place than we are made aware of through the media. These cybersecurity events can affect networks large and small, from large multinational corporations to your own home.

Yes, Funds Come and Go—Without Government Help

By Todd Bernhardt

March 11, 2016

For several years now, ICI has pushed back against those advocating for bank-like regulations on the asset management industry, pointing out the numerous reasons why regulated funds or their managers are not sources of risk to the overall financial system.

The “Waterfall Theory” of Liquidity Management Doesn’t Hold Water

By Sean Collins and Chris Plantier

March 9, 2016

In a series of recent blog posts, economists at the Federal Reserve Bank of New York have discussed new research assessing the potential for bond mutual funds to pose systemic risks.

Three Reasons Why You Should Consider an IRA

By Sarah Holden

March 8, 2016

April 18 is the deadline to file income tax returns with the federal government this year.

Getting Started in a 401(k) Plan—and Getting the Most Out of It

By Christina Kilroy

February 26, 2016

This week, ICI and the Investment Company Institute Education Foundation (ICIEF) joined thousands of corporations, nonprofits, and government agencies to celebrate America Saves Week.

How America Supports Retirement: The Incentive to Save Is Not Upside Down

By Peter J. Brady

February 25, 2016

In my new book, How America Supports Retirement: Challenging the Conventional Wisdom on Who Benefits, and the first three ICI Viewpoints in this series, I’ve demonstrated that Social Security’s benefit formula drives participation in tax-deferred employer-sponsored retirement plans ; that the full system of government support for retirement is progressive; and that those in higher tax brackets don’t enjoy greater “bang for their buck” from tax deferral.

Models vs. the Real World—Why Bond Funds Aren’t the Bond Market

By Chris Plantier and Sean Collins

February 25, 2016

In two recent blog posts, economists at the Federal Reserve Bank of New York use a theoretical model to assess the size of potential spillover effects from bond mutual fund outflows.

How America Supports Retirement: What Do Tax Rates Have to Do with the Benefits of Tax Deferral? Less Than You Think

By Peter J. Brady

February 24, 2016

In my new book, How America Supports Retirement: Challenging the Conventional Wisdom on Who Benefits, I set out to gain a comprehensive view of how government policy supports American workers as they gather resources for retirement.

MetLife Case Shows That “Assuming the Worst of the Worst of the Worst” Doesn’t Work

By Mike McNamee

February 24, 2016

If regulators are going to impose strict rules and heavy burdens on a business, should they have to demonstrate that those rules and burdens address an actual and probable risk?

How America Supports Retirement: No, Benefits Are Not “Tilted” to the Higher Earners

By Peter J. Brady

February 23, 2016

Second in a series of ICI Viewpoints.

In my new book, How America Supports Retirement: Challenging the Conventional Wisdom on Who Benefits, I analyze the benefits individuals receive from the major government policies that help American workers accumulate resources for retirement: Social Security and tax deferral on compensation set aside for retirement in employer-based plans (both traditional pensions and defined contribution plans, such as 401(k) plans).

New Research by New York Fed Confirms: Bond Funds Don’t Pose Systemic Risks

By Chris Plantier and Sean Collins

February 23, 2016

In a series of recent blog posts, economists at the Federal Reserve Bank of New York discussed results from a theoretical model assessing the potential for bond mutual funds to pose systemic risks.

Derivatives—Please Don’t Let Them Be Misunderstood

By Shelly Antoniewicz

February 22, 2016

Derivatives are important portfolio management tools that provide funds with many potential benefits, including the ability to:

hedge risk;
enhance liquidity, because derivatives can be more liquid than traditional physical securities;
gain or reduce exposure to unique markets or to asset classes when access through other instruments is difficult, costly, or impossible;
manage or equitize cash; and
reduce cost.

How America Supports Retirement: Tackling the Myths That Surround Us

By Peter J. Brady

February 22, 2016

America’s retirement system isn’t perfect but it’s a lot stronger than many people think. Whether by accident or design, the U.S. retirement system provides benefits to workers across the earnings distribution and has helped millions of retirees maintain their standard of living in retirement.

Cybersecurity at Work: Creating Passwords That Are More Secure

By Peter Salmon

February 17, 2016

Welcome to the first in a monthly series of ICI Viewpoints focusing on sound practices in cybersecurity.

U.S. and European Fund Investors Continue to Take Long View on EM Economies

By Chris Plantier

February 12, 2016

In an ICI Global Research Perspective last year, we showed that U.S. and European registered funds held $1.7 trillion in emerging market (EM) stocks and bonds at the end of 2014 (this total counts Hong Kong, Singapore, South Korea, and Taiwan as emerging markets). Of that, $1.27 trillion was estimated to be in equities and $431 billion was in bonds. We also showed that this $1.7 trillion was spread widely, across 80 different EM countries, and that fund net purchases of EM securities explained little of the variability of capital flow to EM countries.

All Pain and No Gain for Fund Investors

By Paul Schott Stevens

February 5, 2016

The following is a letter submitted to the editor of the New York Times. A financial transaction tax (FTT) (editorial, The Need for a Tax on Financial Trading, Jan. 28) is a terrible idea that would harm all investors, especially American workers saving for retirement. We have yet to see an FTT proposal that would not hurt Main Street nor weaken our capital markets.

Liquidity Risk Management Must Be Done Right

By Paul Schott Stevens

January 15, 2016

The following ICI Viewpoints is a lightly edited version of a letter that ICI President and CEO Paul Schott Stevens sent to U.S. Securities and Exchange Commission (SEC) Chair Mary Jo White, as part of the Institute’s overall response to the SEC’s liquidity risk management proposal.

How the SEC’s Six-Bucket Approach Could Provide a False Picture of Liquidity

By Brian Reid

January 14, 2016

As I explained in a previous post, I filed a letter on January 13 with the U.S. Securities and Exchange Commission (SEC) in response to its liquidity risk management proposal and to Liquidity and Flows of U.S. Mutual Funds, a study by the Commission’s Division of Economic and Risk Analysis (DERA). My letter was one of four components of ICI’s multipart response to the SEC proposal.

The SEC’s Liquidity Proposal: Good Goals, Unintended Consequences

By Brian Reid

January 13, 2016

On January 13, I filed a letter with the U.S. Securities and Exchange Commission (SEC), in response to the SEC’s liquidity risk management proposal and to Liquidity and Flows of U.S. Mutual Funds, a study by the SEC’s Division of Economic and Risk Analysis (DERA). My letter was one of four components of ICI’s multipart response to the SEC proposal.

High-Yield Bond Mutual Fund Flows: An Update

By Sean Collins

December 23, 2015

In an ICI Viewpoints on December 16, we debuted new weekly data on flows to high-yield bond mutual funds, presenting data through December 9. In light of continuing developments in the high-yield market, we have had requests to provide an update this week, taking into account the flows through December 16. Here is our overview.

High-Yield Bond ETFs: A Source of Liquidity

By Shelly Antoniewicz

December 22, 2015

The high-yield bond market has been buffeted recently, as market participants reassessed the risks of this sector and sent prices for many such bonds tumbling.

High-Yield Bond Mutual Fund Flows: Some Perspective

By Sean Collins

December 16, 2015

Recent conditions in the high-yield credit markets have raised questions about the impact of market turmoil on mutual funds investing in that segment of the bond market.

The First Move: MSRB Issues a Proposal for Shortened Settlement Cycle

By Marty Burns

December 8, 2015

Recently, the Municipal Securities Rulemaking Board (MSRB) opened the door on the regulatory filings needed to move the U.S. securities markets to a shortened settlement cycle.

Traders, Start Your Engines: After August 24, Exchanges Need to Coordinate

By Jennifer Choi and George Gilbert

November 30, 2015

The extraordinary volatility in U.S. equity markets on August 24, 2015, exposed a significant deficiency in the rules governing these markets’ structure: a lack of harmonization across securities exchanges for reopening trading after a “limit up–limit down” trading halt in a security.

Mutual Fund Investments in Private Placements: an Overview

By Gregory M. Smith

November 23, 2015

Given recent media interest in mutual fund investments in private placements, it might be helpful to review mutual fund disclosure and valuation obligations. How do funds handle securities that are not publicly traded?

U.S. Bond ETFs Resilient on August 24

By Shelly Antoniewicz

November 20, 2015

Some observers have suggested that equity market volatility on August 24, 2015, spilled over into other markets and products, in particular to bond exchange-traded funds (see, for example, Bank of England Financial Stability Paper, no. 34, October 2015, pages 26 and 27). In our analysis of the events of that morning, we conclude that U.S. bond ETFs were resilient and largely immune to the turmoil in the equity markets.

Retirement Planning: No Place for Fairy Tales

By Paul Schott Stevens

November 17, 2015

It is sadly appropriate that Labor Secretary Thomas Perez invokes fairy tales in his Nov. 16 commentary, “A path forward for state retirement plans.” Neither his version of the past nor his program for the future accord with reality.

Changes to Money Market Funds Are Showing Up in Data

By Sean Collins

November 10, 2015

In July 2014, the Securities and Exchange Commission (SEC) adopted new regulations for money market funds.

Correcting a Distorted Picture of Retirement Resources

By Peter Brady

October 21, 2015

Can 401(k) plans and individual retirement accounts (IRAs) provide the income that retirees need to supplement Social Security and enjoy a secure retirement?

Small Savers at a Loss

By Brian Reid and Sarah Holden

September 25, 2015

As ICI has pointed out before, the proposed rule from the Department of Labor (DOL) to redefine what counts as a fiduciary relationship in the retirement market is fundamentally flawed. But it is no less flawed than the DOL’s justification for it—a Regulatory Impact Analysis that fails to demonstrate a market failure that supports the need for such a sweeping and costly rule.

The Wall Street Journal’s Dangerous Disservice to Investors

By Mike McNamee

September 22, 2015

For 75 years, mutual funds have successfully met their regulatory obligation to fulfill redemption requests within seven days, meeting investor demands and delivering on their investment objectives through good markets and bad.

Yet the Wall Street Journal seems determined to ignore this established history and the circumstances surrounding it. It has created a liquidity “measure” of its own devising—a test that no regulator has endorsed and no informed market participant would credit. The newspaper uses its self-invented process to imply that bond mutual funds are “pushing the limits” of Securities and Exchange Commission (SEC) guidelines governing fund liquidity.

New York Times Paints False Picture of Funds’ Emerging Market Investments

By Mike McNamee

August 24, 2015

With the global market turmoil over the past week, it’s no surprise that journalists are looking for hot stories of panic, investor flight, and impending crisis. Either they believe that investors are inherently flighty and panic-prone, or they believe that “this time is different” and investors who have not panicked before will panic now.

Ignore the IMF’s Uninformed Call for a Third Round of Reforms to U.S. Money Market Funds

By Jane Heinrichs and Chris Plantier

July 23, 2015

A year ago today, the U.S. Securities and Exchange Commission (SEC) voted to adopt sweeping reforms to its rule governing money market funds.

The IMF on Asset Management: Handle Empirical Results with Care

By Chris Plantier

July 15, 2015

In this ICI Viewpoints series, we’ve examined the wide range of data errors, inconsistencies, results that don’t bear statistical scrutiny, and misinterpretations in the International Monetary Fund’s most recent Global Financial Stability Report (GFSR)—specifically, the chapter on “The Asset Management Industry and Financial Stability.” Those problems primarily involved poor understanding of funds and their investors. We didn’t need advanced statistical methods to uncover them.

ICI Welcomes IOSCO’S Call to Focus on Products and Activities in Asset Management

By Paul Schott Stevens

June 17, 2015

ICI President and CEO Paul Schott Stevens today issued the following statement in response to the communiqué released today by the Board of the International Organization of Securities Commissions (IOSCO)

How SIFI Designation Could Undermine Fund Governance: Parsing the Fed’s Proposal for GE Capital

By Paul Schott Stevens

June 16, 2015

Fund boards and independent directors have a long history of serving shareholder interests, yet today they face an alarming prospect that could threaten their ability to continue doing so.

Cybersecurity: Managing Risk in an Increasingly Connected World

By Todd Bernhardt

June 12, 2015

It’s increasingly obvious that we live in a world where cyber threats are evolving quickly and will remain persistent. But though such risks can never be eliminated, they can be managed, said panelists at ICI’s Operations and Technology Conference, held in conjunction with the Institute’s General Membership Meeting May 6–8 in Washington, DC.

Facing the Future: A Conversation with Former Chairmen

By Candice Gullett

June 11, 2015

On the second day of ICI’s annual General Membership Meeting (GMM), held May 6–8 in Washington, DC, three former ICI chairmen sat down with current ICI President and CEO Paul Schott Stevens to share the lessons they learned over the course of their careers, as well as during their years of service as volunteer leaders at ICI.

Read more…

TOPICS: Events GMM Mutual Fund

Navigating Regulatory Developments and Meeting Investors’ Needs in a Global Industry

By Jeanne C. Arnold

June 9, 2015

There is a great opportunity for capital markets to develop all over the world, presenting a huge opportunity for the mutual fund industry, according to David Wright, secretary general of the International Organization of Securities Commissions (IOSCO).

The IMF on Asset Management: Sorting the Retail and Institutional Investor “Herds”

By Sean Collins

June 4, 2015

Part of a series of ICI Viewpoints about problems in the IMF’s analysis of the asset management industry.

In this ICI Viewpoints series, we’re examining the wide range of data errors, inconsistencies, results that don’t bear statistical scrutiny, and misinterpretations in the International Monetary Fund’s April 2015 Global Financial Stability Report (GFSR)—specifically, the chapter on “The Asset Management Industry and Financial Stability.” These problems undercut the IMF’s conclusion that “Even simple investment funds such as mutual funds can pose financial stability risks.”

Inside SID: It’s All About the Rules

By John Randall

Help Is Available

Making It Even Better

Other Posts in This Series

Find Out More

Americans Trust in Their 401(k) Plans

By Sarah Holden

Funds Actively Seek Companies’ Sound Management

By Paul Schott Stevens

Industry Leaders Highlight Opportunities Presented by Industry Change

By Miriam Bridges

Geopolitics and Global Business: What the Future Holds

By Jeanne C. Arnold

A Tech-Enabled Future—and Present—for Investment Advice

By Rob Elson

A 529 Day Primer: Do You Know What State Your College Savings Plans Are In?

By Christina Kilroy

Cybersecurity at Work: I Know What You Know!

Peter Salmon

Top Investment Strategists Sound Optimistic Notes amid Headwinds

By Rob Elson

Average Expense Ratios for Index ETFs Have Declined

By Shelly Antoniewicz, Sean Collins, James Duvall, and Morris Mitler

Average Expense Ratios for Long-Term Mutual Funds Continued to Decrease in 2016

By Morris Mitler and Sean Collins

Solving for Data Transparency in the Retirement World

By John Randall

ICI Study: Closed-End Fund Assets Were $262 Billion at Year-End 2016

By Shelly Antoniewicz

Stevens Calls for Measures to Enhance Economic Growth

By Rachel McTague

Jeff Immelt and GE’s Bid to Own the Future

By Rob Elson

Retired General Stanley McChrystal: Service, Connection, and Flexibility

By Todd Bernhardt

2017 Investment Company Fact Book: Letter from the Chief Economist

By Brian Reid

Scratch That: Why Arguments of a Broken Retirement System Are Misguided

By Peter J. Brady

ICI Staff Take Local Students on an “Investing Road Trip”

By Christina Kilroy

Exemptions from Investor Protections Put California Savers at Risk

By Paul Schott Stevens

ICI Study: 55 Million US Households Own Mutual Funds

By Sarah Holden

Cybersecurity at Work: Keeping Secure When Away from the Office

By Peter Salmon

What's the “Exposure” of Money Market Funds to Europe?

By Sean Collins

Mutual Funds and ETFs’ Share of the Corporate Bond Market: What’s the Right Answer?

By Shelly Antoniewicz

Education, Outreach, Advocacy: A Big 2016 for IDC and Fund Independent Directors

By Amy B. R. Lancellotta

For “401(k) Pioneers,” No Reason for Regrets

By Paul Schott Stevens

A Proposal that Should Be Popped

By Paul Schott Stevens

The Taper Tantrum—Take II

By Shelly Antoniewicz

Investor Protection Priorities for the New Year

By David Blass

Fund Fees Have Been Falling for Two Decades

By Paul Schott Stevens

Money Market Fund Reforms Combine with Bank Regulations to Boost Interest Rates

By Sean Collins

As Money Market Fund Investors Adjust, Funds Have Managed Flows

By Sean Collins

For Money Market Funds, Massive Preparation Has Paid Off in Smooth Transition

By Marty Burns

US T+2 Is Coming—and Bringing Many Benefits with It

By Ahmed Elghazaly

Revised Fed Data Show Mutual Funds’ Share of Corporate Bond Market Is Small and Stable

By Shelly Antoniewicz

Cybersecurity at Work: The Risks of Information Sharing

By Peter Salmon

Ten Years After the PPA, the Path to Retirement Saving Is Easier

By Sarah Holden and Elena Barone Chism

Secure Choice Is Risky for Workers and for the State

By Paul Schott Stevens