To comply with changing international privacy requirements, ICI informs its visitors that we use cookies on our web site. ICI only uses cookies to allow subscribers and members to more easily use our site and to record site utilization. No personal or private information is gathered or stored. More details, including how to disable cookies, can be found on our privacy and cookie policy page. If you disable cookies, you will see this message on future visits to our site. Please click the enable button to consent to accepting cookies.
  • ICI Global
  • Independent Director's Council
Sign In  |  Forgot Password?
Advanced | Tips
  • Home
  • Policy Priorities
    • Fund Regulation
    • Retirement Security
    • Trading & Markets
    • Fund Governance
    • Taxes
    • ICI Comment Letters
  • Research & Statistics
    • Industry Research
    • Investor Research
    • Retirement Research
    • Statistics
  • Government Affairs
    • Financial Services
    • Retirement Security
    • Tax
    • Testimony
  • Industry Operations
    • Fund Accounting, Financial Reporting, and Valuation
    • Fund Distribution, Fund Clearance, and Settlement
    • Operations, Transfer Agent Servicing, and Recordkeeping
    • Portfolio Security Operations
    • Resource Centers
    • Technology, Business Continuity, and Information Security
  • News & Media
    • Media Contacts
    • News Releases
    • Blog: ICI Viewpoints
    • Speeches & Commentaries
    • Opinions & Responses
    • Videos
    • Podcasts
  • Publications & Resources
    • Resource Centers
    • Frequently Asked Questions
    • Fact Books
    • Research Publications
    • White Papers
    • Annual Reports
  • Events
    • ICI Events
    • ICI Global Events
    • IDC Events
    • Past Event Highlights
    • Sponsorship Opportunities
    • Event Contacts
  • About ICI
    • Mission & History
    • Board & Leadership
    • Membership
    • Annual Reports
    • ICI Education Foundation
    • Business Continuity
    • Careers
    • Contact Us

TOPICS

401(k)
Bond Fund
Bonds
COVID-19
Commodity Investments
Corporate Bonds
Cybersecurity
Equity Fund
Equity Investing
Europe
Events
Exchange-Traded Funds
Federal Reserve
Financial Markets
Financial Stability
Fixed Income
Fund Governance
Fund Regulation
GMM
Global
Government Affairs
ICI Global
IDC
IRA
Index Fund
Interest Rate
International
Investment Education
Investor Research
Money Market Funds
Mutual Fund
Operations and Technology
Policy Research
Proxy Voting
Retirement Policy
Retirement Research
Savings
Shareholder
Target Date Funds
Taxes
Trading
Treasury

ARCHIVE

  • 2021
    • January
  • 2020
    • December
    • October
    • September
    • August
    • July
    • June
    • May
    • April
    • March
    • February
    • January
  • 2019
    • December
    • November
    • October
    • September
    • August
    • July
    • June
    • May
    • April
    • February
    • January
  • 2018
    • December
    • November
    • October
    • September
    • August
    • June
    • May
    • March
    • February
    • January
  • 2017
    • December
    • November
    • October
    • September
    • August
    • July
    • June
    • May
    • April
    • March
    • February
    • January
  • 2016
    • December
    • October
    • September
    • August
    • July
    • June
    • May
    • April
    • March
    • February
    • January
  • 2015
    • December
    • November
    • October
    • September
    • August
    • July
    • June
    • May
    • April
    • March
    • February
    • January
  • 2014
    • December
    • October
    • September
    • August
    • July
    • June
    • May
    • April
    • March
    • February
    • January
  • 2013
    • December
    • October
    • September
    • August
    • July
    • June
    • May
    • April
    • March
    • February
    • January
  • 2012
    • December
    • November
    • October
    • September
    • August
    • July
    • June
    • May
    • April
    • March
    • February
    • January
  • 2011
    • December
    • November
    • October
    • September
    • August
    • July
    • June
    • May
    • April
    • March
    • February
    • January
  • 2010
    • December
    • November

Home Viewpoints

Untitled Document

SUBSCRIBE

Receive an email notification every time a new ICI Viewpoints is posted.

Value Is in the Eye of the UCITS Holder

By Giles Swan

December 3, 2020

ICI research shows a steady decline in the cost of investing in Undertakings for the Collective Investment in Transferable Securities (UCITS). European regulators are looking beyond just declining cost, however, by requiring UCITS managers to justify the value of these funds to investors. But how do investors assess value relative to cost, and what is the role of regulators?  

Is There a Difference Between Cost and Value?

Yes—a big difference. Investors value UCITS that allow them to pursue their desired investment outcomes—regular income, capital growth, or both. Investors incur costs when using the services of a UCITS manager—professional management of a portfolio, access to a wide array of different global investment options, and the benefits of regulation and oversight—in pursuit of those investment outcomes.

That seems straightforward. But how do investors assess whether a UCITS will enable them to achieve their desired investment outcomes and whether the cost and quality of the UCITS manager’s services will match their expectations? In other words, how do investors assess value?

There is no simple answer. Investors seek differing investment outcomes and assess the value of a UCITS based on its usefulness in achieving their particular outcomes. UCITS managers offer a wide range of UCITS with different approaches—such as providing asset allocation, index tracking, or active management—that appeal to different investors. But, with such a broad choice, value can be hard to define.

One simple, seemingly objective approach would equate low cost with high value. But such an assessment is badly flawed on two counts. First, it overlooks the many differences among investors—the investment outcomes they seek, the types of service they desire, and the goals they seek to fulfill, including, for some, achieving environmental, social, or governance (ESG) outcomes. Second, it fails to take into account the multitude of different ways UCITS managers seek to meet investor outcomes and objectives. Investors need to assess value on a more thorough basis that considers the UCITS’ cost and performance and the UCITS manager’s services.

Elements of Value: Cost

UCITS enable investors to access a wide array of global investment options. Investors pay UCITS managers a fee that is dependent on the asset class, management technique of the UCITS manager, and a range of other factors. For instance, actively managed UCITS are generally more costly than index tracking funds—investors pay average ongoing charges for actively managed equity UCITS of 1.36 percent compared with 0.28 percent for index tracking equity UCITS. The higher fees charged by active managers reflect the additional significant research about individual stocks or bonds, market sectors, or geographic regions for active UCITS—offering investors the chance to earn superior returns or to meet other investment objectives such as limiting downside risk, managing volatility, under- or overweighting various sectors, or altering asset allocations in response to market conditions. These characteristics tend to make active management more costly than management of an index tracking UCITS.

Investors assess the appropriateness of fees based on the UCITS manager’s approach to achieving their desired investment outcomes—the target level of investment return—and the risk of not doing so.

Regulators have recently sharpened their focus on assessing whether UCITS managers are levying “undue” costs on investors that are inconsistent with, or prohibitive to, a UCITS achieving its stated outcomes and objectives. For instance, regulators are examining how UCITS managers ensure that they have their clients’ best interest at heart and that costs and charges are reasonable and disclosed in a transparent and non-complex manner.

Elements of Value: Investment Performance

UCITS investors anticipate favorable future investment performance in line with their desired investment outcomes. Investor expectations are based on an assessment of the UCITS’ investment objectives and investment horizon against desired investment outcomes, in either absolute or relative returns, and the UCITS manager’s approach to achieving these outcomes. Regulators are examining more closely how the performance of UCITS matches investor expectations.

Elements of Value: Services

UCITS investors evaluate the services offered by a UCITS manager based on both “hard” and “soft” factors. The first includes the nature and quality of a UCITS manager’s investment approach; its organization, governance, and systems; its client engagement (e.g., reporting, customer service, complaints record); and other factors such as achieving sustainability-related investment outcomes. The second includes corporate brand, culture, and corporate values. Investors use a range of reference points when making this evaluation, including information from regulators, financial advisers, fund managers, and the media.

How Can Investors Be Supported When Assessing Value?

All investors need clear and correct information on costs, performance, and service to assess the value of a fund and understand how this fits with their expectations and intended outcomes. UCITS managers can provide this substantive information and regulators can support its clear and consistent disclosure to investors. Regulatory changes in the European Union, including MiFID II, have fostered simpler and more transparent fee disclosure, but further steps are necessary to ensure more harmonized and useful disclosure.

Some investors may benefit from professional financial advice to build a portfolio of UCITS to pursue their desired investment outcomes. Regulators should assess the distribution of UCITS to better understand investor choice, including the role and activities of intermediaries in fostering competition, delivering choice, and supporting investors in seeking out funds that provide the greatest value.

No single UCITS ticks all the boxes for all investors. Regulators should not favor one investment product over another—on the basis of cost or other metrics—or pass judgment on which UCITS provide the greatest value. Such an approach risks reducing choice, eroding efficient capital allocation and price discovery, and degrading competition and innovation. Instead, the market at large—with its myriad investors evaluating value with distinct outcomes in mind—is best placed to determine which UCITS best fit the bill.

Giles Swan is director of global funds policy at ICI Global.

Permalink: https://www.ici.org/viewpoints/20_view_ucitsvalue

TOPICS: Equity InvestingEuropeFund RegulationICI GlobalInternationalShareholder

IRA Investors Are Concentrated in Lower-Cost Mutual Funds

By James Duvall

July 30, 2020

Individual retirement accounts (IRAs) represent the largest share of assets in the US retirement market, with assets totaling $11.0 trillion at year-end 2019. As part of an ongoing effort to shed light on important insights into IRA investing, ICI is updating its analysis of expense ratios that investors pay on mutual funds in their IRAs.

Read more…

TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder

For Funds' Use of Derivatives, a Promising New Regulatory Framework

By Paul Schott Stevens

April 22, 2020

In a promising new proposal on the use of derivatives, the SEC has consolidated cumbersome regulatory framework into a single, comprehensive rule that is carefully designed to protect investors.

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFund RegulationMoney Market FundsMutual FundShareholder

ETFs Are Passing the COVID-19 Crisis Test

By Shelly Antoniewicz

March 17, 2020

How have exchange-traded funds (ETFs) weathered the intensifying financial market fallout from the COVID-19 pandemic? So far, it looks like ETFs are healthy and robust.

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityIndex FundTrading

Talkin’ ’Bout the Generations: ICI Research on Mutual Fund Ownership by Generation

By Michael Bogdan and Candice Gullett

December 11, 2019

Talk about the differences between generations is a hot topic in today’s cultural conversation. And the Millennial and Baby Boomer generations are in the middle of a little generational warfare. But when it comes to owning mutual funds, are there really that many differences? 

Read more…

TOPICS: 401(k)Equity FundEquity InvestingIRAInvestor ResearchMoney Market FundsRetirement ResearchSavings

Five Key Points on 401(k) Plan Fees from ICI Research

By James Duvall and Steven Bass

October 23, 2019

Thanks to innovation and a competitive market, 401(k) mutual fund fees keep falling. ICI has a window into this information through our study of the cost of providing 401(k)s, in which we take a close look at the expenses and fees of mutual funds incurred by 401(k) plan investors, and in related research on fund fees through a collaborative research effort between ICI and BrightScope.

Read more…

TOPICS: 401(k)Equity InvestingMutual FundRetirement ResearchShareholder

IRA Investors Are Concentrated in Lower-Cost Mutual Funds

By James Duvall

August 20, 2019

Individual retirement accounts (IRAs) represent the largest share of assets in the US retirement market, with assets totaling $8.7 trillion at year-end 2018. Forty-six percent of this total is held in mutual funds, with IRA mutual fund investors primarily invested in equity funds. As part of ICI’s ongoing efforts to shed light on important insights into IRA investing, ICI is updating its analysis of expense ratios that investors pay on mutual funds in their IRAs....

Read more…

TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder

Even in Bear Markets, Equity Fund Investors Stay the Course

By Shelly Antoniewicz

December 21, 2018

With the S&P 500 on a downward trajectory since early October, we’ve seen many headlines in the financial press of an impending bear market in US stocks and the potential for retrenchment by investors. But just as we showed that bond investors aren’t stampeding the exits in another recent ICI Viewpoints, “Debunking Assumptions About Bond Mutual Funds’ Flows and Bond Sales,” equity fund investors’ reactions to substantial declines in stock prices are less dramatic than the popular belief would suggest....

Read more…

TOPICS: Equity InvestingExchange-Traded FundsMutual Fund

Stock Ownership in the United States: It’s Main Street

By Sarah Holden

September 10, 2018

US household activity in the stock market has undergone a transformation over the past three decades. The old idea that investing in the stock market is just for the wealthy is vastly out of date. 

In the late 1980s, less than a third of US households held stocks. Now, a majority do. This growth in stock-owning households has occurred across all income quintiles....

Read more…

TOPICS: Equity InvestingInvestor ResearchRetirement PolicySavingsShareholder

IRA Investors Are Concentrated in Lower-Cost Mutual Funds

By James Duvall

August 8, 2018

Individual retirement accounts (IRAs) represent the largest share of assets in the US retirement market, with assets totaling $9.2 trillion at year-end 2017. Forty-seven percent of this total is held in mutual funds, with IRA mutual fund investors primarily invested in equity funds. As part of ICI’s ongoing efforts to shed light on important insights into IRA investing, ICI is offering an updated analysis of expense ratios that investors pay on mutual funds in their IRAs....

Read more…

TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder

Fund Investors Will “Run”? Sorry, Charlie Brown

By Sean Collins and Sarah Holden

March 7, 2018

For decades, Charles Schulz kept us in suspense: surely this time, Lucy would let Charlie Brown kick the football. Nope. Every time, at the last second, she pulled the ball away—and Charlie Brown fell flat on his back.

We’ve seen the same gap between wish and fulfillment around market turmoil and mutual funds. For decades, commentators have predicted that investors in stock and bond funds, faced with market turmoil, would redeem en masse, perhaps adding to the market turmoil. Despite plenty of opportunities, that just hasn’t happened.

Stock market turmoil in February provides yet another example of this...

Read more…

TOPICS: 401(k)Bond FundEquity InvestingFinancial MarketsFinancial StabilityInterest RateInvestor ResearchMutual FundRetirement ResearchTrading

Pointing Fingers at Index Funds Won’t Explain Market Volatility

By Shelly Antoniewicz

February 14, 2018

With all the recent volatility in the US stock market, two questions are frequently being asked:

  • Are fund investors fleeing the stock market?
  • Are index funds causing market turbulence?

The short answer to both questions is no.

Experience and research show that investor flows to and from mutual funds and exchange-traded funds (ETFs) tend to track market returns. ...

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityIndex FundInterest RateInvestor ResearchMutual FundTrading

Applying Evidence to Theories on Regulated Funds

By Sean Collins

October 12, 2017

Late last month, the Financial Stability Oversight Council (FSOC) voted to rescind its designation of American International Group (AIG). After requiring a bailout during the financial crisis, the insurer was designated as a non-bank “systemically important financial institution,” or SIFI, in 2013. When FSOC conducted its most recent annual review, it decided AIG no longer warranted “systemic” status.

Read more…

TOPICS: Bond FundEquity InvestingFinancial MarketsFinancial StabilityFund RegulationMutual FundTreasury

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.

Read more…

TOPICS: Bond FundEquity InvestingExchange-Traded FundsFixed IncomeIndex FundInterest RateMutual Fund

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). 

Read more…

TOPICS: Bond FundEquity InvestingExchange-Traded FundsFederal ReserveFixed IncomeInterest RateMoney Market FundsMutual Fund

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.

Read more…

TOPICS: Bond FundEquity InvestingExchange-Traded FundsFinancial MarketsFund RegulationMutual FundTrading

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.

Read more…

TOPICS: Bond FundEquity InvestingFund RegulationInvestor ResearchMutual FundShareholder

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.

Read more…

TOPICS: Bond FundBondsEquity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityFixed Income

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.

Read more…

TOPICS: Equity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund Regulation

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?

Read more…

TOPICS: Bond FundEquity InvestingFund GovernanceFund RegulationInvestment EducationMutual FundOperations and TechnologyTrading

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.

Read more…

TOPICS: Bond FundBondsEquity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund Regulation

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.

Read more…

TOPICS: Bond FundBondsEquity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund GovernanceFund RegulationMutual Fund

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.

Read more…

TOPICS: Bond FundBondsEquity InvestingEuropeFinancial MarketsFinancial StabilityFixed IncomeICI GlobalInternationalMutual Fund

How Millennials Are Shaping the Evolution of Investment Advice

By Christina Kilroy

June 2, 2015

The future of investment advice—as embodied in the youngest cohort of working Americans, known as the Millennial Generation—was the focus of a panel of financial services industry leaders at ICI’s 57th General Membership Meeting. The approximately 75 million 18- to 34-year-olds that make up the group have now overtaken Generation X (ages 35 to 50) as the largest generational group in the workforce, according to Pew Research Center.

Read more…

TOPICS: Equity InvestingEventsGMMInvestment EducationMutual Fund

Sizing Up Mutual Fund and ETF Investment in Emerging Markets

By Chris Plantier

August 18, 2014

In coming decades, emerging market (EM) economies will need substantial new capital to accompany and sustain their rapid growth.

Read more…

TOPICS: Bond FundBondsEquity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund RegulationICI GlobalInternationalMutual Fund

Some Facts About Roth IRAs and the Investors Who Use Them

By Todd Bernhardt

July 17, 2014

Since the individual retirement account (IRA) was created as part of the Employee Retirement Income Security Act of 1974 (ERISA), it has become a resounding success, accounting for the largest pool of assets in the U.S. retirement market. By the end of 2013, Americans held $6.5 trillion in IRAs, with 45 percent of that total—$3.0 trillion—invested in mutual funds. 

Read more…

TOPICS: Bond FundEquity InvestingFixed IncomeInvestment EducationInvestor ResearchMutual FundRetirement ResearchSavings

Pages 1 2 3 4 5 6 7 8 9


top
  • About ICI
  • About IDC
  • About ICI Global
  • Privacy and Cookie Policy
  • Apply for User Account
  • Business Continuity
  • Contact ICI

Copyright © 2021 by the Investment Company Institute