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ARCHIVE
2020 Annual Report to Members: Roundtable: The Fund Industry’s Response to COVID-19
By Patrice Bergé-Vincent, Marty Burns, and Susan Olson
January 19, 2021
For the 2020 Annual Report to Members, three members of ICI’s leadership sat down to share their thoughts on how the Institute and the fund industry have navigated the COVID-19 crisis.
Below is an abridged version of their discussion. To read the full roundtable, please see ICI’s 2020 Annual Report to Members.
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Patrice Bergé-Vincent Managing Director ICI Global |
Marty Burns Chief Industry Operations Officer ICI |
Susan Olson General Counsel ICI |
COVID-19 has ushered in a new everyday reality for the fund industry. Take us back to those hectic weeks in March. How did ICI engage with policymakers to support members and their shareholders during this uniquely challenging time?
Olson: Those early weeks were unlike anything we had ever been through—and they certainly came at us fast. But our approach didn’t stray too far from how we’ve handled other challenging situations.
By that I mean, huddling with members to discuss what they were seeing in the markets—what funds and their shareholders were experiencing—and then meeting with policymakers to share that on-the-ground perspective.
This approach guided our engagement with senior officials at Treasury and the Federal Reserve Board, which helped inform their efforts to calm the markets. Same for our discussions with the SEC [Securities and Exchange Commission] and staff, which helped us secure relief to give funds another tool to manage their liquidity, just in case they needed it.
Bergé-Vincent: Here in Europe, we were engaged with policymakers in a wide range of areas. But none more important, I think, than our work to keep financial markets from closing in response to the volatility triggered by the pandemic and the shutdowns of economies.
As the crisis ramped up, we stood shoulder-to-shoulder with other market participants against calls for the markets to close, and led a global effort urging policymakers to commit publicly to keeping them open.
Our thinking here was that such a commitment would assure citizens and businesses that they wouldn’t lose access to funding when they needed it most. And we’re grateful that, in the end, not a single European country closed its markets.
What about supporting members’ own responses to the crisis? ICI was quite active there as well.
Burns: Very much so. Every week—and often more frequently than that—our committees were holding calls for pretty much every area of the industry. Operations, law, the risk officers, the compliance folks—everyone. At times we had several hundred people on a single call—from firms of every size and style you can think of.
Having this holistic view of the fund complex—of the fund business—ensured that our support would reach the entire membership, not just parts of it. Plus, in working with other trade groups, we were able to minimize any bottlenecks that might have disrupted the transaction process or kept the delivery of services to shareholders from running smoothly.
Olson: I would add that our frequent member surveys also played a key role here. Members told us regularly that having a broad understanding of the challenges brought on by the crisis—and responses to it—helped them better assess and improve their operations and compliance efforts.
Why do you think you were able to draw such robust participation?
Burns: You know, members have long turned to our committees as a place for practical, productive discussion to enhance operations for the benefit of fund shareholders.
In times of crisis, this type of forum becomes even more critical. And I think so many folks joined, one, because they were eager for information to bring back to their firms, and two, because they wanted to be a part of the regulatory and operational solution themselves—and turn this information into action.
Data security has been huge.
Burns: You’re telling me. Our members are always working with highly sensitive information, and they never stop working to ward off cyberattacks.
But the number of attacks we’ve seen since the crisis hit—the sophistication of them—it’s all been on another level. So members have had to dedicate an enormous amount of energy and resources to shore up their cyberdefenses, get them in place at people’s homes, and reinforce sound cyberhygiene practices among their staffs.
I’d like to now fast-forward some, and zoom out a bit beyond the fund industry. Because even as markets have calmed, economies continue to reel.
Patrice, that’s certainly true in Europe, which is suffering its worst economic shock since World War II. What role can regulated funds play in Europe’s efforts to restore economic growth, and how is ICI engaging here?
Bergé-Vincent: Well, we’ve been saying it since long before the pandemic. The key to unlocking the EU’s economies is a robust Capital Markets Union—one that promotes a greater role for market-based financing and encourages more retail-investor participation.
The same is true now, only the need is even more urgent. And regulated funds—because they’ve proven so useful for growing household savings and channeling investment to businesses—are well positioned to address this need.
We’ve emphasized these points to the European Commission in recent months. And the Commission’s new Capital Markets Union Action Plan would suggest that our recommendations haven’t gone unnoticed.
A lot remains to be done, though. The EU’s recovery plan relies for the time being on financing from bank loans and taxpayer money. Those are important sources of financing—don’t get me wrong—but they alone won’t be nearly enough to deliver a lasting recovery. So our advocacy looking forward will center on showing policymakers why increased retail investor participation in EU capital markets through regulated funds is the missing piece.
You’ve all worked in and around the fund industry for quite some time, and navigated ICI through more than a few challenges. But I have to ask—what has this crisis taught you about the industry?
Burns: What I’ve learned is, the industry is even more resilient than we thought. Thinking about that shift to remote work, few of us had ever contemplated something at such a scale and speed.
Yet everyone—and I mean, everyone—really stepped up to ensure that service to shareholders wouldn’t suffer.
Bergé-Vincent: It’s kind of like everyone in the industry has been put through this big test—a test of tests, if you will. The fact that we’re still going strong should give us all confidence that whatever challenges come our way, we can overcome them. Together, we are stronger. That’s the big lesson for me.
Olson: And I think that’s heartening. Over the past 80 years, funds have evolved constantly to meet the needs of their shareholders, but the industry had never had to navigate something like this.
Now, we know that wholesale change doesn’t have to be scary. It doesn’t have to worry us. Instead, it can be a spark for serving shareholders even better in the future.
Susan Olson is general counsel and Marty Burns is chief industry operations officer at ICI. Patrice Bergé-Vincent is managing director of ICI Global.
Permalink: https://www.ici.org/viewpoints/21_view_arroundtable
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
2020 Annual Report to Members: A Conversation with Paul Schott Stevens
By Paul Schott Stevens
January 14, 2021
Paul Schott Stevens, ICI’s longest-serving chief executive, retired at the end of 2020. As he neared the end of his 16 years of service, he sat down with ICI staff to discuss the events of his tenure.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
2020 Annual Report to Members: A Letter to ICI’s Membership
By George C. W. Gatch
January 11, 2021
2020 will go down in history as a year that none of us can ever forget. It was a year of turmoil, fear, and reckoning. Yet for the regulated fund industry, it also proved to be a year of resilience, transition, and great hope.
Read more from ICI Chairman George C. W. Gatch’s letter that was released in ICI’s 2020 Annual Report to Members.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
Market Turmoil and Liquidity Crunch Rooted in the COVID-19 Pandemic
By Sean Collins
October 14, 2020
The first paper in ICI’s new research series, “The Impact of COVID-19 on Economies and Financial Markets,” focuses on the relationship between the pandemic, the economic shutdown it triggered, and the volatility that gripped the markets.
TOPICS: BondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityMutual Fund
Regulated Funds: Supporting the Economy During the COVID-19 Crisis
By Paul Schott Stevens
April 22, 2020
In a recent call with the Financial Stability Board, ICI President and CEO Paul Schott Stevens shared some findings and observations about the response of fund investors to recent developments in financial markets, and the picture that has emerged to date is reassuring. The extraordinary actions taken by the Federal Reserve, Treasury, the Securities and Exchange Commission, and Congress helped relieve pressure and ensure orderly functioning of US financial markets.
TOPICS: Financial MarketsFinancial Stability
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.
TOPICS: Equity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityIndex FundTrading
Mutual Fund Flows in the COVID-19 Crisis
By Sean Collins
March 11, 2020
The novel coronavirus disease, or COVID-19, is taking a heavy toll on the world economy—in lives, in the costs of responding, and in lost production and consumption. Worldwide financial markets reflect this. How are retail investors reacting? Are they panicking, selling out? Or are they staying the course, as during previous financial market epidemics?
TOPICS: Bond FundCorporate BondsFinancial StabilityMutual Fund
2019 Annual Report to Members: ICI's International Work
By Miriam Bridges
November 21, 2019
With the industry's interests bound ever more tightly to global trends, ICI pursues an active international agenda through its international arm, ICI Global. ICI’s international work in 2019 was a period of vigorous effort on a host of issues....
TOPICS: CybersecurityExchange-Traded FundsFinancial MarketsFinancial StabilityGlobalICI GlobalInternationalOperations and TechnologyRetirement Policy
2019 Annual Report to Members: A Letter to ICI's Membership
By George C. W. Gatch and Paul Schott Stevens
November 14, 2019
What follows is an abridged version of a letter by ICI Chairman George C. W. Gatch and ICI President and CEO Paul Schott Stevens that was released in ICI’s 2019 annual report. To read their full letter, please see ICI’s 2019 Annual Report to Members....
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
Four Wrongs Don’t Make a Right—A Financial Stability Proposal Falls Short
By Susan Olson
September 16, 2019
After the global financial crisis, the Dodd-Frank Act of 2010 set up a regulatory framework to identify and mitigate threats to financial stability. Since then, regulators and industry have taken many actions to make financial markets and market participants more resilient. Yet a new proposal calling for further reform fails to take this progress into account, instead offering an action plan that’s likely to create—not solve—problems in promoting financial stability.
TOPICS: Financial MarketsFinancial StabilityFund Regulation
Three Bs or Not Three Bs: Revisiting Claims That Investment Grade Corporate Bond Funds Pose Financial Stability Risks
By Shelly Antoniewicz, Sean Collins, Rachel Graham, and Christof Stahel
September 9, 2019
In the past year, regulators have expressed concerns that regulated funds with a mandate to invest in investment grade corporate bonds might pose risks to financial stability. A case in point is the Bank for International Settlements’ (BIS) March 2019 Quarterly Review. The only way that the BIS can conclude that downgrades could fuel “fire sales” in “excess of daily turnover in corporate bond markets” is to assume that all market participants would quickly sell downgraded bonds. But the BIS headlines and charts focus solely on mutual funds....
TOPICS: Bond FundCorporate BondsFinancial StabilityMutual Fund
Corporate and Investment Grade Bond Funds: What’s in a Name?
By Sean Collins
January 4, 2019
Financial stability concerns are being inflated by confusion over what the funds in question actually hold. In fact, these funds invest nearly half their assets in Treasury and agency securities, and less than one-third in corporate bonds. In other words, these funds hold more in government bonds—traditionally the “safe haven” that investors seek in times of turmoil—than in the corporate bonds that seem to cause the regulators’ angst....
TOPICS: Bond FundCorporate BondsFinancial StabilityMutual Fund
SEC Commissioner Michael Piwowar: A Commitment to Markets, Shareholders...and Facts
By Rachel McTague
May 24, 2018
SEC Commissioner Michael Piwowar responded with candor to questions posed by ICI President and CEO Paul Schott Stevens during a lively discussion at the final day of ICI’s General Membership Meeting. Piwowar’s announced July 7 departure from the agency offered the outspoken commissioner the opportunity to reflect on fund regulation during his five-year tenure....
TOPICS: Exchange-Traded FundsFinancial StabilityFund RegulationGMMMutual Fund
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...
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. ...
TOPICS: Equity InvestingExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityIndex FundInterest RateInvestor ResearchMutual FundTrading
Americans Rely on Stocks to Meet Their Financial Goals as Much as Ever
By Sean Collins
January 17, 2018
The following ICI Viewpoints is a letter to the Wall Street Journal by Sean Collins, ICI chief economist, in response to an article published on January 4, 2018:
Are America’s individual investors missing out on one of the biggest bull markets in history? No. The Wall Street Journal’s account (“As Dow Tops 25000, Individual Investors Sit It Out,” January 4) is based on anecdotes and selective use of data.
TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityMutual FundSavings
Let’s Give the US Retirement System the Credit It Deserves
By Sarah Holden
December 27, 2017
The Washington Post’s latest article on the future of retirement security (“‘I Hope I Can Quit Working in a Few Years’: A Preview of the US Without Pensions,” December 23) is not a preview but a retrospective look at some of the challenges that workers face in defined benefit (DB) pension plans even at “blue-chip” firms. As documented in the article, with traditional DB plans, workers often failed to get their full promised benefits, thanks to vesting rules, back-loaded benefit accrual, business failure, and labor mobility.
TOPICS: 401(k)Financial StabilityRetirement PolicyRetirement Research
2017 Annual Report to Members: A Message from the Chairman
By William F. “Ted” Truscott
November 13, 2017
This letter by ICI Chairman Ted Truscott was released in our 2017 Annual Report to Members.
Every day, I’m reminded that each of us in the fund industry is driven to deliver ever-greater value for our fees and keep improving service to fund shareholders. Investors are demanding more from every asset manager—and the resulting competition drives us to innovate, find new efficiencies, and offer even better solutions for investors’ needs.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
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.
TOPICS: Bond FundEquity InvestingFinancial MarketsFinancial StabilityFund RegulationMutual FundTreasury
Simulating a Crisis
By Sean Collins
August 15, 2017
The Bank of England (BoE) recently published a paper detailing results from a simulation intended to “stress-test” open-end investment funds. The paper suggests that under “severe but plausible” assumptions, investors could redeem so heavily from open-end investment funds (e.g., mutual funds or UCITS funds) during a period of market stress that they could cause “dislocations” in corporate bond markets.
TOPICS: Bond FundEuropeFinancial MarketsFinancial StabilityFixed IncomeFund RegulationGlobalInternationalMutual FundPolicy Research
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.
TOPICS: EventsFinancial MarketsFinancial StabilityFund RegulationGMMMoney Market FundsMutual Fund
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?
TOPICS: EuropeFederal ReserveFinancial MarketsFinancial StabilityFund RegulationInternationalMoney Market FundsMutual Fund
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.
TOPICS: Bond FundBondsExchange-Traded FundsFinancial StabilityFund RegulationMutual FundPolicy Research
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.
TOPICS: Bond FundBondsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeFund RegulationInterest RateMutual FundTreasury
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.
TOPICS: Financial MarketsFinancial StabilityFund RegulationOperations and TechnologyShareholder
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?
TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFund RegulationMutual Fund
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.
TOPICS: Bond FundBondsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeInterest RateMutual Fund
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.
TOPICS: Bond FundBondsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeInterest RateMutual Fund
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.
TOPICS: Bond FundBondsFederal ReserveFinancial StabilityFixed IncomeInterest RateMutual Fund
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.
TOPICS: Bond FundEuropeFinancial MarketsFinancial StabilityFund RegulationICI GlobalInternationalMutual Fund
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.
TOPICS: Bond FundBondsEquity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityFixed Income
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).
TOPICS: CybersecurityEventsExchange-Traded FundsFinancial MarketsFinancial StabilityFund RegulationGMMInternationalMutual FundShareholder
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.
TOPICS: Financial StabilityFixed IncomeFund RegulationMutual Fund
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.
TOPICS: Bond FundBondsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeInterest RateMutual Fund
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.
TOPICS: Bond FundFinancial StabilityMutual Fund
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?
TOPICS: Bond FundBondsFederal ReserveFinancial StabilityFund RegulationGovernment AffairsMutual Fund
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.
TOPICS: Bond FundBondsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeInterest RateMutual Fund
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.
TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationInternationalMutual Fund
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.
TOPICS: Financial StabilityFund GovernanceFund RegulationInternationalMutual FundOperations and TechnologyShareholderTrading
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.
TOPICS: Financial StabilityFund GovernanceFund RegulationInternationalMutual FundOperations and TechnologyShareholderTrading
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.
TOPICS: Financial StabilityFund GovernanceFund RegulationInternationalMutual FundOperations and TechnologyShareholderTrading
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.
TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityInterest RateMutual FundTrading
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.
TOPICS: Bond FundExchange-Traded FundsFinancial MarketsFinancial StabilityInterest RateMutual FundTrading
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.
TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityInterest RateMutual FundTrading
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.
TOPICS: BondsFinancial MarketsFinancial StabilityFund RegulationOperations and Technology
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.
TOPICS: Equity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund Regulation
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.
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.
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.
TOPICS: Bond FundBondsEquity InvestingEuropeFinancial MarketsFinancial StabilityFixed IncomeICI GlobalInternationalMutual Fund
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.
TOPICS: Financial MarketsFinancial StabilityFund RegulationMoney Market FundsMutual FundTreasury
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.
TOPICS: EuropeFinancial StabilityFund RegulationICI GlobalInternationalMutual FundTreasury
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)
TOPICS: Financial StabilityFund RegulationICI GlobalInternationalMutual Fund
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.
TOPICS: Federal ReserveFinancial StabilityFund GovernanceFund RegulationMutual FundShareholderTreasury
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.”
TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundPolicy Research
The IMF on Asset Management: Which Herd to Follow?
By Sean Collins
June 1, 2015
Part of a series of ICI Viewpoints about problems in the IMF’s analysis of the asset management industry.
In April 2015, the International Monetary Fund (IMF) published its most recent Global Financial Stability Report (GFSR), which included a chapter titled, “The Asset Management Industry and Financial Stability.”
We have heard suggestions from more than one observer that the IMF’s GFSR Chapter on asset management provides a wealth of charts, tables, and data to support regulators’ case that regulated funds or asset managers could pose systemic risks.
TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundPolicy Research
The IMF on Asset Management: The Perils of Inexperience
By Sean Collins
May 28, 2015
Part of a series of ICI Viewpoints about problems in the IMF’s analysis of the asset management industry.
In April, the International Monetary Fund (IMF) released its most recent Global Financial Stability Report (GFSR), including a chapter on “The Asset Management Industry and Financial Stability.”
TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundPolicy Research
SEC Chair White Affirms Agency Has Tools to Address Risks in Industry
By Rachel McTague
May 8, 2015
The U.S. Securities and Exchange Commission (SEC) has the tools it needs to address systemic risks to the extent they exist in the asset management industry, said SEC Chair Mary Jo White at the opening session on the final day of ICI’s annual General Membership Meeting (GMM). White also announced that David Grim—who had been serving as acting director of the SEC’s Division of Investment Management—has just been named director of the division. White said she is thrilled that Grim, a 20-year veteran of the SEC in the investment management area, is taking the reins at a time when the Commission is moving forward to implement proactive regulations for the industry.
TOPICS: BondsCybersecurityEuropeEventsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFund RegulationGMMGovernment AffairsInterest RateInternationalMutual FundShareholderTreasury
Opinion: The Tax Threat to Your Mutual Fund
By Mike McNamee
May 7, 2015
Vanguard Chairman and CEO Bill McNabb sent “an open letter to all mutual fund investors” in the opinion pages of Thursday’s Wall Street Journal. His message: fund investors face a clear threat of higher costs, weaker returns, and a bailout tax to salvage other failing financial institutions—all if regulators get their way in imposing new rules on funds or their managers.
TOPICS: 401(k)Federal ReserveFinancial MarketsFinancial StabilityFund RegulationMutual FundRetirement PolicySavingsShareholderTradingTreasury
2015 Investment Company Fact Book: Letter from the Chief Economist
By Brian Reid
May 4, 2015
A version of this letter by ICI Chief Economist Brian Reid was released today in our 55th edition of the Investment Company Fact Book.
This year marks the 75th anniversary of the Investment Company Act and the Investment Advisers Act—the key statutes under which mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts are regulated and governed. In 1940—the same year that Congress enacted these laws—the fund industry formed the National Committee of Investment Companies, the trade group that became the Investment Company Institute (ICI).
TOPICS: Financial MarketsFinancial StabilityFund RegulationInvestor ResearchPolicy ResearchRetirement ResearchTrading
The IMF Quietly Changes Its Data, but Not Its Views
By Chris Plantier
April 21, 2015
On Friday, April 10, we pointed out that the International Monetary Fund (IMF) apparently had vastly overstated the size and growth of bond fund holdings of emerging market bonds in its latest Global Financial Stability Report (GFSR).
TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationICI GlobalInternationalMutual FundTreasury
More Unfounded Speculation on Bond ETFs and Financial Stability
By Shelly Antoniewicz and Mike McNamee
April 13, 2015
A recent column in the Financial Times warns of “another accident in waiting” in the growth of fixed-income exchange-traded funds (ETFs)—described as “financial alchemy” that converts illiquid bonds into “baskets” that “trade moment to moment on the stock exchanges.” This “illusory” ETF liquidity will disappear, the author warns, when investors “want to move en masse, and quickly, when the going gets less good.”
TOPICS: Bond FundBondsExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeInterest RateTrading
The IMF Is Entitled to Its Opinion, but Not to Its Own Facts
By Sean Collins and Chris Plantier
April 10, 2015
On Wednesday, the International Monetary Fund released its latest Global Financial Stability Report (GFSR), including a chapter on the asset management industry and financial stability.
TOPICS: EuropeFinancial StabilityFund RegulationICI GlobalInternationalMutual FundTreasury
Designation’s Vast Reach into Investor Portfolios
By Paul Schott Stevens
March 24, 2015
On Wednesday, March 25, I’ll testify before the Senate Committee on Banking, Housing, and Urban Affairs about the Financial Stability Oversight Council’s process for designating nonbank firms as “systemically important financial institutions,” or SIFIs.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundShareholderTreasury
Once Again, Information Moves Markets
By Sean Collins
March 18, 2015
Treasury yields fell sharply today and the stock market jumped. Wouldn’t it be nice if mutual funds could take credit? Unfortunately, they can’t. Any orders that mutual fund investors place to buy or sell shares anytime today before 4:00 p.m. won’t hit the market until 4:00 p.m., just like any other day. And, if you are reading this blog post at the time of its posting, 4:00 p.m. is still 10 minutes away.
TOPICS: Bond FundFederal ReserveFinancial MarketsFinancial StabilityInterest RateMutual FundTrading
Does Liquidity in ETFs Depend Solely on Authorized Participants?
By Shelly Antoniewicz and Jane Heinrichs
March 16, 2015
ICI recently conducted a survey of its members that sponsor exchange-traded funds (ETFs) to collect information on authorized participants (APs)—typically market makers or large institutional investors with an ETF trading desk that have entered into a legal contract with an ETF to create and redeem shares of the fund.
TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityTrading
Why Long-Term Fund Flows Aren’t a Systemic Risk: Multi-Sector Review Shows the Same Result
By Sean Collins
March 4, 2015
In a recent blog post discussing why we believe flows from long-term mutual funds do not pose risk to the financial system, we posted a chart showing that outflows from bond funds are modest even during periods of stress in the financial markets.
TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund
Simple Answers to the Federal Reserve’s Quandaries
By Mike McNamee
February 24, 2015
The Federal Reserve System can’t get past its perplexities on the role of mutual funds in financial stability. Time and again, the Fed’s governors, regional presidents, and staff return to the same hypothetical risks and speculative scenarios in which mutual funds somehow pose a threat to the financial system.
TOPICS: Bond FundBondsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeMutual Fund
Why Long-Term Fund Flows Aren’t a Systemic Risk: Understanding the Data on Institutional and Retail Investors
By Sean Collins
February 20, 2015
In two previous ICI Viewpoints posts, I discussed the muted response of investors in long-term funds―which invest primarily in stocks, bonds, or both―to financial stresses, and examined some of the characteristics of funds and their investors that help explain that muted response.
TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund
Why Long-Term Fund Flows Aren’t a Systemic Risk: Plus Ça Change, Plus C’est La Même Chose
By Sean Collins
February 19, 2015
As discussed in a previous ICI Viewpoints post, regulators and others have voiced concerns that long-term funds―funds that invest primarily in stocks, bonds, or both―might experience large outflows during a financial crisis, adding pressure on financial markets.
TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund
Why Long-Term Fund Flows Aren’t a Systemic Risk: Past Is Prologue
By Sean Collins
February 18, 2015
A recent Brookings Institution conference on Asset Management, Financial Stability, and Economic Growth aired the “active policy debate on how to regulate asset managers to maximize economic growth without endangering financial stability.”
TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund
Plenty of Players Provide Liquidity for ETFs
By Shelly Antoniewicz
December 2, 2014
A recent article in the Financial Times’ FT Alphaville blog (“Lies, Damned Lies, and Liquidity Expectations”) focused on a paper published by the Committee on the Global Financial System, an organization that monitors developments in global financial markets for central bank governors.
TOPICS: Exchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityInternationalTrading
The IMF Makes All of OFR’s Mistakes—And More
By Sean Collins and Chris Plantier
October 10, 2014
The International Monetary Fund (IMF) just released its latest Global Financial Stability Report. In the immortal words of Yogi Berra, it is déjà vu all over again.
The IMF report bears more than a passing resemblance to Asset Management and Financial Stability, published by the U.S. Treasury Department’s Office of Financial Research (OFR) in September 2013. The OFR report was met with widespread criticism for its misinformed discussion of hypothetical “vulnerabilities” posed by mutual funds and other asset managers.
TOPICS: EuropeFinancial StabilityFund RegulationICI GlobalInternationalMutual FundTreasury
Bloomberg Ignores the Evidence on Bond ETFs
By Mike McNamee
September 26, 2014
In response to “Pimco ETF Probe Spotlighting $270 Billion Market Vexing FSB,” we posted the following comment on Bloomberg News’ website:
TOPICS: Bond FundBondsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFund RegulationInterest RateInternationalTrading
Why Regulated Funds Are a Relatively Stable Source of Foreign Investment for Emerging Economies
By Chris Plantier
September 26, 2014
The press and policymakers focus a great deal of attention on flows to U.S. and European regulated mutual funds and exchange-traded funds (ETFs), in part because these funds are perhaps the most easily observed and readily measured players in capital markets.
TOPICS: EuropeFinancial MarketsFinancial StabilityFund RegulationICI GlobalInternationalMutual Fund
A Look Inside ETFs and ETF Trading
By Rochelle Antoniewicz and Jane Heinrichs
September 23, 2014
Investors in exchange-traded funds (ETFs) are trading shares with each other far more than they are turning to authorized participants to create or redeem shares.
TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityMutual FundTrading
Securities Lending by Mutual Funds, ETFs, and Closed-End Funds: Are the Risks Systemic?
By Bob Grohowski
September 18, 2014
The Financial Stability Oversight Council (FSOC), the U.S. Treasury’s Office of Financial Research (OFR), and the Financial Stability Board (FSB) are charged with identifying systemic risks.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundTreasury
Securities Lending by Mutual Funds, ETFs, and Closed-End Funds: Regulators’ Concerns
By Bob Grohowski
September 17, 2014
This post is the third in a series that focuses on securities lending by U.S. regulated funds—mutual funds, exchange traded funds (ETFs), and closed-end funds that are registered under the Investment Company Act of 1940.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundTreasury
Securities Lending by Mutual Funds, ETFs, and Closed-End Funds: The Market
By Bob Grohowski and Sean Collins
September 16, 2014
As the potential risks of securities lending are discussed and debated by the Financial Stability Oversight Council (FSOC), the U.S. Treasury’s Office of Financial Research (OFR), and the Financial Stability Board (FSB), it is important to try to understand both the overall size of the securities lending market and the share of it attributable to different participants.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundTreasury
Securities Lending by Mutual Funds, ETFs, and Closed-End Funds: The Basics
By Bob Grohowski
September 15, 2014
The Financial Stability Oversight Council (FSOC) recently announced that it has directed its staff to “undertake a more focused analysis of industry-wide products and activities to assess potential risks associated with the asset management industry.”
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundTreasury
“Preemptive Runs” and Money Market Fund Gates and Fees: Theory Meets Practice
By Sean Collins and Chris Plantier
August 20, 2014
A recent post on the blog of the Federal Reserve Bank of New York discusses the possibility that new rules by the Securities and Exchange Commission (SEC) allowing money market funds to temporarily impose fees or gates during times of market instability could increase the risk of preemptive runs on such funds during times of stress, rather than helping to limit destabilizing withdrawals, as the SEC intended.
TOPICS: EuropeFederal ReserveFinancial StabilityFund GovernanceFund RegulationGovernment AffairsInternationalMoney Market FundsTreasury
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.
TOPICS: Bond FundBondsEquity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund RegulationICI GlobalInternationalMutual Fund
Living Wills and an Orderly Resolution Mechanism? A Poor Fit for Mutual Funds and Their Managers
By Frances Stadler and Rachel Graham
August 12, 2014
During the global financial crisis, the distress or disorderly failure of some large, complex, highly leveraged financial institutions (banks, insurance companies, and investment banks) required direct intervention by governments—including a number of bailouts—to stem the damage and prevent it from spreading. One focus of postcrisis reform efforts has been to ensure that regulators are better equipped to “resolve” a failing institution in a way that minimizes risks to the broader financial system, as well as costs to taxpayers. The new tools provided under the Dodd-Frank Act include requirements for the largest bank holding companies and nonbank systemically important financial institutions (SIFIs) to prepare comprehensive resolution plans in advance (known as “living wills”), and creation of a new “orderly resolution” mechanism for financial institutions whose default could threaten financial stability.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundShareholderTreasury
Across the Universe: Seeing the Whole Picture in the Systemic Risk Debate
By Paul Schott Stevens
July 30, 2014
Astrophysicists have discovered that they can’t account for the composition and behavior of the universe without including “dark matter”—matter that can’t be observed directly.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundShareholderTreasury
The Real Lessons to Be Learned from 1994’s Bond Market
By Brian Reid
July 29, 2014
A recent “Heard on the Street” column in the Wall Street Journal (“Heeding 1994's Bond-Market Lesson,” July 27, 2014) is correct in saying that there’s a lesson to be learned from the 1994 bond market—but it draws the wrong lesson.
TOPICS: Bond FundBondsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeFund RegulationInterest RateMutual FundRetirement ResearchSavingsTradingTreasury
“The Age of Asset Management”—Less Risk, Not More
By Brian Reid
July 24, 2014
The following was written by ICI’s chief economist, Brian Reid, and published on FT Alphaville on July 23. For more information on ICI’s views and research on financial stability, please visit our Financial Stability Resource Center.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
Now Off the Hill, Senator Snowe Still Brimming with Ideas, Advice
By Rob Elson
June 5, 2014
U.S. policy is ripe for reform in a number of key areas, but changes to ease the polarized political environment must come first, former U.S. senator Olympia Snowe (R-ME) told the crowd during the final session of ICI’s 56th annual General Membership Meeting (GMM), held May 20–22 in Washington, DC.
TOPICS: CybersecurityEventsFederal ReserveFinancial MarketsFinancial StabilityFund RegulationGMMGovernment AffairsMutual FundRetirement PolicyShareholderTreasury
Industry Leaders Reflect on Serving Investors in an Evolving World
By Christina Kilroy
June 4, 2014
Speaking on the Leadership Panel held Wednesday, May 21, at ICI’s General Membership Meeting (GMM), fund industry leaders agreed that challenges as well as opportunities abound for their businesses in today’s complex world.
TOPICS: 401(k)EventsFederal ReserveFinancial MarketsFinancial StabilityFund GovernanceFund RegulationGMMGovernment AffairsInvestment EducationMutual FundRetirement PolicyShareholder
Former ICI President Matt Fink Decries FSOC’s “Revisionist History”
By Mike McNamee
May 30, 2014
Arguments that large stock and bond mutual funds are prone to “runs” that can destabilize markets go back many decades, and are as misguided now as they were then, argues Matt Fink, ICI president from 1991 to 2004, and author of The Rise of Mutual Funds: An Insider's View.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundTreasury
Errors of the Times: Getting the FSOC Debate All Wrong
By Mike McNamee
May 23, 2014
New York Times columnist Floyd Norris makes a number of fundamental errors in his Friday column about the House Financial Services Committee hearing and the broader debate about the Financial Stability Oversight Council (FSOC) and its review of asset management.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
SEC Chair White Stresses Need for FSOC to Consult Sources for Necessary Expertise
By Rachel McTague
May 22, 2014
Securities and Exchange Commission (SEC) Chair Mary Jo White today called for the U.S. Financial Stability Oversight Council (FSOC) to use outside expertise to the degree necessary in its process of designating systemically important financial institutions (SIFIs). She asserted that it is “enormously important for FSOC, before it makes any decision of any kind, to make sure it has the necessary expertise on any of those issues.”
TOPICS: EventsFederal ReserveFinancial MarketsFinancial StabilityFund GovernanceFund RegulationGMMGovernment AffairsMoney Market FundsMutual FundOperations and TechnologyShareholderTradingTreasury
“Market Tantrums” and Mutual Funds: A Second Look
By Sean Collins and Chris Plantier
May 19, 2014
Over the past year, policymakers who are focused on financial stability have pursued a theory that mutual fund investors can destabilize financial markets by redeeming from funds when markets decline. According to this theory, redemptions by fund investors lead fund managers to sell securities; those sales drive asset prices down further and, in turn, spur more investor flight, redemptions, and price declines.
TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeFund RegulationInterest RateInvestor ResearchMutual FundTradingTreasury
For Concerns About Risk, a Better Way Forward
By Mike McNamee
May 16, 2014
Since the financial crisis, regulators in the United States and abroad have been looking for ways to prevent a repeat. But recently it seems they’ve gone off course.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
Overseas Overreach
By Mike McNamee
May 15, 2014
The Financial Stability Board (FSB)—composed of financial regulators and central bankers from around the globe—is proposing a flawed methodology that inappropriately puts regulated U.S. funds under scrutiny for possible designation as global systemically important financial institutions—or G-SIFIs.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
How SIFI Designation Could Lead to a New Taxpayer Bailout
By Mike McNamee
May 14, 2014
We have spent the past several days discussing why efforts by international and domestic regulators to examine mutual funds as sources of systemic risk are unnecessary and inappropriate.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundTreasury
Who Are the FSB 14?
By Mike McNamee
May 13, 2014
In their search for ways that investment funds can pose risks to the financial system, regulators and central bankers from around the globe have proposed an arbitrary threshold: any investment fund with assets of more than $100 billion should automatically be subjected to further examination and consideration as a possible “global systemically important financial institution,” or G-SIFI.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
The Market Crash That Never Came
By Mike McNamee
May 12, 2014
U.S. and international banking regulators, in their search for ways that mutual funds and their managers could threaten financial stability, have come up with a simple story: fund investors and asset managers “crowd or ‘herd’ into popular asset classes or securities” and thus “magnify market volatility.”
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
Size by Itself Doesn’t Matter—Leverage Does
By Mike McNamee
May 9, 2014
Second in a series of Viewpoints postings on funds and financial stability.
The threshold set by the Financial Stability Board (FSB) for examining whether a regulated fund could pose risk to the financial system should be redrawn—or better yet, withdrawn.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
SIFI Designation for Funds: Unnecessary and Harmful
By Mike McNamee
May 8, 2014
U.S. and international regulators are examining whether asset managers or the investment funds that they offer could be sources of risk to the overall financial system and should thus be designated as systemically important financial institutions (SIFIs).
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
ICYMI: "The Feds Target Money Managers"
By Mike McNamee
May 7, 2014
Yesterday’s editorial in the Wall Street Journal, “The Feds Target Money Managers,” neatly summed up the case against treating asset managers as systemically important financial institutions (SIFIs) and subjecting them to bank-style regulation.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
ICYMI: Congress Asks Questions About SIFI Designation and Asset Managers; SEC Chair White Provides Telling Answers
By Mike McNamee
April 30, 2014
DC scene setter, 2013–2014: The Financial Stability Oversight Council (FSOC) is examining asset managers for possible “systemically important financial institution” (SIFI) designation, which would bring with it enhanced prudential regulation from the Federal Reserve. Such “bank-style” regulation is foreign to U.S. capital markets.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
ICI Statement: FSOC Seeking “Pretexts” to Designate Funds
By Mike McNamee
April 24, 2014
ICI President and CEO Paul Schott Stevens today made the following statement in response to media reports that the Financial Stability Oversight Council (FSOC) has stepped up its review of major asset managers—which could lead to their designation as “systemically important financial institutions,” or SIFIs—based on boilerplate metrics.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
ICI Responds to the FSB Consultation on Systemic Risk and Investment Funds
April 8, 2014
In early January, the Financial Stability Board (FSB)—an international group of financial authorities—published a consultation paper on the issue of systemic risk and investment funds.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
ICI Response to Bank of England Haldane Speech on Asset Management and Potential Risk
By Mike McNamee
April 4, 2014
Today, ICI President and CEO Paul Schott Stevens made the following comment in response to a speech by Andy Haldane, currently executive director of the Bank of England and slated to become its chief economist in June.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
Why Asset Management Is Not a Source of Systemic Risk
By Paul Schott Stevens
March 17, 2014
This Viewpoints post is a summary of a speech given by ICI President and CEO Paul Schott Stevens at the Mutual Funds and Investment Management Conference. The entire speech is now available.
Since September, U.S. and international regulators have released reports suggesting that asset managers or the funds that they offer may be sources of risk to the overall financial system. ICI does not agree that the asset management sector poses systemic risk. Nonetheless, these reports could be the predicate for new, bank-style prudential regulation of the asset management industry—which could significantly harm funds and the investors who use them.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury
Column Makes the Same Mistakes as OFR
By Paul Schott Stevens
January 20, 2014
In recent months, both the U.S. Treasury Department's Office of Financial Research (OFR) and international regulators such as the Financial Stability Board (FSB) have examined whether asset managers pose risks to financial stability. One report is deeply flawed; the other offers a more informed view. Unfortunately, Gretchen Morgenson’s New York Times column (“Bailout Risk, Far Beyond the Banks,” January 12) veers toward the flawed report.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalTreasury
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