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.

401(k) plans offer a wide array of investment options (28 options, on average). They often include employer contributions, as well as provide the flexibility of a 401(k) plan loan feature. In fact, nearly nine out of 10 participants are part of plans that offer these features.

Successful retirement saving often relies on a paycheck-by-paycheck commitment over the course of a career, and employees who participate in 401(k) plans put themselves on the path to a secure retirement. ICI recently asked Americans about their views regarding DC plans; their responses, described and analyzed in “American Views on Defined Contribution Plan Saving, 2016,” show that DC-owning households appreciate the savings and investment features of their plans.

Participants Agree: DC Plans Make Saving Easier

401(k) plans offer access to payroll deduction, tax-advantaged saving, and an opportunity to save for retirement with each paycheck. Households with DC plan accounts indicate that they appreciate these benefits. Ninety percent of DC-owning households agree that their DC plan account helps them think about the long term, not just their current needs (see Figure 1, below); 91 percent agree that payroll deduction makes it easier to save; and 44 percent agree that they probably wouldn’t save for retirement if they didn’t have their DC plan at work. These results highlight the important role that employers play in promoting retirement saving.

Figure 1
DC-Owning Households Appreciate the Savings Features of DC Plans
Percentage of DC-owning households agreeing with each statement, fall 2016

Note: The figure reports the percentage of DC-owning households who “strongly agreed” or “somewhat agreed” with the statement. The remaining households “somewhat disagreed” or “strongly disagreed.”

Source: ICI tabulation of GfK KnowledgePanel® OmniWeb survey data (fall 2016)

In setting up a 401(k) plan, an employer selects the investment options to offer—typically stock, bond, and money market investments, and products that hold a diversified mix of investments. Plan participants select from the plan’s options.

Nearly all DC-owning households (96 percent) appreciate the choice and control offered by their DC-account investments, while most (81 percent) agree that their plan offers a good lineup of investment options (see Figure 2, below). More than two-thirds indicate that knowing that they’re saving from every paycheck makes them less worried about the stock market—helping them to continue investing even when the stock market is down, and putting them in a position to ride the market up when it rises.

Figure 2
DC-Owning Households Appreciate the Investment Features of DC Plans
Percentage of DC-owning households agreeing with each statement, fall 2016

Note: The figure reports the percentage of DC-owning households who “strongly agreed” or “somewhat agreed” with the statement. The remaining households “somewhat disagreed” or “strongly disagreed.”

Source: ICI tabulation of GfK KnowledgePanel® OmniWeb survey data (fall 2016)

Survey respondents also registered overwhelming support for the current tax treatment of their plan, as well as control over retirement plan assets and income—both while working and in retirement. For example, nine in 10 US households opposed taking away the tax advantages of DC accounts or reducing the individual contribution limits of DC accounts (see Figure 3, below). Even among households not currently owning DC accounts or individual retirement accounts (IRAs), more than eight in 10 were opposed to taking away the plans’ tax advantages or reducing their contribution limits.

Figure 3
Most US Households Oppose Reducing Tax Advantages of DC Accounts
Percentage of US households agreeing or disagreeing with the statement by ownership status, fall 2016

Note: The “agree” column includes the percentage of households that “strongly agreed” or “somewhat agreed” with the statement, and the “disagree” column includes the percentage of households who “somewhat disagreed” or “strongly disagreed.”

Source: ICI tabulation of GfK KnowledgePanel® OmniWeb survey data (fall 2016)

Full details on the survey and additional results can be found in “American Views on Defined Contribution Plan Saving, 2016,” while more information about 401(k) plans—including FAQs, videos, and publications—can be found in ICI’s 401(k) Resource Center.

Sarah Holden is ICI’s senior director of retirement and investor research.

TOPICS: 401(k)Fund Regulation Investor Research Mutual Fund Retirement Research

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.

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.

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.

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.

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.

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.

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?

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.

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 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.

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).

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.

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.

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.

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?

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.

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.

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.

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.

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.

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.”

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.

Fresh Perspectives on a Changing World

By Miriam Bridges

May 29, 2015

Implications of globalization, the impact of the Millennial Generation on product development, the search for alpha in a world full of passive products—these were among the top priorities and concerns of the fund industry discussed by a panel of industry leaders at ICI’s 57th annual General Membership Meeting (GMM), held May 6–8 in Washington, DC.

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.”

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.

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.

GMM Policy Forum: “It Always Comes Down to Trust”

By Todd Bernhardt

May 6, 2015

Over the 75-year history of the modern mutual fund industry, funds have helped to democratize investing, providing a tremendous array of investing options at a reasonable cost for millions of people. And given rapid advances in technology and the efficiencies that they can bring, the future looks even brighter, said Walter W. Bettinger II at the opening session of ICI’s 57th General Membership Meeting (GMM).

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).

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).

Federal Reserve Reverse Repo Facility Helps Stabilize Short-Term Money Markets

By Chris Plantier

April 17, 2015

Following a pattern observed at the end of recent quarters, money market fund holdings of European issuers dropped at the end of March, although the decline was not as large as the previous quarter, ending December 2014. As we have noted before, for regulatory reasons European banks have been paring their balance sheets at the end of each quarter, resulting in a temporary decline in their desire to borrow from money market funds.

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.

On Fiduciary Rule, New York Times Relies on Fatally Flawed Research

By Paul Schott Stevens

April 8, 2015

Today I submitted the following letter to the editor of the New York Times:

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.

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.

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:

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.

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.

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.

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.

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.”

“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.

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.

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.

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.

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.

“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.

European Banks Significantly Reduced Borrowing from U.S. Money Market Funds in June

By Chris Plantier

July 18, 2014

As we discussed in March and April, European banks have generally become less willing to borrow from U.S. money market funds due to regulatory pressures, especially at the end of the quarter. Specifically, the new Basel III requirements seek to increase capital ratios of banks and explicitly limit how much banks fund their operations through short-term borrowing (which includes short-term securities banks issue that money market funds invest in). This quarter-end effect was particularly strong at the end of June as European bank regulators continued to monitor bank progress toward meeting the new Basel III requirements, which will be fully phased in over the next few years.

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.

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.

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.

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.

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.”

Headlining ICI’s GMM, Blair Talks of Tough Challenges, Vast Opportunities

By Rob Elson

May 21, 2014

Challenges abound in our increasingly global world, said Tony Blair, former prime minister of the United Kingdom. Yet our future could be brighter than ever, he insisted.

Blair’s stirring words came during a keynote speech at ICI’s 56th General Membership Meeting (GMM). After his opening remarks, Blair sat down with ICI Chairman Bill McNabb, Chairman and CEO of The Vanguard Group, to discuss a range of issues. The session headlined the three-day meeting, which began yesterday in Washington, DC.

GMM Policy Forum: BlackRock’s Larry Fink Speaks with ICI’s Paul Stevens

By Todd Bernhardt

May 21, 2014

The fund industry needs to stop focusing on the moment and start focusing on outcomes when advising investors on their resources, said Laurence D. Fink, chairman and CEO of BlackRock, at ICI’s Annual Policy Forum, part of the Institute’s 56th General Membership Meeting (GMM).

“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.

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.

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.

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.

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.

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.”

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.

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).

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.

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.

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.

Seasonality, U.S. Money Market Funds, and the Borrower of Last Resort

By Chris Plantier

April 16, 2014

The March money market fund holdings data indicate a large drop in the share of fund assets allocated to European counterparties and a large increase in the share of fund assets allocated to U.S. counterparties. This shift is likely temporary and reflects reduced willingness of European banks to borrow from money market funds at the end of the quarter, rather than reduced demand from money market funds. Also, the increase in lending to U.S. counterparties is almost entirely due to the large increase in money market fund lending to the Federal Reserve via its overnight reverse-repo (repurchase agreement) facility.

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.

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.

U.S. Prime Money Market Funds and European Borrowing

By Chris Plantier

March 18, 2014

European holdings by U.S. prime money market funds have fluctuated significantly since early 2011.

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.

Money Market Funds and Liquidity Ratios: Why So High and Stable?

By Chris Plantier

February 19, 2014

Second in a series of posts about ICI’s new data release, a monthly compilation and summary of portfolio data from taxable money market funds. To find out more, read the first post about the new data summary or this list of answers to frequently asked questions.

The SEC’s 2010 money market fund reforms require taxable funds to hold at least 30 percent of their assets in securities that are deemed to be liquid within five business days (known as weekly liquidity) and at least 10 percent of their assets in securities that are deemed to be liquid in one business day (known as daily liquidity). In practice, money market funds—especially government money market funds—hold liquidity well above these minimum standards, and these ratios change very little in any given month.

Updated FICCA Framework Makes Auditing Omnibus Accounts Easier, More Efficient

By Kathy Joaquin

January 27, 2014

Many financial intermediaries—such as broker-dealers, financial advisers, and retirement plan recordkeepers—provide services to fund shareholders and maintain customer account information on their own recordkeeping systems. Fund sponsors, in turn, want to ensure that intermediaries are meeting their obligations in servicing fund shareholders, and so, have been seeking oversight tools that allow them to do this efficiently and effectively. ICI recently took steps to improve one of the critical oversight tools available to the industry, through a major update of the Financial Intermediary Controls and Compliance Assessment (FICCA) engagement framework.

ICI’s New Data Release: Further Enhancing the Transparency of Money Market Funds

By Chris Plantier

January 21, 2014

The 2010 reforms to money market mutual funds greatly enhanced the transparency of these funds, giving regulators, analysts, and investors greater insight into important elements of funds’ holdings and operations.

The reforms required funds to disclose their entire portfolio holdings to the public on their company websites five business days after the end of each month. Money market funds also are required to file a more detailed disclosure—SEC Form N-MFP—with the Securities and Exchange Commission directly. The SEC releases this more detailed data to the public 60 days after it’s filed. The SEC does not, however, summarize the data, leaving the public with no non-commercial access to a broad look at holdings across the industry.

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.

‘Sponsor Support’ for Money Market Funds Is Old—and Overblown—News

By Mike McNamee

October 21, 2013

A story in the October 21 issue of the Financial Times (“Almost 20 money market funds bailed out”; subscription required) takes old numbers and tries to present them as news.

Check the Facts: Funds Engage Actively on Corporate Governance

By Ianthé Zabel

July 19, 2013

ICI president and CEO Paul Schott Stevens recently sent the following letter to the New York Times:

Every mutual fund or other registered investment company is required by law to cast votes on proxy proposals in the interests of the fund and its investors. Generally, funds interpret this to mean that they should support proposals that will promote good corporate governance and increase the value of the funds’ investments, carefully weighing shareholder interests and fund objectives.

Americans Trust in Their 401(k) Plans

By Sarah Holden

Participants Agree: DC Plans Make Saving Easier

Figure 1 DC-Owning Households Appreciate the Savings Features of DC PlansPercentage of DC-owning households agreeing with each statement, fall 2016

Figure 2 DC-Owning Households Appreciate the Investment Features of DC PlansPercentage of DC-owning households agreeing with each statement, fall 2016

Figure 3 Most US Households Oppose Reducing Tax Advantages of DC AccountsPercentage of US households agreeing or disagreeing with the statement by ownership status, fall 2016

Funds Actively Seek Companies’ Sound Management

By Paul Schott Stevens

Industry Leaders Highlight Opportunities Presented by Industry Change

By Miriam Bridges

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

By Rob Elson

Stevens Calls for Measures to Enhance Economic Growth

By Rachel McTague

2017 Investment Company Fact Book: Letter from the Chief Economist

By Brian Reid

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

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

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

By Shelly Antoniewicz

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

By Paul Schott Stevens

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

By David Blass

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

By Amy B. R. Lancellotta

When Investor Protection Becomes Protectionism

By Patrice Bergé-Vincent

Industry Leaders Address Changing Industry Terrain

By Miriam Bridges

The SEC’s Historic Success: Six Key Ingredients

By Paul Schott Stevens

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

By Rachel McTague

To the SEC and FINRA: It’s Your Move

By David W. Blass

The SEC’s Online-Delivery Gift to Fund Shareholders

By David W. Blass

Yes, Funds Come and Go—Without Government Help

By Todd Bernhardt

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

By Mike McNamee

Derivatives—Please Don’t Let Them Be Misunderstood

By Shelly Antoniewicz

Liquidity Risk Management Must Be Done Right

By Paul Schott Stevens

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

By Brian Reid

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

By Brian Reid

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

By Marty Burns

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

By Jennifer Choi and George Gilbert

Mutual Fund Investments in Private Placements: an Overview

By Gregory M. Smith

U.S. Bond ETFs Resilient on August 24

By Shelly Antoniewicz

Retirement Planning: No Place for Fairy Tales

By Paul Schott Stevens

Changes to Money Market Funds Are Showing Up in Data

By Sean Collins

Figure 1
DC-Owning Households Appreciate the Savings Features of DC Plans
Percentage of DC-owning households agreeing with each statement, fall 2016

Figure 2
DC-Owning Households Appreciate the Investment Features of DC Plans
Percentage of DC-owning households agreeing with each statement, fall 2016

Figure 3
Most US Households Oppose Reducing Tax Advantages of DC Accounts
Percentage of US households agreeing or disagreeing with the statement by ownership status, fall 2016