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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.

Patrice Berge-Vincent Marty Burns Susan Olson
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.

Read more…

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.

Read more…

TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder

ETFs Are Passing the COVID-19 Crisis Test

By Shelly Antoniewicz

March 17, 2020

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

Read more…

TOPICS: Equity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityIndex FundTrading

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....

Read more…

TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder

Understanding Interest Rate Risk in Bond Funds

By Shelly Antoniewicz and James Duvall

December 17, 2018

Long-term interest rates reached their lowest recorded levels in July 2016 and were on a steady upward trend until early December. Rates dipped recently, but that could be short-lived if global trade tensions ease and the outlook for economic growth remains robust. Investors should be aware of the effects rising interest rates could have on their bond fund investments....

Read more…

TOPICS: Bond FundBondsExchange-Traded FundsFixed IncomeIndex FundMutual Fund

Fund Adviser Proxy Votes Align with Fund Interests

By Paul Schott Stevens

September 24, 2018

A key assertion in “Cracking the Proxy Racket” (The Wall Street Journal's Review & Outlook, September 18) is that asset managers vote “in block” to support recommendations set forth by advisory firms like Glass Lewis and Institutional Shareholder Services. Such statements ought to be tested against actual data.

A decade’s worth of research shows that fund advisers vote proxies diligently, in line with their fiduciary duty to the fund and its shareholders...

Read more…

TOPICS: Fund GovernanceFund RegulationIndex FundMutual FundProxy VotingShareholder

Pointing Fingers at Index Funds Won’t Explain Market Volatility

By Shelly Antoniewicz

February 14, 2018

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

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

The short answer to both questions is no.

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

Read more…

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

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.

Read more…

TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder

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.

In their muddled and inconsistent arguments, the authors of “Index Funds Are Great for Investors, Risky for Corporate Governance” (op-ed, June 22) rely on unfounded assertions while ignoring clear legal requirements placed on registered funds, their boards, and their advisers...

Read more…

TOPICS: Exchange-Traded FundsFund GovernanceFund RegulationIndex FundMutual FundShareholder

Average Expense Ratios for Index ETFs Have Declined

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

May 24, 2017

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

Read more…

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

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