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From December Outflows to January Inflows: Seasonal Factors in Mutual Fund Flows

By Shelly Antoniewicz and Morris Mitler

February 4, 2019

As US and global stock markets churned in December, the press took note of ICI’s reports on outflows from US long-term mutual funds and drew a hasty conclusion: individual fund investors were fleeing from market turmoil. In response, ICI pointed out that these flows, while large in dollar terms, made up a tiny fraction of fund assets and could not be interpreted as a mass flight from the market. December’s outflow of $183 billion totaled about 1 percent of the $15.7 trillion in assets in long-term mutual funds (stock, bond, and hybrid funds) at the end of November. The reason for this muted response is simple investor behavior: most mutual fund shareholders are investing for long-term goals, and don’t react strongly to short-term market swings.

Weighing flows against total assets is the first step to putting fund flows in context. A second factor to be considered is the calendar. It turns out that mutual fund flows have a distinct seasonal pattern, with stronger inflows early in the year giving way to weaker inflows or outflows during the second half.

The reason again is investor behavior. Early in the year, investors are putting year-end bonuses to work or making tax-deductible contributions to their individual retirement accounts (IRAs), or both. But in December, we generally see outflows as investors hasten to meet year-end deadlines. Some outflows are due to “tax loss harvesting”—when investors sell funds in which they have capital losses and use those realized losses to reduce their taxes by offsetting income distributions or capital gains from other funds or securities. Other investors may redeem to complete their annual required minimum distributions (RMDs) from IRAs. We could also see increased outflows because of investors who delay investing in mutual funds to avoid paying taxes on capital gains that funds distribute (capital gains distributions from funds tend to be concentrated in November and December). In all of these cases, tax deadlines—April 15 to fund IRAs and December 31 to realize gains and losses or avoid tax penalties associated with RMDs—contribute to strong seasonal effects.

As shown in Figure 1, those seasonal effects have been in play recently. ICI’s weekly estimates of long-term mutual fund flows show outflows during December 2018 and inflows for the first few weeks of January 2019. Although market volatility in December likely played a role in some investors’ decisions to redeem moderately from long-term mutual funds, the calendar and the tax code also contributed.

Figure 1: Estimated Flows of Long-Term Mutual Funds
Billions of dollars, weeks ended December 4, 2018, to January 23, 2019

Source: Investment Company Institute

How Big Are Seasonal Factors in Mutual Fund Flows?

These regularly recurring investment decisions by fund investors at the beginning and end of a calendar year have a noticeable impact on mutual fund flows during those months. Using statistical techniques, we can estimate what are called “seasonal factors” for each month of the year. These seasonal factors, shown by the bars in Figure 2, are estimates of the dollar amount of mutual fund flows in each month that would be expected to be regularly more than (positive value) or less than (negative value) the average monthly mutual fund flows. The estimates are based on the historical pattern of monthly flows in long-term mutual funds (excluding money market funds) over the past 10 years.

As Figure 2 shows, flows to long-term mutual funds tend to be higher than average in the first part of the year and lower than average at the end of the year. This pattern is consistent across different types of mutual funds, such as domestic equity, world equity, bond, and hybrid. Overall, flows to mutual funds are regularly boosted by $17 billion in January and $21 billion in February. In contrast, flows to mutual funds are regularly dampened by $40 billion in December—by far the largest seasonal factor.

While many government agencies routinely adjust their statistical reports for seasonal effects, ICI does not seasonally adjust any of its reported fund data. The process is complex, and few users of ICI data are looking for seasonal adjustments. Still, it’s important to keep the impact of the calendar in mind when interpreting fund flows—particularly in times of market stress.

How much of this past December’s flows could be attributed to these average seasonal effects? According to our monthly estimate, long-term mutual funds had $183 billion in outflows in December. Based on average seasonal movements over the last 10 years, at least 22 percent ($40 billion out of $183 billion) of those outflows resulted from investor behavior similar to what we’ve seen in previous Decembers over the past 10 years.

Figure 2: Seasonal Factors for Monthly Long-Term Mutual Fund Flows*
Billions of dollars

* Each bar represents the average of the month’s seasonal factors estimated over the period from January 2009 to December 2018 using the X-13 ARIMA statistical technique

Source: ICI calculations

Shelly Antoniewicz is senior director of industry and financial analysis and Morris Mitler is an economist at ICI.

Permalink: https://www.ici.org/viewpoints/view_19_seasonal_nncf

TOPICS: Bond FundEquity FundMutual 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....

Read more…

TOPICS: Bond FundCorporate BondsFinancial StabilityMutual Fund

Even in Bear Markets, Equity Fund Investors Stay the Course

By Shelly Antoniewicz

December 21, 2018

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

Read more…

TOPICS: Equity InvestingExchange-Traded FundsMutual Fund

Debunking Assumptions About Bond Mutual Funds’ Flows and Bond Sales

By Shelly Antoniewicz

December 20, 2018

Recent outflows from bond mutual funds have drawn press attention and revived concerns among regulators about the impact of bond fund investors’ actions on the broader bond market. Unfortunately, this attention is rooted in misconceptions—as we’ll show using ICI’s comprehensive data covering 98 percent of mutual fund industry assets.

Read more…

TOPICS: Bond FundBondsFixed IncomeMutual Fund

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

Mutual Funds: Rated E for Everyone

By Sarah Holden

December 12, 2018

Investing is subject to many misconceptions, including the notion that only wealthy households own mutual funds. As US households’ ownership of mutual funds has grown over the past four decades, the need to correct myths about who owns mutual funds has also grown....

Read more…

TOPICS: Investor ResearchMutual FundRetirement PolicySavingsShareholder

Funds and Proxy Voting: Funds Vote Thoughtfully and Independently

By Morris Mitler, Sean Collins, and Dorothy Donohue

November 7, 2018

During the 2017 proxy voting season, registered investment companies—including mutual funds, exchange-traded funds (ETFs), and closed-end funds—cast more than 7.6 million votes for proxy proposals submitted by either management or shareholders of corporations held in the funds’ portfolios. Some of those proposals were straightforward; others were more controversial. But in every case, a fund adviser had a duty to evaluate the proposal and act in the best interest of the fund and its shareholders.

Read more…

TOPICS: Mutual FundProxy VotingShareholder

Funds and Proxy Voting: Who Submits Shareholder Proposals?

By Morris Mitler, Sean Collins, and Dorothy Donohue

November 6, 2018

Any registered fund that holds companies’ stocks in its portfolio has a duty to consider proxy proposals offered by those companies—and to act in the best interests of the fund and its shareholders. These funds also have a regulatory obligation to report those votes.

As the only investors required to disclose their votes publicly, funds draw an outsized share of the attention focused on proxy issues and voting outcomes. And critics frequently focus on whether they agree or disagree with funds’ votes—without regard to funds’ obligation to vote in the interests of fund shareholders....

Read more…

TOPICS: Mutual FundProxy VotingShareholder

Funds and Proxy Voting: The Mix of Proposals Matters

By Morris Mitler, Sean Collins, and Dorothy Donohue

November 5, 2018

Proxy voting is in the news and on the minds of policymakers, corporate executives, and investors. The Securities and Exchange Commission (SEC) will focus on a number of issues related to proxy advisory firms, shareholder proposals, and technology and innovation to make the proxy process more efficient at a staff roundtable on November 15. Major corporate issuers—organized as the “Main Street Investors Coalition”—are agitating against the voting practices of institutional investors, including registered funds....

Read more…

TOPICS: Mutual FundProxy VotingShareholder

Fund Shareholders Have to Receive Reports. They Don’t Have to Pay So Much for Them

By Paul Schott Stevens

November 1, 2018

ICI has filed a comment letter calling on the Securities and Exchange Commission (SEC) to overhaul the framework for fees that funds are required to pay to vendors when intermediaries such as broker-dealers hire those vendors to distribute legally required reports and disclosures to shareholders. The issue may sound dry and technical—but if the SEC follows through on our recommendations, shareholders will save real money.

Read more…

TOPICS: Mutual FundShareholder

28 Trillion Smart Decisions

By Christina Kilroy

October 22, 2018

Have you ever done one small, smart thing that ended up making a huge difference in your future? I’m not talking about blind luck—like buying a ticket that turns out to be the winner in the (currently) $1.6 billion Mega Millions. No, I’m talking about small, smart decisions that can materially affect us later in life....

Read more…

TOPICS: Investment EducationMutual FundRetirement ResearchSavingsShareholderTaxes

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

IRA Investors Are Concentrated in Lower-Cost Mutual Funds

By James Duvall

August 8, 2018

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

Read more…

TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder

IBM Expert Demystifies Artificial Intelligence, Touts Its Value for Asset Management

By Jeanne C. Arnold

June 22, 2018

Forget what you’ve heard about artificial intelligence (AI), Tom Eck, chief technology officer for IBM industry platforms, told the crowd at ICI’s 60th annual General Membership Meeting. Despite its depiction sometimes in popular culture as a malevolent force, he said, there is nothing to fear from the technology, which happens to hold great potential for the registered fund industry....

Read more…

TOPICS: EventsGMMMutual Fund

Young Leaders Reflect on Building a Better Business

By Christina Kilroy

June 21, 2018

Emerging leaders in the asset management industry are at the forefront of changes that will fundamentally affect the business—from technology, to client expectations, to how to attract and retain top talent. During a panel at ICI’s Operations and Technology Conference, held concurrently with the 60th annual General Membership Meeting, three such leaders explored how their firms are rethinking legacy processes and moving into the future....

Read more…

TOPICS: EventsGMMMutual FundOperations and TechnologyShareholder

Meeting Investors’ Evolving Expectations—and Why Delivering Returns Is No Longer Enough

By Jeanne C. Arnold

June 19, 2018

Serving investors is at the heart of asset management. Yet in today’s technology-driven world, in which personalized services and experiences dominate everything from banking to shopping, asset managers are having to rethink how to best meet the evolving needs of investors and advisers. 

During the opening session of ICI’s 60th annual General Membership Meeting, held this year from May 22–24, a group of industry experts took to the stage to discuss the future of the fund industry—and to explain why simply delivering returns is no longer enough....

Read more…

TOPICS: EventsGMMMutual Fund

How Astronaut Jerry Linenger Found Strength, Perspective During His 132 Days in Space

By Candice Gullett

June 14, 2018

Captain Jerry Linenger has been around the world more than a few times—literally. As a retired US Navy flight surgeon and NASA astronaut posted on Russian space station Mir, he’s seen it all. But you don’t have to go in to space to benefit from Linenger’s insight—he had plenty of wisdom to share with attendees of ICI’s 60th annual General Membership Meeting (GMM), held in Washington, DC, from May 22–24.

Read more…

TOPICS: EventsGMMMutual Fund

Amy Herman Makes Order out of Chaos with the Art of Perception

By Melanie Cohen

June 11, 2018

Art might not be the first topic that comes to mind when discussing the mutual fund industry, but lawyer and art historian Amy Herman showed that there is a connection to be found after all.

Addressing attendees at ICI’s recent Operations and Technology Conference, held concurrently with ICI’s General Membership Meeting in Washington, DC, from May 22–24, Herman explained that analyzing art requires stepping in closely and asking questions from every angle—a style of observation that also is important for the fund industry…

Read more…

TOPICS: EventsGMMMutual Fund

Asset Management Leaders Talk Shop on Markets and Trends—and the Industry’s Gender Divide

By Rob Elson

May 31, 2018

A panel of four leading women in asset management took the stage at ICI’s 60th annual General Membership Meeting last week to share their insights on market outlooks, industry trends, and gender diversity....

Read more…

TOPICS: EventsGMMInternationalMutual 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....

Read more…

TOPICS: Exchange-Traded FundsFinancial StabilityFund RegulationGMMMutual Fund

The Carlyle Group’s David M. Rubenstein: Expanding Horizons, Doing What He Loves

By Miriam Bridges

May 23, 2018

“It’s the rate of return. Everything is the rate of return,” said David M. Rubenstein, cofounder and co-executive chairman of The Carlyle Group, summing up what has fueled the growth and success of the modern private equity business.

Read more…

TOPICS: EventsGMMMutual Fund

Morgan Stanley’s James Gorman Builds Pride from the Inside Out

By Todd Bernhardt

May 22, 2018

A mental model that James Gorman uses in his role as chairman and CEO of Morgan Stanley involves viewing the world as a series of concentric circles: the innermost circle represents the firm itself, while the subsequent circles represent the industry, the economy, and the political environment that a firm operates within. To succeed, one must build an understanding and mastery of each circle. Only then can one move back toward the middle.

Read more…

TOPICS: GMMGlobalMutual Fund

2018 Investment Company Fact Book: Letter from the Chief Economist

By Sean Collins

May 15, 2018

Those of us who wear glasses know that one of the most crucial elements in seeing the world is the right lens. A bad lens warps the light and distorts the signals; the right lens sharpens the image and enhances our understanding.

This is a useful metaphor for the work that ICI Research does in providing informed analysis to guide public policy. Through our voluminous collections and surveys, we gather large amounts of data—signals about the behavior of funds, markets, and investors. But finding the patterns in these signals requires the right lens—accumulated knowledge provided by context, economic insights, and understanding of institutions.

The Investment Company Fact Book is one very visible result of this process and its many elements...

Read more…

TOPICS: Financial MarketsFund RegulationInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder

Invest in Your Future Through an IRA

By Christina Kilroy

March 13, 2018

Nearly 44 million US households invest and save for their future through individual retirement accounts (IRAs). If your household isn’t one, now is a great opportunity to join them. And if you are already saving in an IRA, there are some advantages that you may not be aware of—and that are worth knowing about as Tax Day approaches...

Read more…

TOPICS: Investment EducationMutual FundRetirement ResearchSavingsShareholderTaxes

Fund Investors Will “Run”? Sorry, Charlie Brown

By Sean Collins and Sarah Holden

March 7, 2018

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

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

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

Read more…

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

Pointing Fingers at Index Funds Won’t Explain Market Volatility

By Shelly Antoniewicz

February 14, 2018

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

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

The short answer to both questions is no.

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

Read more…

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

Education, Outreach, Advocacy: A Big 2017 for IDC and Fund Independent Directors

By Amy B. R. Lancellotta

February 8, 2018

The following appeared as the “Letter from the Managing Director” in IDC’s 2017 Annual Review.

If there has been a single constant across the 13-year history of the Independent Directors Council (IDC), it’s the stability of our four-part mission...

Read more…

TOPICS: Fund GovernanceFund RegulationIDCMutual Fund

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.

Read more…

TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityMutual FundSavings

States Are Abusing Abandoned-Property Funds to Plug Budget Shortfalls

By Tamara K. Salmon

January 11, 2018

Imagine finding out that your investment account has been turned over to your state because it was considered “abandoned.” Imagine, too, that after the account was turned over to the state, the account received a capital gains distribution. As a result, you are liable for paying the taxes on that distribution—and can be assessed monetary penalties for not paying the taxes in a timely fashion.

Read more…

TOPICS: Fund RegulationGovernment AffairsMutual FundRetirement PolicySavingsShareholderTaxes

Independent Directors’ Stringent Oversight Contributes to Decline in Fund Fees

By Amy B. R. Lancellotta

January 9, 2018

The following ICI Viewpoints is a letter to the New York Times by Amy B. R. Lancellotta, managing director of the Independent Directors Council, in response to an article published on December 30, 2017.

Read more…

TOPICS: Fund GovernanceFund RegulationMutual FundShareholder

More People Are Building Nest Eggs with Their IRAs

By Sarah Holden

December 20, 2017

Individual retirement account (IRA) owners are good stewards of their money. They take a thoughtful approach to preparing for retirement by taking advantage of the dual role of IRAs and by researching important investment decisions, according to recent research from ICI. These are among the findings from “The Role of IRAs in US Households’ Saving for Retirement, 2017,” which details ICI’s research on IRA-owning households.

Read more…

TOPICS: 401(k)Fund RegulationInvestor ResearchMutual FundRetirement Research

Congress Must Spike “FIFO” for All Investors

By Paul Schott Stevens

December 8, 2017

As the House and Senate reconcile their differing versions of tax reform, one provision from the Senate’s bill should be deleted immediately. Tax reform must not impose an accounting system known as “first-in, first-out” (FIFO) that would deprive America’s investors of their long-standing ability to manage their finances for the greatest tax efficiency.

Read more…

TOPICS: Fund RegulationGovernment AffairsMutual FundRetirement PolicyTaxesTrading

A Way Forward on Modernizing Fund Director Responsibilities

By Amy B. R. Lancellotta

November 14, 2017

In recent years, the workload for boards of US regulated funds has grown heavier and more complex—owing in part to the fund industry’s growth and evolution, but due largely to a raft of new responsibilities established in Securities and Exchange Commission (SEC) rulemakings and other initiatives.

Read more…

TOPICS: Fund GovernanceFund RegulationMutual Fund

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

Let’s Make Disclosure Reform Serve Shareholders

By Dorothy Donohue

October 25, 2017

The October 12 meeting of the Investor Advisory Committee (IAC)—a group established by the Dodd-Frank Act to advise the Securities and Exchange Commission (SEC) on regulatory priorities and other issues—has breathed new life into a long-running debate over how US-registered funds can best provide essential information to their shareholders.

Read more…

TOPICS: Financial MarketsFund RegulationInvestor ResearchMutual FundShareholder

Autumn Air, Playoff Baseball, and…National Retirement Security Week

By Christina Kilroy

October 17, 2017

The baseball postseason is well underway and the air has finally turned crisp. Perhaps that’s why—as we’re marking National Retirement Security Week—our thoughts have turned to the words of Yogi Berra, the great New York Yankees catcher. He was credited with so many pithy, wise, and witty sayings that, in classic Berra style, he remarked, “I really didn't say everything I said.”

Read more…

TOPICS: 401(k)Investment EducationMutual FundSavingsShareholderTaxes

Applying Evidence to Theories on Regulated Funds

By Sean Collins

October 12, 2017

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

Read more…

TOPICS: Bond FundEquity InvestingFinancial MarketsFinancial StabilityFund RegulationMutual FundTreasury

In Reality, Data Tell a Different Story of Old Age in America

By Sarah Holden

October 10, 2017

 “The New Reality of Old Age in America” (September 30) portrays economic security in retirement by pairing anecdotes about workers who have fared poorly with selected statistics. Comprehensive data on how our system is working overall tell a far different story: America’s retirement system enables most of today’s retirees to maintain their standards of living.

 

Read more…

TOPICS: 401(k)Investor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder

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.

Read more…

TOPICS: Bond FundEuropeFinancial MarketsFinancial StabilityFixed IncomeFund RegulationGlobalInternationalMutual FundPolicy Research

Practical Use of RPR: Solving Oversight Issues in the Retirement Market

By John Randall

August 14, 2017

In this post, the second in a series on how to enchance operational efficiency using existing tools and practices, we look at a real-life example of Retirement Plan Reporting (RPR) in use by brokerage firm Edward Jones.

Read more…

TOPICS: Mutual FundOperations and Technology

DOL Fiduciary Rule Review Is Opportunity for SEC

By Paul Schott Stevens

August 8, 2017

The following ICI Viewpoints is an op-ed by Paul Schott Stevens that was published in InvestmentNews on August 7, 2017.

Securities and Exchange Commission (SEC) Chairman Jay Clayton deserves credit for his decisive action inviting public feedback on the standards of conduct for financial advisers to retail investors. He now has a critical window of opportunity to press forward and work with the Department of Labor (DOL) to establish a consistent best-interest standard of conduct that applies uniformly across retirement and non-retirement accounts, while preserving investor choice. 

Read more…

TOPICS: Fund RegulationGovernment AffairsMutual FundRetirement Policy

Inside SID: It’s All About the Rules

By John Randall

July 12, 2017

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

Read more…

TOPICS: Mutual FundOperations and Technology

Americans Trust in Their 401(k) Plans

By Sarah Holden

July 7, 2017

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

Read more…

TOPICS: 401(k)Fund RegulationInvestor ResearchMutual FundRetirement 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.

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...

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TOPICS: Exchange-Traded FundsFund GovernanceFund RegulationIndex FundMutual FundShareholder

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.

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TOPICS: EventsFund RegulationGMMInternationalMutual Fund

Geopolitics and Global Business: What the Future Holds

By Jeanne C. Arnold

May 31, 2017

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

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TOPICS: GMMICI GlobalMutual Fund

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

By Christina Kilroy

May 26, 2017

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

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TOPICS: Investment EducationInvestor ResearchMutual FundSavings

Top Investment Strategists Sound Optimistic Notes amid Headwinds

By Rob Elson

May 25, 2017

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

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TOPICS: EventsExchange-Traded FundsFinancial MarketsGMMInternationalMutual Fund

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.

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

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

By Morris Mitler and Sean Collins

May 23, 2017

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

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

Solving for Data Transparency in the Retirement World

By John Randall

May 19, 2017

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

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

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TOPICS: Mutual FundOperations and Technology

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.

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TOPICS: EventsFinancial MarketsFinancial StabilityFund RegulationGMMMoney Market FundsMutual Fund

Retired General Stanley McChrystal: Service, Connection, and Flexibility

By Todd Bernhardt

May 3, 2017

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

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TOPICS: GMMInternationalMutual Fund

2017 Investment Company Fact Book: Letter from the Chief Economist

By Brian Reid

April 27, 2017

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

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TOPICS: Financial MarketsFund RegulationGovernment AffairsInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchShareholder

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

By Peter J. Brady

April 6, 2017

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

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TOPICS: 401(k)Investor ResearchMutual FundRetirement PolicyRetirement ResearchSavings

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

By Christina Kilroy

March 31, 2017

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

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TOPICS: 401(k)Investment EducationMutual FundSavings

Exemptions from Investor Protections Put California Savers at Risk

By Paul Schott Stevens

March 22, 2017

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

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TOPICS: 401(k)Investor ResearchMutual FundRetirement PolicyRetirement ResearchSavingsShareholder

ICI Study: 55 Million US Households Own Mutual Funds

By Sarah Holden

February 24, 2017

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

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TOPICS: 401(k)Investor ResearchMutual FundRetirement ResearchSavings

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?

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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.

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TOPICS: Bond FundBondsExchange-Traded FundsFinancial StabilityFund RegulationMutual FundPolicy Research

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.

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TOPICS: Fund GovernanceFund RegulationMutual Fund

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

By Paul Schott Stevens

January 10, 2017

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

Dear Editor:

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

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TOPICS: Investor ResearchMutual FundRetirement PolicyRetirement ResearchSavingsShareholder

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.

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TOPICS: Bond FundEquity InvestingExchange-Traded FundsFinancial MarketsFund RegulationMutual FundTrading

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.

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TOPICS: Bond FundBondsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeFund RegulationInterest RateMutual FundTreasury

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.

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TOPICS: Bond FundEquity InvestingFund RegulationInvestor ResearchMutual FundShareholder

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.

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TOPICS: Financial MarketsFund RegulationMoney Market FundsMutual FundOperations and Technology

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.

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TOPICS: Financial MarketsFund RegulationMoney Market FundsMutual FundOperations and Technology

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.

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TOPICS: Financial MarketsFund RegulationMoney Market FundsMutual FundOperations and Technology

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

By Ahmed Elghazaly

September 6, 2016

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

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TOPICS: Financial MarketsMutual FundOperations and TechnologyTrading

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?

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TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFund RegulationMutual Fund

Secure Choice Is Risky for Workers and for the State

By Paul Schott Stevens

August 17, 2016

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

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TOPICS: Government AffairsMutual FundRetirement PolicySavings

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.

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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.

 

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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.

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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.

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TOPICS: Bond FundEuropeFinancial MarketsFinancial StabilityFund RegulationICI GlobalInternationalMutual Fund

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).

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TOPICS: 401(k)Fund RegulationGovernment AffairsMutual FundRetirement Policy

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.

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TOPICS: Fund GovernanceFund RegulationMutual Fund

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.

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TOPICS: EuropeFinancial MarketsFund RegulationICI GlobalInternationalMutual FundTaxes

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.

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TOPICS: EventsFund RegulationGMMMutual Fund

Conducting Business in a Rapidly Changing World

By Jeanne Arnold

June 1, 2016

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

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TOPICS: EuropeGMMInternationalMutual FundTrading

A Changing Landscape for the Fund Industry—and Fund Investors

By Rob Elson

May 27, 2016

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

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TOPICS: EventsFederal ReserveFinancial MarketsGMMInterest RateMutual Fund

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.

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TOPICS: EventsFinancial MarketsFund RegulationGMMMutual Fund

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).

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TOPICS: CybersecurityEventsExchange-Traded FundsFinancial MarketsFinancial StabilityFund RegulationGMMInternationalMutual FundShareholder

GMM Policy Forum: Michael Bloomberg and the Focus on Value

By Todd Bernhardt

May 18, 2016

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

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TOPICS: EventsFinancial MarketsGMMMutual FundShareholder

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.

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TOPICS: Financial MarketsFund RegulationInvestor ResearchMutual FundShareholder

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.

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TOPICS: Financial MarketsFund RegulationInvestor ResearchMutual FundShareholder

Factors Contributing to the Decline of Expense Ratios in 2015

By Sean Collins and James Duvall

March 31, 2016

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

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TOPICS: Bond FundMutual 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.

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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.

Read more…

TOPICS: Bond FundBondsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeInterest RateMutual Fund

Three Reasons Why You Should Consider an IRA

By Sarah Holden

March 8, 2016

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

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TOPICS: Investment EducationMutual FundSavingsTaxes

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.

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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?

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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.

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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.

 

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TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationInternationalMutual Fund

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

By Chris Plantier

February 12, 2016

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

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TOPICS: Bond FundEuropeFinancial MarketsICI GlobalInternationalMutual Fund

All Pain and No Gain for Fund Investors

By Paul Schott Stevens

February 5, 2016

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

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TOPICS: Financial MarketsMutual FundOperations and TechnologyShareholderTaxesTrading

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. 

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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.

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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.

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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.

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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.

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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.

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TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityInterest RateMutual FundTrading

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?

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TOPICS: Bond FundEquity InvestingFund GovernanceFund RegulationInvestment EducationMutual FundOperations and TechnologyTrading

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.

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TOPICS: 401(k)Fund RegulationGovernment AffairsMutual FundRetirement Policy

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.

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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.

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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.

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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.

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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)

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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.

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TOPICS: Federal ReserveFinancial StabilityFund GovernanceFund RegulationMutual FundShareholderTreasury

Facing the Future: A Conversation with Former Chairmen

By Candice Gullett

June 11, 2015

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

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TOPICS: EventsGMMMutual Fund

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.”

 

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TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundPolicy Research

How Millennials Are Shaping the Evolution of Investment Advice

By Christina Kilroy

June 2, 2015

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

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TOPICS: Equity InvestingEventsGMMInvestment EducationMutual Fund

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.

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TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundPolicy Research

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.

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TOPICS: CybersecurityFund RegulationGMMICI GlobalMutual FundSavings

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.”

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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.

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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.

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TOPICS: 401(k)Federal ReserveFinancial MarketsFinancial StabilityFund RegulationMutual FundRetirement PolicySavingsShareholderTradingTreasury

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).

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TOPICS: 401(k)EventsFund RegulationGMMMutual FundShareholder

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).

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TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationICI GlobalInternationalMutual FundTreasury

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.

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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.

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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.

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TOPICS: Bond FundFederal ReserveFinancial MarketsFinancial StabilityInterest RateMutual FundTrading

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.

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TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund

Getting the Numbers Right on Investment Advice for Retirement Savers

By Brian Reid

February 26, 2015

As the Wall Street Journal noted this morning, ICI has deep concerns about the data used in a White House memorandum to support the Department of Labor’s push for tighter standards for financial advisers who help investors in employer plans—such as 401(k)s—and individual retirement accounts (IRAs).

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TOPICS: Government AffairsMutual FundRetirement PolicyRetirement Research

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.

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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.

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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.

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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.”

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TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund

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.

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TOPICS: EuropeFinancial StabilityFund RegulationICI GlobalInternationalMutual FundTreasury

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.

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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.

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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.

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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.

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TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundTreasury

Statement of the Investment Company Institute at Senate Finance Committee Hearing on “Retirement Savings 2.0: Updating Savings Policy for the Modern Economy”

By Brian Reid

September 16, 2014

This statement was given on behalf of ICI by Brian Reid, chief economist, at the Senate Finance Committee’s hearing on “Retirement Savings 2.0: Updating Savings Policy for the Modern Economy.” For more information, see ICI’s full written testimony.

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TOPICS: 401(k)Government AffairsInvestor ResearchMutual FundRetirement PolicyRetirement ResearchSavingsTaxes

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.

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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.”

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TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundTreasury

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.

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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.

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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.

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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.

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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.

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TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury

Some Facts About Roth IRAs and the Investors Who Use Them

By Todd Bernhardt

July 17, 2014

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

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TOPICS: Bond FundEquity InvestingFixed IncomeInvestment EducationInvestor ResearchMutual FundRetirement ResearchSavings

Industry Leaders Address Evolving Industry Challenges and Opportunities

By Miriam Bridges

June 9, 2014

In conversations exploring outcome-oriented investing, the globalization of the fund industry, and the next generation of retirement plans, industry leaders offered their perspectives on serving investors in an evolving world during several insightful sessions at ICI’s annual General Membership Meeting, held in Washington May 20–22.

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TOPICS: 401(k)EventsGMMInternationalMutual FundRetirement PolicySavingsShareholder

Adapting to the Rapidly Evolving Cybersecurity Environment

By Todd Bernhardt

June 6, 2014

Because external hackers typically try to “look like an insider” when attempting to penetrate IT systems, “every cyberattack is likely an ‘internal’ attack,” according to Mark Clancy, managing director of technology risk management at the Depository Trust & Clearing Corporation (DTCC).

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TOPICS: CybersecurityEventsGMMMutual FundOperations and Technology

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.

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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.

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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.

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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.

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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.”

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TOPICS: EventsFederal ReserveFinancial MarketsFinancial StabilityFund GovernanceFund RegulationGMMGovernment AffairsMoney Market FundsMutual FundOperations and TechnologyShareholderTradingTreasury

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.

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TOPICS: 401(k)EventsFinancial MarketsFund RegulationGMMInternationalMutual Fund

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).

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TOPICS: 401(k)BondsEventsFinancial MarketsFund RegulationGMMInternationalInvestment EducationMutual FundRetirement PolicySavingsShareholderTreasury

“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.

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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.

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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.

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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.

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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.

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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.”

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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.

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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).

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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.

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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.

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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.

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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.

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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.

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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.

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TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundTreasury

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.

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TOPICS: Fund GovernanceFund RegulationMutual FundOperations and Technology

America’s Retirement System Is Strong

By Sarah Holden

December 18, 2013

One year ago, ICI released its landmark study, The Success of the U.S. Retirement System, a compilation of research from a wide range of sources, which found that the country’s retirement system is fostering economic security in retirement for Americans across all income levels.

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TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes

ICI’s Guide to Avoiding a Common 401(k) Tax Trap

By Mike McNamee

December 9, 2013

A tax trap for retirement savings is catching many smart people unaware. If allowed to go unchecked, it could harm the retirement savings of millions of Americans. A columnist for the Washington Post was just the latest in a long list of victims. 

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TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes

Yes, DC Follies Hurt Retirement Savers—But Let’s Not Overstate

By Brian Reid

October 10, 2013

“Debt ceiling follies” certainly do put retirement savers and their assets at risk. On that, ICI agrees with a recent Washington Post blog.

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TOPICS: 401(k)Financial MarketsMutual FundRetirement ResearchSavings

Revenue Estimates of Restricting Tax Deferral: It Ain’t Necessarily So

By Peter Brady

September 20, 2013

Fifth in a series of posts about retirement plans and the policy proposals surrounding them.

In previous Viewpoints posts, I explained that retirement contributions are neither tax deductions nor tax exclusions, but rather are tax deferrals. I also explained why, in my opinion, the two most prominent proposals to restrict qualified deferred compensation are flawed (post three and post four).

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TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes

Tax Reforms Should Not Favor DB Plans over DC Plans

By Peter Brady

September 19, 2013

Fourth in a series of posts about retirement plans and the policy proposals surrounding them.

In The Tax Benefits and Revenue Costs of Tax Deferral and in two previous Viewpoints posts (post one and post two), I explained the benefits that workers get from deferring tax on compensation set aside for retirement.

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TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes

A ‘Modest’ Proposal That Isn’t: Limiting the Up-Front Benefits of Retirement Contributions

By Peter Brady

September 18, 2013

Third in a series of posts about retirement plans and the policy proposals surrounding them.

In two previous Viewpoints posts (post one and post two), I explained the benefits that workers get from deferring tax on compensation set aside for retirement. 

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TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes

Marginal Tax Rates and the Benefits of Tax Deferral

By Peter Brady

September 17, 2013

Second in a series of posts about retirement plans and the policy proposals surrounding them.

In a previous Viewpoints post, I discussed the difference between tax deferral—the tax treatment applied to retirement savings—and tax deductions and exclusions, such as the mortgage interest deduction or the exclusion of employer-paid health insurance premiums from income. The difference is often overlooked or misunderstood, leading to inaccurate analysis and harmful policy proposals.

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TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes

Retirement Plan Contributions Are Tax-Deferred—Not Tax-Free

By Peter Brady

September 16, 2013

First in a series of posts about retirement plans and the policy proposals surrounding them.

In today’s fiscal and political climate, taxes are never far from politicians’ minds. Whether to achieve comprehensive tax reform or to raise revenue to meet budget deficits, members of Congress are now considering changes to a range of tax code provisions—including those governing retirement policy. Any comprehensive effort to address fiscal policy or tax reform should examine every option, but some discussions of retirement policy have been misguided. The tax treatment of retirement savings—tax deferral— too often has been lumped together with tax deductions (such as the deduction from income of mortgage interest expense) and tax exclusions (such as the exclusion from income of employer-provided health insurance premiums).

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TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes

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