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ARCHIVE
Growth in Bond Mutual Funds: A Question of Balance
By Sean Collins
April 8, 2021
Why have bond mutual funds grown substantially in the past several years? There are two possible explanations, with very different implications:
- One view: large inflows to bond funds have been driven by yield-seeking or return-chasing behavior. This explanation is promoted by commentators who worry that bond mutual funds could pose financial stability concerns—who fear that yield-chasing investors are likely to redeem en masse if yields on corporate bonds rise sharply and returns plummet, as might be anticipated during a financial crisis.[1]
- The alternative view: the growth in bond fund assets has been driven more by fundamental secular trends. If this view is correct, concerns about mass redemptions should be tempered.
The evidence is strong: growth in bond mutual funds has been driven by secular trends such as stock market returns, demographics, and changes in how retirement savers invest. These trends will be described in this and the next Viewpoints. In fact, as this Viewpoints demonstrates, given the strength of those trends, what’s surprising is that investors didn’t add even more money to bond funds than they did.
Chasing Yields? Really?
Mutual fund investors, including bond fund investors, do react to market returns. But if bond fund investors have been chasing yields and returns in recent years, they’ve been doing a poor job of it. As the left panel of Figure 1 shows, from January 2010 to December 2020, investors poured a total of $1.84 trillion in new cash into taxable bond mutual funds and exchange-traded funds (ETFs) with a focus on the US market (“taxable domestic bond funds”). At the same time, they redeemed a cumulative total of almost $1 trillion from mutual funds and ETFs with a mandate to invest primarily in US stocks (“domestic equity funds”).
Figure 1
Flows to Equity and Bond Funds and Returns in Their Relevant Markets
Flows to selected equity and bond mutual funds and ETFs, January 2010 to December 2020
1 Cumulative net new cash flow to taxable domestic bond mutual funds and taxable domestic bond ETFs compared with cumulative net new cash flow to domestic equity mutual funds and broad-based (domestic) equity ETFs.
2 Annualized percentages for total market returns from January 2010 to December 2020; return on stocks is total return on the S&P 500 index and return on bonds is total return on the Bloomberg Barclays US Agg Total Return Value Unhedged USD index.
Sources: Investment Company Institute and Bloomberg
However, that was clearly not because bonds outperformed. As the right panel indicates, stocks far outperformed bonds over this period: a 14.0 percent annual average return for the US stock market, compared to 4.1 percent for the taxable US bond market.
So, the evidence that inflows have been driven primarily by yield- or return-chasing retail investors is questionable. Conversely, there’s strong evidence in favor of secular trends.
Maintaining a Balanced Portfolio
The first such trend: investors trying to keep their portfolios in balance during the long bull market in US stocks.
Figure 2
The Bull Market in US Stocks Likely Prompted Investors to Rebalance Their Portfolios
Net new cash flow and change in assets of domestic equity funds, annual, billions of dollars
Note: Domestic equity funds includes domestic equity mutual funds and broad-based (domestic) equity ETFs.
Source: Investment Company Institute
From 2010 to 2020, the bull market in stocks has powered strong growth in assets for domestic equity funds. As Figure 2 shows, in nine of the past 11 years, investors redeemed significant amounts from these funds. Nevertheless, the strong appreciation of the stock market boosted these funds’ assets far in excess of investors’ redemptions. For example, in 2017, investors redeemed $80 billion from domestic equity mutual funds, but assets in these funds increased by nearly $1.5 trillion. The same patterns were repeated—indeed, were even more pronounced—in 2019 and 2020.
With assets in domestic equity funds rising so sharply, many investors no doubt chose to direct some of the outflows from domestic equity funds to bond funds in an effort to keep their portfolios balanced.[2] Figure 3 provides some evidence of this. From 2010 to 2020, there has been a striking inverse correlation between dollar outflows from domestic equity funds and inflows to taxable domestic bond funds.
Figure 3
Rebalancing Toward Fixed Income Boosted Inflows to Bond Funds
Net new cash flow, billions of dollars, annual
Note: The domestic equity funds category includes domestic equity mutual funds and broad-based (domestic) equity ETFs. The taxable domestic bond funds category includes taxable domestic bond mutual funds and taxable domestic bond ETFs.
Source: Investment Company Institute
This development may have been aided by automatic rebalancing tools. In recent years, investors have increasingly adopted strategies, such as model portfolios and robo-advisers, that periodically and automatically rebalance their portfolios to meet market conditions. When the stock market rises sharply, automatic rebalancing may shift investors’ balances in stocks toward fixed income or, in other words, from equity funds toward bond funds. In addition, households may tilt their periodic contributions to individual retirement accounts (IRAs) and 401(k) plans somewhat more toward bond funds.
Although investors cumulatively added more than $1.8 trillion in new flows to taxable domestic bond funds from January 2010 to December 2020, the US stock market was so strong that they arguably could have added even more.
Figure 4 illustrates this by comparing actual money flowing to taxable domestic bond funds to the amount investors should have added to maintain their 2009 allocations to bond and domestic equity funds—30 percent in bond funds and 70 percent in domestic equity funds. Investors poured a cumulative $1,843 billion in net new money into bond funds from 2010 through 2020 (dark blue). But to keep 30 percent of their assets in bond funds, they would have needed to add an additional $789 billion (light blue).[3]
Figure 4
To Maintain Balance, Households Should Have Purchased Even More Bond Funds
Net inflows to taxable domestic bond funds, billions of dollars, cumulative by year
Note: Taxable domestic bond funds includes taxable domestic bond mutual funds and taxable domestic bond ETFs.
Source: Investment Company Institute
This analysis suggests that portfolio rebalancing alone may be sufficient to explain the strong demand for bond funds in the past decade. But there are other fundamental secular factors driving that growth as well—factors that I’ll discuss in my next post.
Sean Collins is chief economist of ICI.
Other Posts in This Series
- Bond Mutual Fund Outflows: A Measured Investor Response to a Massive Shock
- What’s in a Name, Redux: For Bond Mutual Funds, “Corporate” Matters
- Growth in Bond Mutual Funds: See the Whole Picture
2 Redemptions from domestic equity funds may also, in part, have flowed to funds focusing on world stock and bond markets, as well as to collective investment trusts focusing on US and world stock and bond markets.
3 In 2009, the ratio of assets in taxable domestic bond funds to the total assets of taxable domestic bond funds plus domestic equity funds was 30 percent. The analysis in Figure 4 takes as given annual stock and bond market returns (as measured by the S&P 500 index and the Bloomberg Barclays US Agg Total Return Value Unhedged USD index, respectively). It also takes as given actual annual net new cash flows to taxable domestic bond funds and domestic equity funds. Given these, the analysis makes hypothetical purchases or sales of these two types of funds that are sufficient to keep the ratio of assets in bond funds at 30 percent at the end of each year. The analysis makes these hypothetical purchases or sales sequentially, taking 2009 as a starting point and proceeding year by year until 2020.
TOPICS: Bond FundBondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityFund RegulationMutual FundPolicy ResearchShareholder
Grow Your Money Skills…It’s Financial Literacy Month!
By Miriam Bridges
April 1, 2021
April showers bring…Financial Literacy Month! The ICI Education Foundation is sharing resources you can use to build your investment and savings skills. Financial literacy can lead you to greater financial well-being—and help you achieve goals such as education, home ownership, and a comfortable retirement. And those will last a lot longer than May flowers.
TOPICS: 401(k)Equity InvestingIRAInvestment EducationInvestor ResearchMutual FundRetirement PolicySavingsShareholder
Traditional and Roth IRAs Offer Choice and Flexibility
By Sarah Holden and Daniel Schrass
March 29, 2021
Whether opened with rollovers or contributions, whether traditional or Roth, individual retirement accounts (IRAs) offer investors access to a world of investing. With $12.2 trillion in assets, IRAs represent more than one-third of total US retirement market assets and more than one-tenth of all US household financial assets. In mid-2020, 47.9 million US households, or 37.3 percent, owned IRAs.
TOPICS: Equity InvestingIRARetirement ResearchSavingsShareholder
Fund Investors’ Expenses Are Falling on Both Sides of the Pond
By Shelly Antoniewicz, James Duvall, and Giles Swan
March 24, 2021
Data on UCITS ongoing charges have become more widely available to investors in recent years. Enhancements to costs and charges disclosures that UCITS and distributors make available to investors have provided them with a wealth of beneficial information, which we believe can be further enhanced.
TOPICS: Equity InvestingEuropeFund RegulationICI GlobalInternationalShareholder
Growth in Bond Mutual Funds: See the Whole Picture
By Sean Collins and Shelly Antoniewicz
March 19, 2021
In the past decade, a number of regulators and academics have discussed concerns about the growth in the assets of bond mutual funds, as well as their increasing share of the bond market, especially the corporate bond market. The concern is that bond fund investors, now playing a much larger role in the bond market, might massively redeem their fund investments during a market correction, potentially amplifying market stresses. A closer look at the data, however, reveals aspects of the growth in bond funds that should help assuage such concerns.
TOPICS: Bond FundBondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityFund RegulationMutual FundPolicy ResearchShareholder
What’s in a Name, Redux: For Bond Mutual Funds, “Corporate” Matters
By Sean Collins
March 11, 2021
Policymakers around the globe are studying the pandemic-related turmoil of March 2020 to determine what happened and why. Bond mutual funds have been one area of focus, and policymakers will be considering the data to assess whether structural reforms might be warranted. But gaps in understanding how regulated funds operate are adding to a flawed narrative about what happened last March—and are distorting analysis of the corporate and Treasury bond markets.
TOPICS: Bond FundBondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityFund RegulationMutual FundPolicy ResearchShareholder
Bond Mutual Fund Outflows: A Measured Investor Response to a Massive Shock
By Sean Collins
March 4, 2021
In recent months, we have seen many high-profile analyses arguing that bond mutual funds amplified stresses in financial markets during the start of the COVID-19 pandemic in March 2020. These analyses conclude that bond mutual funds therefore may require structural regulatory reforms. But as the information in this ICI Viewpoints and others to follow indicates, policymakers should not jump to that hasty conclusion.
TOPICS: Bond FundBondsCOVID-19Corporate BondsFinancial MarketsFinancial StabilityFund RegulationMutual FundPolicy ResearchShareholder
To Do: Check Your Savings Goals This Week!
By Miriam Bridges
February 22, 2021
This week, the Investment Company Institute (ICI) and the ICI Education Foundation (ICIEF) are joining thousands of corporations, nonprofits, government agencies, and individuals to celebrate America Saves Week. This annual campaign encourages Americans to assess their financial situations, set savings goals, and implement plans to achieve them.
TOPICS: 401(k)Equity InvestingIRAInvestment EducationInvestor ResearchMutual FundRetirement PolicySavingsShareholder
All You Need Is Love…and a Spousal IRA
By Sarah Holden
February 11, 2021
As you’re racking your brain to find that perfect Valentine’s Day gift, you might want to consider, whether for yourself or your spouse, a contribution to an individual retirement account (IRA).
Main Street Owns Wall Street
By Sarah Holden and Michael Bogdan
February 10, 2021
Stock ownership used to conjure up images of Wall Street—but today people all up and down America’s Main Streets own stocks and are counting on stock ownership to help realize their financial goals. Today, more Americans own stock than in the past—and stock ownership has become increasingly common for lower- and middle-income households.
TOPICS: Equity InvestingInvestor ResearchMutual FundRetirement PolicySavingsShareholder
Mutual Funds: Rated G—All Audiences Admitted
By Sarah Holden and Dan Schrass
February 4, 2021
Investing is subject to many misconceptions, including the notion that only older households, or only wealthy households, or only households saving for retirement own mutual funds. The reality is that households of all ages, all incomes, and with a wide range of financial goals, own mutual funds.
TOPICS: Investor ResearchMutual FundRetirement PolicySavingsShareholder
2020 Annual Report to Members: Roundtable: The Fund Industry’s Response to COVID-19
By Patrice Bergé-Vincent, Marty Burns, and Susan Olson
January 19, 2021
For the 2020 Annual Report to Members, three members of ICI’s leadership sat down to share their thoughts on how the Institute and the fund industry have navigated the COVID-19 crisis.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
2020 Annual Report to Members: A Conversation with Paul Schott Stevens
By Paul Schott Stevens
January 14, 2021
Paul Schott Stevens, ICI’s longest-serving chief executive, retired at the end of 2020. As he neared the end of his 16 years of service, he sat down with ICI staff to discuss the events of his tenure.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
2020 Annual Report to Members: A Letter to ICI’s Membership
By George C. W. Gatch
January 11, 2021
2020 will go down in history as a year that none of us can ever forget. It was a year of turmoil, fear, and reckoning. Yet for the regulated fund industry, it also proved to be a year of resilience, transition, and great hope.
Read more from ICI Chairman George C. W. Gatch’s letter that was released in ICI’s 2020 Annual Report to Members.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
Value Is in the Eye of the UCITS Holder
By Giles Swan
December 3, 2020
ICI research shows a steady decline in the cost of UCITS investing. European regulators are looking beyond just declining cost, however, by requiring UCITS managers to justify the value of these funds to investors. But how do investors assess value relative to cost, and what is the role of regulators?
TOPICS: Equity InvestingEuropeFund RegulationICI GlobalInternationalShareholder
Investing Basics: Saving for Retirement with a 401(k) Plan
By Christina Kilroy
September 9, 2020
The ICI Education Foundation’s Investing Road Trip ends at retirement, depicted with idyllic images of a park bench and a golf cart. But what if, in real life, your path doesn’t quite follow this tidy path? Even for workers who get a late start, hit some bumps, and take a few detours, saving for retirement is still possible. Here are guideposts for 401(k) saving as you journey to retirement.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: Saving for Retirement on Your Own
By Christina Kilroy
August 31, 2020
A majority of workers aged 26 to 64 were active participants in a workplace retirement plan in 2017, according to ICI’s most recent tabulation of tax data. But what if you don’t have access to a workplace retirement plan? You still have great options to save for retirement with similar advantages to the 401(k). Learn more in the latest installment of ICI Education Foundation’s investing basics series.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Congress Should Give Americans Flexibility to Keep Retirement Savings on Track
By Paul Schott Stevens
July 31, 2020
As policymakers take further steps to assist families and businesses weathering the storm, Congress can help American families get their retirement savings goals back on track by including the “Temporary Coronavirus-Related Catch-Up Contribution” proposal in the next COVID-19 relief package.
TOPICS: 401(k)Government AffairsIRAMutual FundRetirement PolicyShareholder
Investing Basics: Understanding Fees and Expenses
By Christina Kilroy
July 30, 2020
In the ICI Education Foundation’s Investing Road Trip exhibit, a toll booth illustrates the fees and expenses that are part of investing. Every vehicle on a toll road pays and some of that money helps to maintain the road, which ultimately makes for a smoother and safer trip for everybody. Likewise, every investor pays a cost to invest but receives professional management and services in return.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
IRA Investors Are Concentrated in Lower-Cost Mutual Funds
By James Duvall
July 30, 2020
Individual retirement accounts (IRAs) represent the largest share of assets in the US retirement market, with assets totaling $11.0 trillion at year-end 2019. As part of an ongoing effort to shed light on important insights into IRA investing, ICI is updating its analysis of expense ratios that investors pay on mutual funds in their IRAs.
TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder
A New Benchmark for Distribution Oversight
By Ahmed Elghazaly
July 21, 2020
On June 1, the fund industry achieved a milestone for global cooperation. In an industry-led agreement, fund distributors and fund managers of Undertakings for the Collective Investment in Transferable Securities (UCITS) and alternative investment funds (AIFs) joined together to issue a common protocol for distribution oversight.
TOPICS: EuropeFund GovernanceFund RegulationGlobalICI GlobalInternationalOperations and TechnologyShareholder
Investing Basics: Compound Returns and the Power of Reinvestment
By Christina Kilroy
June 29, 2020
Start saving early. You’ve heard it once, you’ve heard it a million times. There are a few reasons why that’s a good idea—to get in the habit, to manage risks to your investments and income, and to allow more time to contribute to your savings and let them grow. But the strongest case for starting early boils down to one phrase: compound returns.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
2020 Investment Company Fact Book: Letter from the Chief Economist
By Sean Collins
May 19, 2020
A version of this letter by ICI Chief Economist Sean Collins was released in the Institute’s 60th edition of the Investment Company Fact Book.
TOPICS: Financial MarketsFund RegulationGlobalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder
2020 Investment Company Fact Book: Letter from the President and CEO
By Paul Schott Stevens
May 13, 2020
This ICI Viewpoints is a version of a letter from ICI President and CEO Paul Schott Stevens that was released in the 60th edition of the Investment Company Fact Book.
TOPICS: Financial MarketsFund RegulationGlobalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder
Investing Basics: 529 Savings Plans
By Christina Kilroy
May 7, 2020
One thing you can expect when you’re expecting a baby is to pay a lot for diapers—you might pay about $600 by your child’s first birthday. But the cost of diapers is child’s play compared to the costs that could come later when paying for college.
To encourage people to save for these education costs, nearly every state and the District of Columbia offer 529 plans, and most offer special tax treatment for savers participating in those plans.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
For Funds' Use of Derivatives, a Promising New Regulatory Framework
By Paul Schott Stevens
April 22, 2020
In a promising new proposal on the use of derivatives, the SEC has consolidated cumbersome regulatory framework into a single, comprehensive rule that is carefully designed to protect investors.
TOPICS: Equity InvestingExchange-Traded FundsFund RegulationMoney Market FundsMutual FundShareholder
Investing Basics: Tax Benefits to Encourage Saving
By Christina Kilroy
April 14, 2020
To encourage people to save, federal and state governments offer special tax treatment for savings plans for specific goals, such as retirement and education. By increasing the benefit that savers receive in the short term, the government nudges savers to take a positive action that will provide a benefit in the long term.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: The Benefits of Mutual Funds
By Christina Kilroy
March 31, 2020
We’ve reached the halfway point in this series, and we’ve covered a lot of ground: the benefits of investing, how to think about risk, different types of investments, why diversification is important, and dollar-cost averaging. This month’s installment brings all these topics together and examines seven features of mutual funds that make them an enduringly popular investment choice.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Working to Ensure Funds Can Maintain Vital Services
By Paul Schott Stevens
March 22, 2020
Key personnel of mutual fund sponsors and service providers should be deemed “essential workers” and thus should be permitted to report to work to maintain security and services for fund investors. Two key developments over the weekend offered some hope that state governors will hear this message and provide the needed relief from their shelter-in-place orders.
TOPICS: CybersecurityFinancial MarketsShareholder
During COVID-19 Crisis, Fund Company Staff Are Essential
By Paul Schott Stevens
March 20, 2020
As governments consider extending orders to “shelter in place,” they must include staff of fund companies among the “essential” workers who qualify for an exemption. Fund company staff are very much part of the country’s critical infrastructure, and they must be able to offer their full support to shareholders during these uncertain times.
Investing Basics: Dollar-Cost Averaging
By Christina Kilroy
February 27, 2020
Emotions are the enemy of successful investing. For long-term investors, dollar-cost averaging is a smart way to take the emotion out of investing and to eliminate the difficulty and uncertainty of trying to time the market.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
ICI Continues Its Work on Disclosure Improvements
By Paul Schott Stevens
February 12, 2020
In a letter to the New York Times in response to an article published earlier this month, ICI President and CEO Paul Schott Stevens refutes claims that ICI and the Securities and Exchange Commission (SEC) are seeking to "water down" disclosure requirements....
TOPICS: Fund RegulationMutual FundShareholder
Investing Basics: Diversification
By Christina Kilroy
January 30, 2020
Eggs play a starring role in diversification’s ubiquitous analogy—one we used in the Investing Road Trip©—and for good reason. If you drop a basket holding all your eggs, you’ll be out a lot of eggs. Spreading your eggs across several baskets is a good defense against the risks of exposing all your assets to the same risk.
But perhaps we should also make the point that eggs shouldn’t be the only food in your basket. They may be high in protein, but your body needs a mix of nutrients for good health. Similarly, with investing, a better goal is to build a balanced “diet” of asset classes across industries, geographic areas, and types of securities....
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Proxy Proposals Worth Supporting
By Matt Thornton
January 29, 2020
The SEC can save millions of dollars for registered fund shareholders, while maintaining investor protections, by reforming the fund proxy system. The system, which funds use to solicit votes from their shareholders, poses significant challenges and costs to funds and their investors. A new report by the Investment Company Institute points to concrete regulatory actions that would improve the efficiency and cost-effectiveness of the fund proxy system…
TOPICS: Fund GovernanceMutual FundProxy VotingShareholder
Investing Basics: Types of Investments
By Christina Kilroy
December 23, 2019
Two of the most common investments are stocks and bonds. Chances are if you own a portfolio of investments, those two types of assets make up a significant part—or perhaps all—of it. For those who want to start investing, it’s essential to understand these common portfolio building blocks...
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: What Is Risk?
By Christina Kilroy
November 26, 2019
You invest with the hope of earning a return on your investment. That opportunity invariably involves risk, including the possibility of losing some or all of the money you invested. Understanding these risks is an essential step toward successful investing.
The second installment of the ICI Education Foundation's blog series celebrating its 30th anniversary explores different types of investing risks.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
ICYMI: A Q&A with Members of ICI's Retirement Team
November 19, 2019
For this year's 2019 Annual Report to Members, four members of ICI's retirement team sat down to discuss ICI's legislative, regulatory, research, and communications activities to advocate for well-informed public policies that help Americans prepare for retirement....
TOPICS: 401(k)Fund RegulationGovernment AffairsMutual FundRetirement PolicyRetirement ResearchShareholder
2019 Annual Report to Members: A Letter to ICI's Membership
By George C. W. Gatch and Paul Schott Stevens
November 14, 2019
What follows is an abridged version of a letter by ICI Chairman George C. W. Gatch and ICI President and CEO Paul Schott Stevens that was released in ICI’s 2019 annual report. To read their full letter, please see ICI’s 2019 Annual Report to Members....
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
Closed-End Funds: Opportunities for a True Renaissance
By Dorothy Donohue and Kenneth Fang
November 5, 2019
Closed-end funds are in vogue once again. Legislators, regulators, and fund sponsors are turning to the structure as a promising vehicle for retail investment and capital formation. And recent government actions are positive steps that can lead to a deeper pool of closed-end funds. With a few critical tweaks, this legislation and related regulatory action could stimulate further growth and better deliver on that promise....
Investing Basics: What Is Investing?
By Christina Kilroy
October 31, 2019
This month, the ICI Education Foundation celebrates 30 years of developing, delivering, and promoting investor education. As part of our yearlong celebration, we will be sharing an ICI Viewpoints post each month that explains a basic concept of investing, drawn from the ICI Education Foundation’s Investing Road Trip.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Five Key Points on 401(k) Plan Fees from ICI Research
By James Duvall and Steven Bass
October 23, 2019
Thanks to innovation and a competitive market, 401(k) mutual fund fees keep falling. ICI has a window into this information through our study of the cost of providing 401(k)s, in which we take a close look at the expenses and fees of mutual funds incurred by 401(k) plan investors, and in related research on fund fees through a collaborative research effort between ICI and BrightScope.
TOPICS: 401(k)Equity InvestingMutual FundRetirement ResearchShareholder
Happy Birthday, IRA! Congratulations on 45 Years
By Sarah Holden and Elena Barone Chism
September 12, 2019
Labor Day 2019 marked the 45th birthday of the individual retirement account (IRA). When the Employee Retirement Income Security Act was signed into law on September 2, 1974, it introduced bold steps to safeguard Americans’ employer-sponsored pensions and created the IRA.
Forty-five years later, IRAs are a significant component of US households’ retirement assets, holding $9.4 trillion in assets, or about one-third of the total US retirement market, at the end of March 2019…
TOPICS: IRAInvestor ResearchMutual FundRetirement ResearchSavingsShareholder
IRA Investors Are Concentrated in Lower-Cost Mutual Funds
By James Duvall
August 20, 2019
Individual retirement accounts (IRAs) represent the largest share of assets in the US retirement market, with assets totaling $8.7 trillion at year-end 2018. Forty-six percent of this total is held in mutual funds, with IRA mutual fund investors primarily invested in equity funds. As part of ICI’s ongoing efforts to shed light on important insights into IRA investing, ICI is updating its analysis of expense ratios that investors pay on mutual funds in their IRAs....
TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder
Mind the Gap
By Sarah Holden and Christina Kilroy
July 22, 2019
It’s a good idea to “mind the gap” if you’re traveling on the Tube in London, taking Amtrak in the United States, or riding Metro in Paris or Washington, DC. Being mindful of the space between where you are and where you’re going is important—not only when navigating public transit, but also when saving for retirement. Saving for retirement is a career-long process, with many decisions along the way....
TOPICS: 401(k)IRAInvestment EducationMutual FundRetirement ResearchSavingsShareholderTaxes
2019 Investment Company Fact Book: Letter from the Chief Economist
By Sean Collins
May 7, 2019
Globalization has hit a few speed bumps in recent years, but it hasn't slowed the globalization of the Investment Company Fact Book. Consistent with ICI’s mission to represent the interests of regulated funds and their investors worldwide, Fact Book is expanding its international presence....
TOPICS: Financial MarketsFund RegulationGlobalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder
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....
TOPICS: Investor ResearchMutual FundRetirement PolicySavingsShareholder
Common Ownership: "Puffery" in the Legal Analysis
By Mike McNamee
December 3, 2018
Proponents of the common ownership hypothesis presume that the economic debate over the competitive effects of institutional investing is settled. But a new paper from Douglas H. Ginsburg, judge on the US Circuit Court of Appeals for the District of Columbia Circuit, and Keith Klovers, a judicial clerk on that court, finds that those proponents "substantially overstate the validity and strength of the existing empirical work" on common ownership....
TOPICS: Financial MarketsFund RegulationPolicy ResearchShareholder
Growing Better with Age: The 401(k) Turns Forty
By Miriam Bridges and Christina Kilroy
November 30, 2018
This month marks the fortieth birthday of the most prevalent retirement plan available to workers today: the 401(k). It’s a milestone, to be sure, but there are no mid-life doldrums here—401(k) plans continue to grow, and currently hold $5.3 trillion in assets on behalf of more than 55 million active participants and millions of former employees and retirees.
TOPICS: 401(k)Investor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholderTarget Date Funds
Common Ownership: Ignoring the Age-Old Conflict Between Owners and Managers
By Mike McNamee
November 30, 2018
In his first public remarks as a member of the Federal Trade Commission, Commissioner Noah Joshua Phillips tackled what he called “the common ownership story”—and concluded that “this ‘economic blockbuster’ seems a little light on plot.” And like many other experts, Commissioner Phillips sees problems with both the empirical evidence and the theoretical basis for the claim of anticompetitive harm....
TOPICS: Financial MarketsFund RegulationPolicy ResearchShareholder
Common Ownership: Faulty Assumptions on Investors’ ‘Economic Interests’
By Mike McNamee
November 29, 2018
In a new paper, scholars Thomas A. Lambert and Michael E. Sykuta find that proponents of the common ownership hypothesis don’t understand—or even attempt to consider—the actual economic interests and incentives of asset managers and their fund clients....
TOPICS: Financial MarketsFund RegulationPolicy ResearchShareholder
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.
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....
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....
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.
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....
TOPICS: Investment EducationMutual FundRetirement ResearchSavingsShareholderTaxes
SEC Should Reject Complex, Costly “Pass-Through” Proxy Voting
By Paul Schott Stevens
October 2, 2018
Policymakers and regulators at the US Securities and Exchange Commission (SEC) have renewed their interest in proxy voting issues recently. Among the items under discussion at an upcoming SEC Roundtable is the idea that a fund would only be allowed to vote on portfolio company proxies after the fund asks its own shareholders how the fund should vote. In essence, this would “pass through” to fund shareholders the decision of how corporate proxies would be exercised. Even the briefest consideration demonstrates how misguided and impractical the idea is—and why it should go no further.
TOPICS: Fund GovernanceFund RegulationProxy VotingShareholder
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...
TOPICS: Fund GovernanceFund RegulationIndex FundMutual FundProxy VotingShareholder
Stock Ownership in the United States: It’s Main Street
By Sarah Holden
September 10, 2018
US household activity in the stock market has undergone a transformation over the past three decades. The old idea that investing in the stock market is just for the wealthy is vastly out of date.
In the late 1980s, less than a third of US households held stocks. Now, a majority do. This growth in stock-owning households has occurred across all income quintiles....
TOPICS: Equity InvestingInvestor ResearchRetirement PolicySavingsShareholder
“Common Ownership” Hypothesis Is Unconvincing
By Sean Collins and Susan M. Olson
August 22, 2018
Economists and legal scholars have issued pointed critiques and empirical rebuttals of the “common ownership” hypothesis—the notion that institutional investors holding small, non-controlling stakes in competing companies in concentrated industries decrease competition and raise consumer prices. Yet the issue continues to draw attention and is one of a long list of topics that the Federal Trade Commission (FTC) will include in upcoming hearings on competition and consumer protection.
In response, the Investment Company Institute (ICI) has submitted a comment letter to the FTC to provide a factual baseline on key elements of the discussion to help dispel misrepresentations underlying the common ownership hypothesis.
TOPICS: Fund RegulationPolicy ResearchShareholder
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....
TOPICS: 401(k)Bond FundEquity InvestingIRAMutual FundRetirement ResearchShareholder
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....
TOPICS: EventsGMMMutual FundOperations and TechnologyShareholder
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...
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...
TOPICS: Investment EducationMutual FundRetirement ResearchSavingsShareholderTaxes
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.
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.
TOPICS: Fund GovernanceFund RegulationMutual FundShareholder
2017 Annual Report to Members: A Message from the Chairman
By William F. “Ted” Truscott
November 13, 2017
This letter by ICI Chairman Ted Truscott was released in our 2017 Annual Report to Members.
Every day, I’m reminded that each of us in the fund industry is driven to deliver ever-greater value for our fees and keep improving service to fund shareholders. Investors are demanding more from every asset manager—and the resulting competition drives us to innovate, find new efficiencies, and offer even better solutions for investors’ needs.
TOPICS: Financial MarketsFinancial StabilityFund RegulationGlobalGovernment AffairsICI GlobalIndex FundInternationalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyShareholder
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.
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.”
TOPICS: 401(k)Investment EducationMutual FundSavingsShareholderTaxes
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.
TOPICS: 401(k)Investor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder
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...
TOPICS: Exchange-Traded FundsFund GovernanceFund RegulationIndex FundMutual FundShareholder
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.
TOPICS: Financial MarketsFund RegulationGovernment AffairsInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchShareholder
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.
TOPICS: 401(k)Investor ResearchMutual FundRetirement PolicyRetirement ResearchSavingsShareholder
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.
TOPICS: Investor ResearchMutual FundRetirement PolicyRetirement ResearchSavingsShareholder
Investor Protection Priorities for the New Year
By David Blass
December 12, 2016
The following ICI Viewpoints is adapted from a presentation that ICI General Counsel David Blass gave to the Investor Advisory Committee of the US Securities and Exchange Commission on December 8, 2016. Visit this page to read the entire presentation.
If I were to poll ICI members about next year’s priorities, I am sure we would receive consistent feedback: give us an opportunity to implement all the rules that have been imposed on us. New rules from the Securities and Exchange Commission (SEC) covering data reporting, swing pricing, and liquidity risk management will require huge expenditures and years of work to implement fully. And they were adopted in the aftermath of two rounds of money market fund reform, as well as many other rules applicable to the fund industry adopted by other regulatory agencies.
TOPICS: Financial MarketsFinancial StabilityFund RegulationOperations and TechnologyShareholder
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.
TOPICS: Bond FundEquity InvestingFund RegulationInvestor ResearchMutual FundShareholder
Ops Leaders Extol the Transformational Power of Data and Analytics
By Todd Bernhardt
May 26, 2016
The evolution of fund companies’ ability to gather and analyze data is creating a revolution in the way that those companies serve their customers, said panelists at “Big Data Initiatives and the Power of the Cloud,” the session that kicked off ICI’s Operations and Technology Conference on May 19 in Washington, DC.
TOPICS: CybersecurityEventsGMMOperations and TechnologyShareholder
SEC Chair White Expects Continued ‘Bright Spotlight’ on Asset Management
By Rachel McTague
May 20, 2016
The U.S. Securities and Exchange Commission (SEC) is contemplating several new initiatives governing registered funds, in addition to adopting rules this year on reporting modernization, liquidity management, and the use of derivatives, SEC Chair Mary Jo White announced at the opening session on the final day of ICI’s annual General Membership Meeting (GMM).
TOPICS: CybersecurityEventsExchange-Traded FundsFinancial MarketsFinancial StabilityFund RegulationGMMInternationalMutual FundShareholder
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.
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.
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.
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.
TOPICS: Bond FundMutual FundShareholder
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.
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.
TOPICS: Financial StabilityFund GovernanceFund RegulationInternationalMutual FundOperations and TechnologyShareholderTrading
How the SEC’s Six-Bucket Approach Could Provide a False Picture of Liquidity
By Brian Reid
January 14, 2016
As I explained in a previous post, I filed a letter on January 13 with the U.S. Securities and Exchange Commission (SEC) in response to its liquidity risk management proposal and to Liquidity and Flows of U.S. Mutual Funds, a study by the Commission’s Division of Economic and Risk Analysis (DERA). My letter was one of four components of ICI’s multipart response to the SEC proposal.
TOPICS: Financial StabilityFund GovernanceFund RegulationInternationalMutual FundOperations and TechnologyShareholderTrading
The SEC’s Liquidity Proposal: Good Goals, Unintended Consequences
By Brian Reid
January 13, 2016
On January 13, I filed a letter with the U.S. Securities and Exchange Commission (SEC), in response to the SEC’s liquidity risk management proposal and to Liquidity and Flows of U.S. Mutual Funds, a study by the SEC’s Division of Economic and Risk Analysis (DERA). My letter was one of four components of ICI’s multipart response to the SEC proposal.
TOPICS: Financial StabilityFund GovernanceFund RegulationInternationalMutual FundOperations and TechnologyShareholderTrading
How SIFI Designation Could Undermine Fund Governance: Parsing the Fed’s Proposal for GE Capital
By Paul Schott Stevens
June 16, 2015
Fund boards and independent directors have a long history of serving shareholder interests, yet today they face an alarming prospect that could threaten their ability to continue doing so.
TOPICS: Federal ReserveFinancial StabilityFund GovernanceFund RegulationMutual FundShareholderTreasury
SEC Chair White Affirms Agency Has Tools to Address Risks in Industry
By Rachel McTague
May 8, 2015
The U.S. Securities and Exchange Commission (SEC) has the tools it needs to address systemic risks to the extent they exist in the asset management industry, said SEC Chair Mary Jo White at the opening session on the final day of ICI’s annual General Membership Meeting (GMM). White also announced that David Grim—who had been serving as acting director of the SEC’s Division of Investment Management—has just been named director of the division. White said she is thrilled that Grim, a 20-year veteran of the SEC in the investment management area, is taking the reins at a time when the Commission is moving forward to implement proactive regulations for the industry.
TOPICS: BondsCybersecurityEuropeEventsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFund RegulationGMMGovernment AffairsInterest RateInternationalMutual FundShareholderTreasury
Nooyi’s Purpose, Pepsi’s Performance
By Rob Elson
May 7, 2015
We all have a moral compass. But for PepsiCo’s Indra Nooyi, “the moral compass of our lives must also be the moral compass of our livelihoods.”
Stirring words from the company’s chair and chief executive—and just a few of the many she delivered in a lively Q&A with Vanguard Chairman and CEO Bill McNabb at ICI’s 57th General Membership Meeting, which began yesterday in Washington, DC.
TOPICS: EventsGMMInternationalShareholder
Opinion: The Tax Threat to Your Mutual Fund
By Mike McNamee
May 7, 2015
Vanguard Chairman and CEO Bill McNabb sent “an open letter to all mutual fund investors” in the opinion pages of Thursday’s Wall Street Journal. His message: fund investors face a clear threat of higher costs, weaker returns, and a bailout tax to salvage other failing financial institutions—all if regulators get their way in imposing new rules on funds or their managers.
TOPICS: 401(k)Federal ReserveFinancial MarketsFinancial StabilityFund RegulationMutual FundRetirement PolicySavingsShareholderTradingTreasury
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).
TOPICS: 401(k)EventsFund RegulationGMMMutual FundShareholder
On Fiduciary Rule, New York Times Relies on Fatally Flawed Research
By Paul Schott Stevens
April 8, 2015
Today I submitted the following letter to the editor of the New York Times:
TOPICS: 401(k)Fund RegulationInvestment EducationRetirement PolicySavingsShareholder
Designation’s Vast Reach into Investor Portfolios
By Paul Schott Stevens
March 24, 2015
On Wednesday, March 25, I’ll testify before the Senate Committee on Banking, Housing, and Urban Affairs about the Financial Stability Oversight Council’s process for designating nonbank firms as “systemically important financial institutions,” or SIFIs.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundShareholderTreasury
Living Wills and an Orderly Resolution Mechanism? A Poor Fit for Mutual Funds and Their Managers
By Frances Stadler and Rachel Graham
August 12, 2014
During the global financial crisis, the distress or disorderly failure of some large, complex, highly leveraged financial institutions (banks, insurance companies, and investment banks) required direct intervention by governments—including a number of bailouts—to stem the damage and prevent it from spreading. One focus of postcrisis reform efforts has been to ensure that regulators are better equipped to “resolve” a failing institution in a way that minimizes risks to the broader financial system, as well as costs to taxpayers. The new tools provided under the Dodd-Frank Act include requirements for the largest bank holding companies and nonbank systemically important financial institutions (SIFIs) to prepare comprehensive resolution plans in advance (known as “living wills”), and creation of a new “orderly resolution” mechanism for financial institutions whose default could threaten financial stability.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundShareholderTreasury
Across the Universe: Seeing the Whole Picture in the Systemic Risk Debate
By Paul Schott Stevens
July 30, 2014
Astrophysicists have discovered that they can’t account for the composition and behavior of the universe without including “dark matter”—matter that can’t be observed directly.
TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundShareholderTreasury
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.
TOPICS: 401(k)EventsGMMInternationalMutual FundRetirement PolicySavingsShareholder
Now Off the Hill, Senator Snowe Still Brimming with Ideas, Advice
By Rob Elson
June 5, 2014
U.S. policy is ripe for reform in a number of key areas, but changes to ease the polarized political environment must come first, former U.S. senator Olympia Snowe (R-ME) told the crowd during the final session of ICI’s 56th annual General Membership Meeting (GMM), held May 20–22 in Washington, DC.
TOPICS: CybersecurityEventsFederal ReserveFinancial MarketsFinancial StabilityFund RegulationGMMGovernment AffairsMutual FundRetirement PolicyShareholderTreasury
Industry Leaders Reflect on Serving Investors in an Evolving World
By Christina Kilroy
June 4, 2014
Speaking on the Leadership Panel held Wednesday, May 21, at ICI’s General Membership Meeting (GMM), fund industry leaders agreed that challenges as well as opportunities abound for their businesses in today’s complex world.
TOPICS: 401(k)EventsFederal ReserveFinancial MarketsFinancial StabilityFund GovernanceFund RegulationGMMGovernment AffairsInvestment EducationMutual FundRetirement PolicyShareholder
SEC Chair White Stresses Need for FSOC to Consult Sources for Necessary Expertise
By Rachel McTague
May 22, 2014
Securities and Exchange Commission (SEC) Chair Mary Jo White today called for the U.S. Financial Stability Oversight Council (FSOC) to use outside expertise to the degree necessary in its process of designating systemically important financial institutions (SIFIs). She asserted that it is “enormously important for FSOC, before it makes any decision of any kind, to make sure it has the necessary expertise on any of those issues.”
TOPICS: EventsFederal ReserveFinancial MarketsFinancial StabilityFund GovernanceFund RegulationGMMGovernment AffairsMoney Market FundsMutual FundOperations and TechnologyShareholderTradingTreasury
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).
TOPICS: 401(k)BondsEventsFinancial MarketsFund RegulationGMMInternationalInvestment EducationMutual FundRetirement PolicySavingsShareholderTreasury
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.
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.
TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes
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).
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.
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.
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.
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).
TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes
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