vol. xxiv, no. 28 / july 15, 2013 fund action is dominated by vanguard group, blackrock’s ishares...

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VOL. XXIV, NO. 28 / July 15, 2013

Business Strategy and Innovation for Mutual Fund Industry Leaders

The weekly issue from Fund Industry IntelligenceFund Action

www.fundindustryintelligence.com

Product Development | 3 Distribution & Marketing | 5 Regulatory Watch | 6

ALSO IN THIS ISSUE:

Guinness Atkinson Eyes RIAsGuinness Atkinson is shifting its focus to registered investment advisors for distribution growth.

Story on page 5

The View From The Top

American Century Focuses On Education, Costs In DC Space American Century Investments is focusing on investor

education and providing advisors and plan sponsors with

more flexibility and the tools to facilitate better plan design and

execution. Part of this process involves providing a lower-cost

option for employer-sponsored retirement plans, including

its $8 billion One Choice Portfolios,

which earned the top grade for the fourth

consecutive year in BrightScope and

Target Date Analytics’ annual ranking of

target-date funds. The fund firm also plans

to increase its partnerships with its advisors,

consultants and plan sponsors, according

to Rick Luchinsky, senior v.p. and head

of DCIO, who discussed American Century’s strategy with

Reporter Dervedia Thomas.

Bogle Pressures SEC On Fund Firm Fiduciary RuleVanguard Group founder John Bogle is pushing to change regulations so that mutual fund management firms become subject to a fiduciary standard of conduct. Bogle believes now is the time to push for this because the Securities and Exchange Commission faces a decision soon on whether to clamp a fiduciary rule on the brokerage firms that sell most fund shares. After the SEC passes a fiduciary standard for fund firms, Bogle wants Congress to follow with statutory action to

(continued on page 10)


Advisors Tap More ETF ProvidersFinancial advisors are turning to a wider variety of exchange-traded fund providers to gain their exposure to ETFs. According to figures from Cogent Research, intermediaries are turning to more providers this year than they did in 2012.

The trend is mostly being seen due to the increased adoption of the registered investment advisor channel. According to Cogent’s figures RIAs now have 3.9 relationships with ETF shops, up from 3.2 in 2012.

The trend bodes well for small and medium-sized ETF providers. The ETF space is dominated by the so-called “big three” providers: Vanguard Group, BlackRock’s iShares and State Street Global Advisors’ SPDR ETFs. According to figures from Morningstar, the trio controls 82.75% of all ETF assets under management, with iShares leading the way with 39.96%. With intermediaries now looking to use a wider variety of providers to gain exposure, there could be an opportunity for others to get on the board.

“It’s a natural result of increased adoption,” Ben Johnson, head of ETF research at


iShares: 39.96%

Vanguard: 19.3%

SPDR: 22.89%

Other: 17.85%

Source: Morningstar

Battling The Big ThreeThree Firms Dominate ETF Market Share

Rick Luchinsky

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Fund Action The weekly issue from Fund Industry Intelligence www.fundindustryintelligence.com

2 © Institutional Investor, LLC 2013 VOL. XXIV, NO. 28 / July 15, 2013

IN THIS ISSUE

PRODUCT DEVELOPMENT

3 | Hancock Carries On Fee Cuts 3 | Eaton Vance Does The Shuffle 4 | ING Renames Offering 4 | Invesco Plays On Vol 4 | Fidelity Looks To Soft Close 4 | Federated Switches

Bond Managers

DISTRIBUTION & MARKETING

5 | Guinness Atkinson On RIA Hunt 5 | Nuveen Provide New Tool

For Advisors

REGULATORY WATCH

6 | Excessive Fee Bid Loses 6 | ICI Aware Of CFTC Rule 6 | Mutual Funds Lament

Hedge Fund Rule 7 | Light Touch For Fiduciary Rule

EDITOR’S NOTE

The big three providers continue to dominate the exchange-traded fund space, but things appear to be changing. Advisors are having relationships with more ETF firms in their quest to find the most innovative offerings at the lowest cost. The shift, albeit a slow one, is offering smaller ETF providers a chance to expand their market share in a space that is dominated by Vanguard Group, BlackRock’s iShares and State Street Global Advisors.

John Bogle wants a clear fiduciary rule for fund management firms, and he wants it now. As the Securities and Exchange Commission contemplates a beefed up fiduciary standard for brokers, Bogle wants to strike while the iron is hot and have the SEC spell out that fund firms must put fund shareholders first. His contention is that, since most fund firms are public companies, their duty is to make the most profit as possible for their own shareholders. This puts them in contention with what is in the best interests of investors in their individual funds, he says. There’s only so much money to go around, and shareholders are getting short shrift in this scenario, Bogle says.

In The View From The Top this week, American Century’s Rick Luchinsky talks with Reporter Dervedia Thomas about the firm’s focus in the defined contribution space. He talks about a new share class, educational initiatives and assessing the effectiveness of plans to make sure investors achieve the retirement goals.

Don’t forget to check out this week’s Tweet Spot to see what our followers are talking about, and don’t forget to follow us on LinkedIn and Twitter so you can be part of the discussion.

Regards,Mike SchnitzelManaging Editor

Fund Action

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PRODUCT DEVELOPMENT

John Hancock Funds is continuing to slash fees on a number of its offerings, adding a new breakpoint to one of its funds and cutting fees on another offering. The firm is also planning on liquidating two of its index funds, according to a filing with the Securities and Exchange Commission.

John Hancock announced its John Hancock Sovereign Investors Fund, with $570 million in assets, will have its management fee reduced from 60 basis points to 57.5 bps. Andrew Arnott, president and ceo, told FII that the move was to position the fund more competitively among similar products and look after shareholders already invested in the offering.

The firm has also added a new breakpoint to its $3.6 billion John Hancock Global Absolute Return Strategies Fund. The fund will have its management fees reduced by 5 bps while assets under management are above $3 billion. The firm added new breakpoints and cut fees to a number of funds last month, telling FII the move was to bring the fees in line with other products in the market (FII, 6/5). Over the past year, Hancock made fee cuts on seven of its products and will continue to assess its lineup, Arnott told FII.

The firm is also planning on liquidating two index equity funds next year, according to a separate SEC filing. The firm will get rid of its Mid Cap Growth Index Fund and its Mid Cap Value Index Fund in May 2014. The two funds have $46.1 million and $45.7

million in assets under management, respectively, according to Morningstar. Both funds were introduced in 2010.

Eaton Vance is consolidating the management of its municipal separately managed accounts and shuffling managers along with the move. The fund firm moved its managed municipal SMA team from Boston to its New York office, where the team will work alongside its laddered and tax-advantaged bond

strategies. The consolidated teams will be under the leadership of Jim Evans, director of tax-advantaged bond strategies and head of managed municipal SMAs. Evans will lead a team of portfolio managers that includes Issac Kuo, Joe Davolio, Lauren Kashmanian and Brian Clouser.

Richard Wyke, who co-managed the Boston-based SMA team along with Elizabeth Steadman, will leave Eaton Vance as soon as the move is complete, according to Ralph Studley, v.p. and institutional portfolio specialist. Studley could not give an exact end-date for the consolidation, but he does not expect Wyke to be with the fund firm past October. Steadman had already resigned for personal reasons on March 31, Studley noted.

“We believe managing all our municipal SMA accounts from one centralized location will facilitate our ability to implement proper

controls, provide adequate personnel back-up and cross-training efficiencies, as well as a one-stop point of contact for our business partners and clients,” he said. Studley added that Steadman’s departure prompted the fund firm to consider whether to hire a new portfolio manager or combine the teams. The consolidation of its credit research team in March, as well as five years of analysing the positioning of its municipal SMA teams, also fueled the move. Eaton Vance has no plans to consolidate other areas of its business, according to Studley.

As part of the consolidation, Clouser, who will now manage its managed municipal SMAs, was removed from its $904 million Tax Advantaged Bond Fund effective July 31. The change was made to apply his skills exclusively for its SMAs, Studley said. Clouser was replaced by Devin Cooch on the bond fund. Cooch, a former trader at Eaton Vance, was promoted to portfolio manager alongside James Evans and Brian Barney. Both Evans and Barney have been with the fund since its launch in 1998.

Simone Santiago and Biana Shteyn, traders with the municipal SMA team, have also been moved to its mutual fund trading desk in Boston.

Hancock Continues Fee Cuts, Will Liquidate Funds

Eaton Vance Consolidates Muni SMAs, Shuffles Managers

Eaton Vance consolidated and shuffled the management of its muni SMAs.

BOTTOM LINE

John Hancock Fee Cuts Over Last 12 MonthsFund Cut Details

Classic Value Fund Decreased advisory fee by 4 bps on all breakpoints, immediately decreasing fees by 4 bps

US Global Leaders Growth Fund Added two new breakpoints and modified advisory breakpoint asset levels, immediately decreasing fees; Lowered initial breakpoint from first $2B down to first $500M

Alternative Asset Allocation Fund Added two new breakpoints, fees will decrease as assets grow

Global Absolute Return Strategies Fund Added new breakpoint on assets over $3B, immediately decreasing fees

Sovereign Investors Fund Lowered advisory fee on first breakpoint, immediately decreasing fee by 2.5 bps

Core High Yield Fund Lowered Class A expense cap by 6 bps, immediately decreasing fees

Government Income Fund Lowered Class A expense cap by 8 bps, immediately decreasing fees

Source: John Hancock Funds

Ralph Studley

http://www.fundindustryintelligence.com/Article/3215213/Search/John-Hancock-Cuts-Fees-Changes-Breakpoints.html

http://www.fundindustryintelligence.com/Article/3215213/Search/John-Hancock-Cuts-Fees-Changes-Breakpoints.html



ING Funds is rebranding one of its international offerings. The firm is also adding three subadvisors to the fund, which is already a subadvised offering.

According to a Securities and Exchange Commission filing, the ING International Growth Fund will change its name to the ING Multi-Manager International Equity Fund. The offering has been managed since its inception in 2011 by Baillie Gifford, which serves as a subadvisor to the fund. Now, according to the filing, ING is adding additional subadvisors, bringing Lazard Asset Management, JPMorgan Investment Management and T. Rowe Price onboard. The breakdown between the managers will be determined by the fund’s financial advisor; each will be allowed to pick investments independently.

The product has just over $330 million in assets under management, according to figures from Morningstar. It has performed in the top 31st percentile of funds in its category over the last year. The fund has an expense ratio of 99 basis points.

ING has been making some moves with its subadvised international funds lately. In March, the firm filed to merge two of its international value funds and removed two subadvisors from one of these offerings (FII, 3/25). The firm also is planning on merging away one of its offerings subadvised by Pioneer Investments as it looks to bring the management of the fund in-house (FII, 6/3).

A spokeswoman for ING did not return calls seeking further comment by press time.

Fidelity To Soft-Close European FundFidelity Investments plans to close its $316 million European stock fund to new investors and is considering merging it with another fund. According to a Securities and Exchange Commission filing, the fund firm will close its Europe Capital Appreciation Fund to new investors on July 19. Sophie Launay, spokeswoman said Fidelity has not yet decided whether it will marge the fund or which fund it would merge into.

John Bonnanzio, editor of Fidelity Insight, expects the fund to be merged into Fidelity’s $704.6 million Europe Fund—a sibling offering that has had similar holdings and was managed by the same manager from 2008 to 2012. “They were fishing out of the same pool,” Bonnanzio said. “When they launched the capital appreciation fund, it was going to be more aggressive, but it never lived up to that. It never had its own pure identity.”

Bonnanzio added that merging the capital appreciation fund into

the Europe Fund is Fidelity’s best option because of its similarities. “If they are trying to clean up their product line and consolidate for less confusion, the more sensible thing to do is merge it into the Europe Fund,” he said.

Federated Shuffles Bond ManagersFederated Investors has replaced the manager of three of

its bond funds. According to a Securities and Exchange

Commission filing, Andrew Kirschler will manage Federated’s

$626.6 million U.S. Government Securities 2-5 Year Fund, its

$417.3 million U.S. Government Securities 1-3 Year Fund and its

$70.2 million Real Return Bond Fund, effective July 2013.

According to Ed Costello, spokesman for the asset manager,

Kirschler replaced Donald Ellenbergerm, who was named senior

portfolio manager of Federated’s $6.2 billion Total Return Bond

Fund after its long-time manager Joseph Balestrino retired.

Balestrino retired in April after 27 years with the fund firm (FII, 3/11).

Invesco is making several changes to its $140.2 million international fund to reflect a new focus on minimizing volatility. According to a Securities and Exchange Commission filing, the fund’s name will be changed from the Invesco Global Quantitative Core Fund to the Invesco Global Low Volatility Equity Yield Fund. Income was also added to the fund’s objective, along with long-term growth of capital. Its strategy was also tweaked to incorporate a volatility focus.

“We believe the proposed changes will better position the fund to reduce risk without sacrificing return and generate income,” Bill Hensel, spokesman for the asset manager, told FII. Hensel declined to elaborate further.

The name change is appropriate as it gives a better description

of the fund’s strategy, according to Jeff Tjornehoj, senior analyst at Lipper. “Quant can mean any numbers of things, but low volatility is pretty clear that management focuses on risk,” he said. “They’re tweaking the process a bit—it’s still quant-driven, but more risk-aware than previously.”

Tjornehoj added that the move is also appropriate given product development trends, including Putnam Investments’ Low Volatility Equity Fund and State Street Global Advisors’ SPDR Russell 1000 Volatility ETF, launching in the first quarter. Additionally, Tjornehoj noted that a competing fund from Nuveen Investments—the $6.4 million Optimized Alpha Fund—was renamed the Nuveen Low Volatility Equity Fund at the end of May.

ING Renames Fund, Adds Subadvisors

Invesco Adds Volatility Focus To Fund

http://www.fundindustryintelligence.com/Article/3180987/Search/ING-Plots-Value-Fund-Merger.html

http://www.fundindustryintelligence.com/Article/3214005/Search/ING-To-Merge-Away-Subadvised-Fund.html

http://www.fundindustryintelligence.com/Article/3166870/Search/Federated-To-Replace-Long-Time-Bond-Manager.html



DISTRIBUTION & MARKETING

Guinness Atkinson Asset Management has appointed a new national sales director. The move is aimed at increasing the firm’s distribution efforts within the registered investment advisor channel.

Frank Zukowski is joining the firm to fill the new role. According to Jim Atkinson, ceo, his role is a newly created position in that it will focus on the RIA channel. Atkinson told FII the firm did have a previous head of distribution, Karin Walkovitz, who left the firm in March. She is now business development manager at Sammons Retirement Solutions. Walkovitz’s role was much broader than Zukowski’s will be, focusing on all channels. Prior to joining Guinness Atkinson, Zukowski was director of the RIA consulting group at Cohen & Steers.

Atkinson told FII the firm is focusing on the RIA channel because it fits the firm’s products better. Since the funds are no-load products, they don’t appeal much to commission-based advisor channels, Atkinson said. “Our two most appropriate channels are the ‘do-it-yourself’ investors and the RIA channel,” he told FII. He added the firm also experienced gatekeeper issues when it came to large wirehouses, noting that it can be difficult to get smaller funds onto a platform.

Atkinson admitted that the firm hadn’t really been committed to the RIA channel in the way it should have been in the past, focusing broadly on all distribution channels. Now, with Zukowski in place, he said the firm will be trying to build up a sales team to target RIAs. The number of people the firm plans to hire depends on assets raised. Additionally, Atkinson said the firm had no goal for how much it wanted to increase its assets under management following the new distribution effort.

Nuveen Investments has launched a new planning tool to help advisors of 401(k) plans figure out the profitability of their business. The firm, which only entered the defined contribution space a few years ago, is looking to use the new tool to forge relationships

within the space. “We recognized we needed a way to build

relationships,” Mike DeFeo, managing director for DCIO and strategic platform business, told FII. He added that through surveying advisors, the firm realized few were able to accurately calculate their profitability based on the performance of plans they were advising. As a

result, Nuveen has introduced its Plan Profit (k)alculator. “When we asked them [advisors], ‘Do you have an idea of your

profitability?’ they don’t have a clue,” DeFeo said. “They know they’re making money but they don’t know what their margins are.” The tool allows advisors to see how they can become more profitable, identifying factors within a plan that can increase

profitability as well as pinpointing services advisors can outsource to save money.

The new tool also makes it easier for the firm to market itself to new advisors in the DCIO space with a view to talking about Nuveen’s investment capabilities, DeFeo said. “This allows us a credible way to introduce ourselves,” he told FII.

Advisors told FII they like tools such as Nuveen’s new offering, but they have some reservations. “Part of it is only as good as the data you’re putting in there,” Jim Holtzman, advisor at Legend Financial Advisors, told FII. He added that often tools like this make an assumption about returns on retirement plans. For example, he said that in the past tools like these made assumptions that there would be 9-10% returns in the U.S. equity markets, but from 2000-2013 there were only returns of about 2%. Holtzman told FII that his firm did make use of these tools, however, but that it didn’t impact which investment products he chose. “We don’t use it for cross selling, we use it strictly as a retirement planning tool.”

Guinness Atkinson Shifts Focus To RIAs

Nuveen Focuses On Advisors With New 401(k) Tool

Mike DeFeo

Guinness Atkinson is concentrating its distribution efforts on RIAs and has hired a national sales director to bolster its business with RIAs.

BOTTOM LINE

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At deadline, the Commodity Futures Trading Commission was on the brink of voting to make permanent its controversial guidance requiring U.S. regulation of the non-U.S. side of cross-border derivative transactions. Hearing that the final guidance might be even worse for retail funds than expected, on July 5 the Investment Company Institute offered the agency an alternative approach. Under ICI’s version, if fund shares were only offered to non-U.S. persons, the funds would not be subject to regulation here, even if the institutions had U.S. asset manager subsidiaries.

The ICI anticipated the Commission would capture as U.S.-regulated entities any non-U.S. retail fund that either has a majority of U.S. investors or a principal place of business in the U.S. “It appears these tests would be applied to non-U.S. funds very broadly,” the fund lobby’s letter said. Beneficial owners of the fund shares would not be identifiable because they would be

included in omnibus accounts. Also, the funds would not have places of business, but fund providers might be in a variety of locations. Also, funds might be subject to overlapping regulatory jurisdictions, with European as well as American officials having cause to assert a role.

The consequence, the letter said, could be non-U.S. retail funds shunning U.S. asset managers to avoid CFTC regulation. “These disincentives would discourage a non-U.S. retail fund from selecting a U.S. asset manager, even if the U.S. asset manager may have the best expertise to manage fund,” ICI stated. If the CFTC did not accept the limitations on the definition of a “U.S. person” given above, the Institute said at the end, it might want to consider exempting from the definition non-U.S. retail funds whose transactions “are subject to a comparable derivative regulatory regime” abroad.

Mutual funds are not pleased that hedge funds will be allowed to advertise under a provision of the JOBS Act that was passed last week in a Securities and Exchange Commission vote. Lawyers are figuring out how much of a marketing advantage hedge funds will end up getting over mutual funds as a result. On the one hand, by the SEC’s voting to lift the ban on general solicitations by private issuers, the agency opened the door for hedge funds to go to market for the first time. But separately the agency also voted to consider putting some future limitations on how private funds may write their ads. Until the fine print of the rule proposal is out, it won’t be clear how much the commission is thinking of doing to curb hedge fund ads.

It’s also possible the rule proposal will run into opposition and be watered down or shelved. After the agency acted last Wednesday, the Investment Company Institute put out a statement indicating its dissatisfaction with the status quo: “We are disappointed that the SEC has failed to adopt common-sense consumer protections that should have been a part of it from the outset.” But the SEC’s proposal for a follow-up rule containing investor protections suggested that the SEC majority (the proposal was agreed to by a 3-2 vote) is eyeing putting hedge funds under limitations for what they can say in ads, similar to Rule 482 for mutual funds.

If and when the rule proposal is adopted, if it remains in its

The prospect of an excessive fund fees case being tried before a jury instead of a judge has been at least delayed, if not quashed, after a U.S. magistrate in New Jersey granted the defense’s motion to strike plaintiffs’ demands for a jury trial. Sivolella v. AXA Equitable Life Insurance Company, etc. was brought in January by

investors of funds managed by the AXA Equitable Funds Management Group. While excessive fee cases have never come before a jury—reputed to be more favorable to plaintiffs than the bench—recent U.S. Supreme Court findings in non-fund

cases gave the plaintiffs grounds for seeking one. But on July 3, Magistrate Douglas Arpert denied the plaintiffs a jury trial.

In particular, counsel for investor plaintiffs in the AXA case led

by Mary Ann Sivolella cited the Supreme Court’s opinion in the Feltner v. Columbia Pictures Television case as having “changed the analytical framework for the evaluation of a party’s entitlement to a jury.” They quoted the opinion as saying it was “beyond dispute that a plaintiff who seeks to recover actual damages is entitled to a jury trial.”

Magistrate Arpert disagreed. The opinion of the high court was quoted out of context, he said. Secondly, he said, in the Feltner case the Supreme Court was deliberating questions based on a different statute than the one applicable to mutual funds. Last week fund lawyers thought the AXA plaintiffs would object to the Arpert opinion and seek to go over the magistrate’s head to a full judge for a review. Magistrates are appointed by federal district judges to perform such duties as the judges may assign to them.

ICI Wary Of CFTC Cross-Border Rule

Advantage: Hedge Funds?

Mutual Funds Miffed That Hedge Funds Get To Advertise

Bid To Have Jury Try Excessive Fees Case Denied

REGULATORY WATCH

A motion to have an excessive fees case tried by a jury was denied by a New Jersey magistrate.

KEY POINT


Fund lobbies and firms weighed in recently on a fiduciary standard for brokers, urging regulators to use a light touch. Rather than apply the same fiduciary standard of care that’s used by advisors, regulators should allow brokers to use more relaxed guidelines, Fidelity Investments counseled regulators in a July 5 letter. This is in line with comments the Securities and Exchange Commission got from the Securities Industry and Financial Markets Association, the Financial Services Roundtable, the Investment Company Institute and the Association of Institutional Investors, all of which have dispatched letters to the SEC on this subject in the last few days.

The brokers’ standard should not be too drastic, Fidelity added. Brokers should only have to follow any rules requirements at “the specific point in time” when they advise customers. Consumer groups argue there should be a follow-up duty on the broker to track how the investment turns out. A separate major concern for Fidelity, which manages much 401(k) money, is the possibility that the Department of Labor may have fiduciary standard at odds with the SEC’s.

ICI cautioned the Commission against applying any standard “in a way that will chill legitimate practices” and specified

interactions with customers that it thought would not constitute tendering advice. SIFMA said it agreed with the SEC’s purpose of devising a fiduciary rule for brokers. SIFMA added that after consulting with 17 member firms it believes compliance cost could amount to $5 million per firm per year—a number that could cause political eruptions on Capitol Hill.

Other business lobbies sent comments flatly opposed to SEC’s goal of bringing brokers and advisors under the same fiduciary standard. Brokers currently are only required to recommend products that are deemed suitable—a less stringent standard than the one to which advisors must adhere. The American Bankers Association, while supporting efforts to “mitigate investor confusion regarding the standard of care” firms must use when providing advice, thought the term “fiduciary”

might itself be misleading or confusing. The American Society of Pension Professionals and Actuaries also thought putting a fiduciary label on brokers. “Instead of mislabeling all investment professionals who are government by different requirements, we believe improved disclosure will better serve retail customers,” said ASPPA Executive Director Brian Graff.

Fiduciary Rule Needs Light Touch, Say Lobbies

Any fiduciary rule that is too harsh on brokers might have a chilling effect when it comes to dispensing advice, warn financial lobbies and firms.

KEY POINT

current form, hedge funds ads selling performance will have to provide additional information “to highlight the limitations on the usefulness of this type of information. The issuer also would need to highlight the difficulty of comparing this information with past performance information of other funds,” the SEC said in its

decision. Commentators are invited to write about “whether other manner and content restrictions should apply to written solicitation materials used by private funds.” Those members of the mutual fund industry that don’t own hedge funds will get their chance to make suggestions.

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For further information on iisearches’ daily search leads and searchable database of mandates awarded and lost since 1995, please visit iisearches.com or contact Jaime Kilburn at (212) 224-3018 or [email protected]

The directory above includes search and hire activity from news and information service iiSEARCHES for the two-week period through Thursday, July 11. The accuracy of the information, which is derived from many sources, is deemed reliable but cannot be guaranteed. The Potential category includes early notice of potential future activity and should not be construed as an ongoing search. All amounts are in US$ millions unless otherwise stated. To report manager hires and new searches, please call Louis Pope, data manager, at (212) 224-3211 or email at [email protected].

Houston Deferred Compensation Program

USD 717 Public D.C. U.S./Multi Asset/Bundled USD 717 None The city has issued a request for proposals seeking administrative, investment management and custodial services for its 457 plan. The request is due July 25. A selection is expected by October.

Updated SearchesCity of Las Vegas (NV) USD 147 Public D.C. U.S./Multi Asset/Bundled USD 147 None The city has canceled its request for proposals seeking a bundled

provider for unspecified reasons. It may reissue the RFP in six months.

City of Palm Beach Gardens USD 8 Public D.C. U.S./Multi Asset/Bundled USD 8 None The selection committee has recommended selecting ICMA Retirement as bundled provider for its 457(b) plan. A decision will be made at the the council’s end of July meeting.

Completed SearchesAutomatic Data Processing (Defined Contribution)

USD 1500 Corporate D.C.

U.S./Recordkeeper/Administrator USD 0 None ING Retirement Services

City of Burbank 457 Plan USD 121 Public D.C. U.S./Consultant USD 0 None The city has selected Hyas Group as investment consultant for its 457 plan.

College of Lake County (Ill.) USD 8.9 Public D.C. U.S./Consultant USD 0 None The college has hired Raymond James Financial as investment consultant for its 457 and 403(b) plans.

Indiana Public Employees’ Deferred Compensation Plan

USD 875 Public D.C. U.S./Recordkeeper/Administrator USD 874 None The fund hired Great-West Retirement Services as third-party administrator for its deferred compensation plans.

The City of Renton USD 71.5 Public D.C. U.S./Recordkeeper/Administrator USD 0 None TIAA-CREF Retirement Services

The Utah Educational Savings Plan USD 5900 529 Plan Global/Equity/Active USD 0 None Dimensional Fund Advisors

The Utah Educational Savings Plan USD 5900 529 Plan International/Equity/Active USD 0 None Dimensional Fund Advisors

The Utah Educational Savings Plan USD 5900 529 Plan U.S./Real Estate USD 0 None Dimensional Fund Advisors

The Utah Educational Savings Plan USD 5900 529 Plan U.S./Equity/Passive/Small-Cap/Value

USD 0 None Dimensional Fund Advisors

The Utah Educational Savings Plan USD 5900 529 Plan U.S./Equity/Passive/Large-Cap/Value

USD 0 None Dimensional Fund Advisors

The Utah Educational Savings Plan USD 5900 529 Plan U.S./Equity/Passive/Large-Cap/Growth

USD 0 None The Vanguard Group

The Utah Educational Savings Plan USD 5900 529 Plan U.S./Equity/Passive/Small-Cap/Value


The Utah Educational Savings Plan USD 5900 529 Plan U.S./Equity/Passive/Large-Cap/Value


The Utah Educational Savings Plan USD 5900 529 Plan U.S./Equity/Passive/Small-Cap/Growth


The Utah Educational Savings Plan USD 5900 529 Plan Emerging Markets/Equity/Passive USD 0 None The Vanguard Group

The Utah Educational Savings Plan USD 5900 529 Plan U.S./Fixed Income/Passive/Short Term


Wisconsin Deferred Compensation Plan

USD 3100 Public D.C. U.S./Fixed Income/Mixed/Unspecified

USD 0 None Nationwide

New Searches

SEARCH DIRECTORY

Fund & CityTotal

AmountPlan Type Assignment

Account Size

Consultant Comments/Firm Hired

mailto:lpope%40iiintelligence.com?subject=



American Century (Continued from page 1)

Education Push: Focus On GoalsGetting investors to save adequately is the main challenge for the industry, according to Luchinsky. “Retirement in general is a critical issue,” he said. “Overall, as an investment-only provider, our goal is to deliver the solutions and capabilities that will aid participants in their ability to achieve their financial goals and help plan sponsors improve overall wellness of their plans.”

The fund firm recently conducted a study on pre-retirees (aged 55 to 65 and still employed full-time), evaluating how this group viewed their personal efforts to save and their employers’ support of savings. According to Luchinsky, the study shows

NEWS BRIEFS

• Vanguard Group reported its first monthly net outflows since

December 1994. The firm said investors pulled $9.7 billion from

bond funds, compared with $9.6 billion in inflows to stock and

money funds. (InvestmentNews)

• Hartford Investment Management named Matthew Addesa

and Michael Mondo institutional sales representatives covering

the central and eastern regions, respectively. The firm named

Christopher Miller head of consultant relations. (PlanSponsor)

• Mesirow Financial named Charles Lawless senior managing

director. He has been with the firm since 1996 and founded the

Lawless Advisory Group in 2000. (PlanAdviser)

• The Financial Industry Regulatory Authority has postponed

action on a proposal that would require the disclosure to customers

of broker recruitment deals. FINRA said would consider an

updated disclosure proposal at a board meeting on July 11.

(InvestmentNews)

• NYSE Euronext has agreed to purchase Libor from the

British Bankers’ Association. The transaction would take

effect in early 2014 after the Financial Conduct Authority’s

authorization of the NYSE Euronext unit taking over the

benchmark is complete, NYSE Euronext and the BBA said.

(IndexUniverse)

• Benefits advisor Lockton has opened a new office in Milwaukee.

The firm said John O’Connor and Bill Crowley have joined as

senior v.p.s in the new office. (PlanSponsor)

• Wagner Law Group named Roberta Casper Watson head

of welfare benefits. She will be responsible for issues with the

Affordable Care Act and other health and welfare plan concerns.

(PlanAdviser)

• Aviva Investors manager Josh Rank has left the firm to join

Principal Global Investors. Rank was lead manager of the firm’s

Investors Global High Yield Bond Fund. (FundWeb)

• Mercer Investments named Christine Carolan investment

director for the western region. She joined Mercer in 2010 from T. Rowe Price Group. (PlanSponsor)

• Premier Asset Management named Chris White head of U.K.

equities, replacing Simon King, who has left the firm. White joined

Premier in 2010 from Threadneedle. (FundWeb)

• Cazenove Capital sales exec Robert Thorpe has joined Sarasin & Partners as head of retail. Sarasin also hired Tom Hanafin and

Paul Pugh from Cazenove. (FundWeb)

• Long-term funds fell $28.54 billion for the week ended June 26,

the biggest week of outflows since August 2011, according to

the Investment Company Institute. Bond funds had outflows of

$28.12 billion. (The Wall Street Journal)

• Knight Capital Chairman and CEO Thomas Joyce has resigned,

two days after the firm’s acquisition by Getco was finalized. “As

you know, it was my recommendation to the board of directors that

Knight remain independent,” Joyce had said. (IndexUniverse)

• Gottex Fund Management has completed its acquisition in a

majority interest in Frontier Investment Management. Gottex

said the deal increases its ability to offer alternatives, multi-asset

products. (FundWeb)

• Legg Mason Global Asset Management confirmed it is

launching a tactical dividend income fund. The Legg Mason

ClearBridge Tactical Dividend Income Fund will be managed by

Mark McAllister and Peter Vanderlee. (FundWeb)

that pre-retirees have significant regrets about what they did, or didn’t do earlier in their working lives, such as save more and pay attention to daily expenses, including dining out and movies.

Pre-retirees also believe that employers have the ability to structure plans in ways that would encourage saving early and to higher levels. Automatic programs—specifically, automatic enrollment and automatic escalation—would have helped this group, Luchinsky noted. “This study will help plan sponsors think about the design, features and services to help participants save for a successful retirement,” he said. He added that strong default programs are key to taking advantage of participant inertia. Luchinsky declined to disclose a specific release date



for the study, but noted it will be available by the latter part of the third quarter.

Plan AssessmentAn online tool for advisors called Plan Health Pro is also in the

pipeline. This tool, which will be launched in September, is a

questionnaire designed to examine and assess the effectiveness of a

plan. It works by using a proprietary algorithm that scores plan health,

retirement readiness and due diligence, according to Luchinsky. “The

conversations that advisors and plan sponsors need to be having are

around plan health and effectiveness,” he said. “It’s about helping

plan participants achieve financial success in retirement.”

Luchinsky expects that Plan Health Pro will be particularly

useful in determining the right allocation mix when plan sponsors

are shifting worker’s 401(k) dollars out of their current investment

allocations into a qualified default investment option. Luchinsky

declined to disclose the development and distribution cost. American Century will communicate plan features, benefits

and the importance of retirement readiness through webinars

and videos on its website that will be disseminated through plan

sponsors and advisors to plan participants.

Lower-Cost OptionsAmerican Century also plans to introduce a new R6 share class on

41 of its funds by July 31 for employer-sponsored retirement plans.

The new share class expense ratios will be around 52-70 basis

points—making it the lowest total expense ratio of any share class

offered by the asset manager. “The new share class gives our clients more options when

determining the best way to pay for the investment management

and recordkeeping costs associated with employer sponsored

retirement plans,” Luchinsky said, noting that a lower-cost option is

in demand from plan sponsors and consultants. Demand for lower-

cost options has prompted a year-over-year decline in overall fees

for target-date funds from an average of 72 bps to 70 bps at the end

of 2012 (FII, 6/18).

The fund firm will target new clients through multiple business

channels, including small, medium and large plan sponsors—

directly and through advisors and consultants, according to

Luchinsky.

Its new share class will be promoted though face-to-face

discussions with its existing and potential clients rather than

traditional advertising.

Bogle Pressures (Continued from page 1)

confirm the SEC’s decision in order to avoid lengthy legal appeals of such a ruling.

PointBogle’s key point is customer and management company interests diverge, and he wants the SEC to take the lead in giving customers priority.

He contends that there is a conflict of interest across the industry. Most fund firms are publicly owned, so their management has a duty first to its own shareholders and to make as much of a profit as possible, Bogle said. This puts them at loggerheads with the individual mutual fund, which has a responsibility to do what’s best for its investors, not the shareholders of its management company.

Taking ActionWithin the past month, Bogle has shot three

successive statements over to the SEC, driving

home the argument that since funds manage

$14 trillion in assets, the Commission would leave “a yawning

gap” if it placed a formal “customer first” requirement on brokers

and yet still remained silent about the funds whose shares the

brokers are selling.To make sure the idea of a fiduciary standard for fund

management got on the table, on June 10 he sent the

Commission a preview of an article he will release this fall on the “commercialization” of the fund industry. On June 24, he wrote to SEC Chairman Mary Jo White on the same theme, and on July 2 he followed up with a comment letter to the agency responding to its recent request for information on a fiduciary standard for brokers.

Bogle ended the July 2 letter by saying: “It is vital that the Commission take this opportunity to make clear that

fund advisers (and their parent companies) are unequivocally subject to the principle of fiduciary duty reflected in the clear language and obvious intent of the 1940 Acts.”

CounterpointIn the very different view of the industry itself,

fund firms are already acting as fiduciaries, as

the individual funds themselves are required to

operate in the interests of shareholders. Bogle contends that all of the conflicting

interests in today’s fund market make a rule necessary, and that firm management merely

“pay lip service” when it comes to acting as fiduciaries. Asked about the new comments by

Bogle, an Investment Company Institute spokeswoman responded: “Both fund advisors and fund board directors are fiduciaries and therefore must act in the best interests of a fund and its shareholders. This is a standard that the industry works every day to uphold.”

Bogle’s assistant said he was out of town and unavailable for comment. —Stan Wilson

John Bogle

http://www.fundindustryintelligence.com/articlefeature.aspx?articleid=3220385



NEW FUND FILINGS

Source: Strategic Insights www.SimfundFiling.com

QUOTE OF THE WEEK

“When we asked them, ‘Do you have an idea of your profitability?’ they don’t have a clue.”—Mike DeFeo, managing director for DCIO at Nuveen Investments, discussing a new tool the firm developed to help advisors figure out the profitability of their business (see story, page 5).

ONE YEAR AGO

FIVE YEARS AGO

Charles Schwab Investment Management launched a global bond fund which invests in domestic and international bonds including those issued by emerging markets. [The Laudus Mondrian Global Fixed Income Fund now has $26 million in assets.]

The Calvert Group launched its first sustainability-focused water resources equity fund. [Today, the Calvert Global Water Fund has $186.3 million in assets under management.]

TWEET SPOTWhat Our Followers Are Tweeting About…

Vanguard (@Vanguard_FA)

The British have the answer to bond market troubles: “Keep Calm and Carry On.”—Ken Volpert, VG’s head of Taxable Bond Group.

GET INVOLVED! Follow @fundindustry on Twitter and join the Fund Industry Intelligence LinkedIn group to join in the conversation.

Morningstar, told FII. He added that the introduction of more niche ETFs was opening the door for a greater number of providers. “Certain providers have more diverse and more distinct offerings than others. If something is not on the menu, you’ve got to look elsewhere for it.” Analysts previously told FII that the best way small to medium-sized ETF shops could compete in the space was by focusing on niche strategies and not trying and compete with core offerings (FII, 4/19).

Bobby Brooks, national sales director at Invesco PowerShares, told FII that he’s not surprised the RIA channel is starting to adopt products from more providers. The fee-only channel was the first to really adopt ETFs, he said, since it doesn’t depend on commission from the offerings.

Now, the firm is looking to sell to this intermediary by employing three tactics. PowerShares is pushing vast educational material largely centered on its smart beta products. “The RIA is a very research-driven sale,” Brooks told FII. Secondly, the firm is also partnering with index providers that can provide additional material about the products’ indices. ETF firms are largely prohibited from providing this sort of information. Lastly, the firm is partnering with custodians like Charles Schwab and TD Ameritrade to provide additional services to RIAs, such as commission-free trading. Since these firms are associated with lower customer costs, Brooks believes RIAs would associate the firm as working in the best interests of their client base and would more likely to consider PowerShares.

Brooks also spoke about the value of the firm’s smart beta products compared with the core index products of the “big three” providers as being a selling point to intermediaries. “Benchmarks

Advisors Tap (Continued from page 1)

were built to be a barometer for active managers,” he said. “They weren’t necessarily meant to be investments themselves.”

Advisors told FII that they wouldn’t be loyal to the large ETF providers if the products offered didn’t match up to their investment objectives. “We’re not wedded to any one provider, we’re looking at the investment strategy,” Jim Holtzman, advisor at Legend Financial Advisors, told FII. If an ETF’s strategy fits the firm’s objective, Holtzman said, then it doesn’t matter who’s providing it.

Holtzman added, however, that this attitude doesn’t mean he’d just allocate to small, niche products if the strategy happens to fulfill a goal. “The problem is that some of these smaller ETFs don’t have enough assets for us to be able to trade in and out,” he said. When looking at new products, the firm simultaneously assesses whether the strategy fits and whether the ETF is large enough to be used easily. If the product happens to be too small, Holtzman said that it’s often added to a tracking list so that the firm can think about it when more assets are gained. —Nick Jardine

http://www.SimfundFiling.com

http://www.fundindustryintelligence.com/Article/3194282/Search/Best-Bet-For-ETF-Providers-Be-A-One-Trick-Pony.html

vol. xxiv, no. 28 / july 15, 2013 fund action is dominated by vanguard group, blackrock’s ishares...

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