Investors around the world are aware that the asset growth and the prolonged period of low interest rates that defined the decade-plus bull run are unlikely to return any time soon, according to Cerulli Associates’ latest report,Global Markets 2023: A Changing World. Product development and innovation will be vital for asset managers seeking to retain and win business in the coming years.
“The mutual fund industry demonstrated resilience last year, achieving growth despite the volatile market environment,” says André Schnurrenberger, managing director, Europe at Cerulli Associates. “We believe the best opportunities for asset managers exist in specialist areas such as responsible investment and alternatives, as well as the wealth management channel.”
In the highly competitive U.S. market, product strategy and innovation are driven by the fact that many investment products are viewed as lacking differentiation. Cerulli believes that, to satisfy the unique needs of investors, asset managers need to deliver more solutions across a broader range of vehicle structures and provide scalable solutions that can be customized at the individual investor level. Firms that have built their businesses on the backbone of the mutual fund structure over several decades need to determine which direction to pivot their offerings to retain assets.
In Hong Kong, product innovation has been seen in the exchange-traded fund (ETF) segment, with developments in virtual asset; technology; and environmental, social, and governance (ESG) ETFs, among others. Korea has also seen developments in the ETF space, where regulation has been eased since the end of 2022, allowing product diversification.
This has led to innovations such as ETFs tracking new underlying indices that are not usually tracked or customized, hybrid ETFs centered on a single stock, and maturity-matching bond ETFs with a lifespan.
In China, the assets of ETFs, excluding money market ETFs, increased by 19.8% to RMB1.3 trillion (US$200 billion) last year as innovative products such as bond, index enhanced, cross-border, and themed ETFs boomed. Meanwhile, in the U.S., where the ETF has historically been linked to index strategies, there has recently been increased product development in actively managed ETFs, including mutual fund conversions.
In Singapore, Cerulli believes there is scope for innovation in ESG and alternatives, particularly in the high-net-worth (HNW) segment. For example, Abrdn has launched an ESG-focused Asian high-yield bond fund targeting retail investors. In the investment-linked product (ILP) space, local insurers are not only putting emphasis on sustainability and looking for related investment solutions, but also continuing to launch new and innovative ILPs and search for underlying funds.
The importance of ESG criteria to Swedish institutional investors means opportunities exist for asset managers that can demonstrate a clear, transparent, and repeatable sustainable investment process. Those that can support innovative and forward-looking approaches to environmental themes will be particularly in demand among smaller pension funds seeking efficient exposures.
“Climate and environment-themed funds have so far dominated ESG product development, but we are seeing plenty of activity in impact investing,” says Schnurrenberger. “In Singapore, for example, the DBS Asia Impact First Fund, which was launched in August 2022, seeks to provide capital to social enterprises that focus on social and environmental issues in Asia.”
S&P Dow Jones Indices (S&P DJI) today released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released today for May 2023 show all 20 major metro markets reported month-over-month price increases for the third straight month. More than 27 years of history are available for the data series and can be accessed in full by going to following link.
YEAR-OVER-YEAR
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a -0.5% annual decrease in May, down from a loss of -0.1% in the previous month. The 10-City Composite showed a decrease of -1.0%, which is a tick up from the -1.1% decrease in the previous month. The 20-City Composite posted a -1.7% year-over-year loss, same as in the previous month.
Chicago, Cleveland, and New York reported the highest year-over-year gains among the 20 cities in May. Chicago moved up one to the top spot with a 4.6% year-over-year price increase, while Cleveland came in at number two with a 3.9% increase, and New York entered the top three in third with a 3.5% increase. There was an even split of 10 cities reporting lower prices and those reporting higher prices in the year ending May 2023 versus the year ending April 2023.
MONTH-OVER-MONTH
Before seasonal adjustment, the U.S. National Index posted a 1.2% month-over-month increase in May, while the 10-City and 20-City Composites both posted increases of 1.5%.
After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0.7%, while the 10-City Composite gained 1.1% and 20-City Composites posted an increase of 1.0%.
ANALYSIS
“The rally in U.S. home prices continued in May 2023,” says Craig J. Lazzara, Managing Director at S&P DJI. “Our National Composite rose by 1.2% in May, and now stands only 1.0% below its June 2022 peak. The 10- and 20-City Composites also rose in May, in both cases by 1.5%.
“The ongoing recovery in home prices is broadly based. Before seasonal adjustment, prices rose in all 20 cities in May (as they had also done in March and April). Seasonally adjusted data showed rising prices in 19 cities in May, repeating April’s performance. (The outlier is Phoenix, down 0.1% in both months.) On a trailing 12-month basis, the National Composite is 0.5% below its May 2022 level, with the 10- and 20-City Composites also negative on a year-over-year basis.
“Regional differences continue to be striking. This month’s league table shows the Revenge of the Rust Belt, as Chicago (+4.6%), Cleveland (+3.9%), and New York (+3.5%) were the top performers. If this seems like an unusual occurrence to you, it seems that way to me too. It’s been five years to the month since a cold-weather city held the top spot (and that was Seattle, which isn’t all that cold). Since May 2018, the top-ranked cities have been Las Vegas (12 months), Phoenix (33 months), Tampa (5 months), and Miami (9 months).
“At the other end of the scale, the worst performers continue to cluster near the Pacific coast, with Seattle (-11.3%) and San Francisco (-11.0%) at the bottom. This month the Midwest (+2.7%) unseated the Southeast (+2.1%) as the country’s strongest region. The West (-6.9%) remains weakest.
“Home prices in the U.S. began to fall after June 2022, and May’s data bolster the case that the final month of the decline was January 2023. Granted, the last four months’ price gains could be truncated by increases in mortgage rates or by general economic weakness. But the breadth and strength of May’s report are consistent with an optimistic view of future months.”
CI Private Wealth announces it is rebranding as Corient. The new name is derived from “client oriented” and expresses the firm’s commitment to providing its clients with an unparalleled wealth management experience.
“The Corient brand embodies our mission to put our clients at the center of everything we do. We exist for one reason: to help our clients achieve their financial goals, simplify their lives and establish legacies that will last for generations,” said Kurt MacAlpine, Chief Executive Officer of Corient and CI Financial Corp. (“CI”), Corient’s parent company. “The new name better reflects the extensive capabilities we offer today as a national, integrated organization and our vision to become the country’s pre-eminent private wealth firm.”
Corient now serves as the brand for all of the company’s offices, as it has discontinued co-branding with its legacy firm names, effective immediately. This reflects the ongoing integration of Corient’s predecessor companies into one cohesive registered investment advisor (“RIA”) firm.
“The unified Corient brand clarifies for clients that they benefit from the expertise of our entire network and the expanded services and capabilities made possible by our greater size and scale,” Mr. MacAlpine said. “In the short time since our founding, we have accomplished much on behalf of our clients that would not have been possible for most independent firms. We established a tax practice and a trust company, we have delivered better investment pricing and lending rates, and we significantly strengthened our alternative investments platform. Today, we are operating under an integrated platform that, along with our collective scale, enables us to better serve the complex needs of our clients.”
Corient is a fiduciary, fee-only wealth management firm that is distinguished by its private partnership model, similar to leading professional services firms. This approach encourages its advisors to collaborate rather than compete and creates an environment that rewards teamwork in pursuit of the shared vision to deliver unrivaled client excellence.
CI first entered the U.S. RIA sector in 2020 and has become one of the industry’s fastest-growing wealth platforms through acquisitions and strong organic growth. Today, CI’s U.S. wealth management business has $147 billion in assets under management, and is one of the largest integrated RIAs in the U.S.
“It’s the right time to adopt a new identity, one that conveys the value we offer and our distinct character and positioning in the marketplace,” said Mr. MacAlpine. “We’re very excited about our brand and the future of Corient.”
The Corient name was selected through a rigorous, multi-step process. A third-party branding agency conducted extensive research and helped to identify a list of potential choices. More than 70 of the firm’s partners participated in focus groups, narrowing the initial list to two finalists. The ultimate selection was determined by a vote of all partners, who favored Corient by a wide margin. This approach demonstrates the firm’s unique, integrated structure and its differentiated approach to the business.
The Corient name originated with one of the company’s legacy firms and has been thoroughly re-imagined through its new positioning and a newly designed logo.
CI continues to use the CI Private Wealth brand for its Canadian ultra-high-net-worth wealth management business.
Dominion Capital Strategies, a leading fund manager with an investment platform for regular savings and investments, is pleased to announce the appointment of Pablo Paladino as Global Sales Director. Currently heading sales in Latin America, Paladino brings extensive experience and a strong sales track record to his new role. He will be responsible for overseeing the commercial strategy and support for all regions of the company, including Latin America, Europe, Asia-Pacific, the Middle East, and Africa. This appointment reflects Dominion’s commitment to growth and expansion, capitalizing on Paladino’s expertise.
Before joining Dominion Capital Strategies, Paladino held key leadership positions at renowned financial institutions, including Old Mutual and one of Latin America’s largest Independent Financial Advisor (IFA) firms. Throughout his career, he consistently demonstrated exceptional sales skills and a deep understanding of the needs of IFAs in emerging markets.
Paladino’s new role as Global Sales Director emphasizes Dominion’s dedication to its position as a leading fund manager and investment platform provider for regular savings and investments. With Paladino’s leadership and extensive network in Latin America, he will play a crucial role in expanding Dominion’s presence and seizing opportunities in Asia-Pacific, Africa, and the Middle East.
Paladino’s appointment marks the beginning of a series of strategic initiatives that Dominion Capital Strategies plans to undertake, strengthening its position as a leader in fund management and investment platforms for regular savings and investments. With Paladino’s expertise, the company is poised to explore new avenues for growth and enhance its product offerings to meet the evolving needs of its global client base.
Dynasty Financial Partners has named Ron Insana to the new role of Chief Market Strategist. Insana will join the firm’s Investment Committee and the investment committees of Dynasty Network firms. He will, in addition, meet and share insights with financial advisors in Dynasty’s Network and their clients.
As Dynasty’s Chief Market Strategist, Insana will be a spokesperson for the company on investment, economic, and related topics.
“We are thrilled to have Ron Insana, a legend in the financial services industry and a pioneer of financial journalism, representing Dynasty and sharing his deep and varied investment experience in hopes to catalyze growth for our partner firms,” said Shirl Penney, Dynasty’s CEO and co-founder.
Insana has had a distinguished career in broadcast journalism. Significant moments include his award-winning coverage of the market crash of 1987 and one of the first eyewitness accounts of the collapse of the World Trade Center towers on 9/11. He has also worked as an asset manager. As a bestselling author, his books include “The Message of the Markets” and “Trend Watching: How to Avoid Wall Street’s Next Fads, Manias, and Bubbles.” He is a frequent guest on CNBC and MSNBC, where he sheds light on pressing economic and market issues. He also shares his syndicated Market Scoreboard Report with radio listeners everywhere.
Named one of the “Top 100 Business News Journalists of the 20th Century,” Insana is known for his high-profile interviews with world leaders such as President Bill Clinton and President George Bush, billionaire investors including Warren Buffett and George Soros, captains of industry like Bill Gates and Jack Welch, as well as top economists, analysts, and influencers, the Press Release said.
Insana joins Dynasty as the firm prepares to host its annual Investors Forum for independent advisors in November 2023. A leading investment conference for RIAs, this year’s Investment Forum will take place in Nashville, Tenn., from November 13 through November 15, 2023. Insana will be a featured speaker along with other leading investment-firm executives.
In his new role with Dynasty, Insana will work closely with Chief Investment Officer Bob Shea to identify strategic opportunities for the investment portfolios. Shea oversees Dynasty’s Investment Platform, which administered $36 Billion in end-client assets as of Q1 2023 Period End.
“Ron is a giant in the investment industry, both as an incisive reporter and a hands-on practitioner,” said Shea. “To say my team and I are looking forward to this collaboration is an understatement.”
Besides the responsibilities described above, Insana’s work with Dynasty will include developing and leveraging investment content and advising Dynasty’s leadership on investment strategy, market intelligence, and business development.
Independent advisors can use Dynasty’s Investment Platform in several ways, from research and due diligence to outsourced investment products and services through the company’s OCIO program, featuring a range of asset classes, including equities, fixed income/capital markets, and alternative investments.
The Federal Reserve announced that its new system for instant payments, the FedNow® Service, is now live. Banks and credit unions of all sizes can sign up and use this tool to instantly transfer money for their customers, any time of the day, on any day of the year.
“The Federal Reserve built the FedNow Service to help make everyday payments over the coming years faster and more convenient,” said Federal Reserve Chair Jerome H. Powell. “Over time, as more banks choose to use this new tool, the benefits to individuals and businesses will include enabling a person to immediately receive a paycheck, or a company to instantly access funds when an invoice is paid.”
To start, 35 early-adopting banks and credit unions, as well as the U.S. Department of the Treasury’s Bureau of the Fiscal Service, are ready with instant payments capabilities via the FedNow Service. In addition, 16 service providers are ready to support payment processing for banks and credit unions.
When fully available, instant payments will provide substantial benefits for consumers and businesses, such as when rapid access to funds is useful, or when just-in-time payments help manage cash flows in bank accounts.
For example, individuals can instantly receive their paychecks and use them the same day, and small businesses can more efficiently manage cash flows without processing delays. Over the coming years, customers of banks and credit unions that sign up for the service should be able to use their financial institution’s mobile app, website, and other interfaces to send instant payments quickly and securely.
As an interbank payment system, the FedNow Service operates alongside other longstanding Federal Reserve payment services such as Fedwire® and FedACH®. The Federal Reserve is committed to working with the more than 9,000 banks and credit unions across the country to support the widespread availability of this service for their customers over time.
Deal volumes remain anemic even though transactions rebounded in the second quarter off a historically low base, according to S&P Global Market Intelligence’s newly released global Q2 2023 M&A and Equity Offerings Market Report.
The total value issued in global equity deals rose from the prior quarter for the first time in more than a year, but the issuance level was about 2x lower than the quarterly average during 2021. The total global value of announced M&A also ticked up quarter over quarter, but even with the growth, the second quarter was reminiscent of the lows reached during the height of the COVID-19 pandemic.
The headwinds facing dealmaking for much of the last six quarters are expected to continue plaguing transaction activity in the second half of 2023. Geopolitical unrest, rising rates and economic growth concerns are all giving companies pause before pursuing transactions.
“The lack of equity issuance and M&A announcements since the early part of 2022 has created some pent-up demand,” said Joe Mantone, lead author of the report. “It’s no surprise that we’ve seen some pockets of quarter-over-quarter growth, but activity levels are far from normal. Companies and investors should gain more clarity over the direction of interest rates and the economy later this year and once that occurs, markets could become more sanguine and supportive of deal activity.”
Key highlights from the quarterly report include:
Second-quarter M&A transactions’ total value was $564.03 billion, a 42.4% decline from an already low base a year earlier.
The total value raised from global equity deals increased 28.8% quarter over quarter to $77.39 billion in the second quarter but remains far below levels reached in 2021 when the quarterly averaged raised topped $260 billion.
The total number of global M&A announcements in 2023 hit a monthly low in June with just 3,044 transactions.
The quarterly report provides an overview of global M&A and equity issuance trends, offering insights into the sectors and geographies that are seeing the most activity. It also focuses on deals with the highest valuations and strategies larger players pursue that underscore trends occurring throughout an industry. S&P Global Market Intelligence has produced the quarterly global M&A and equity offering report since the first quarter of 2018.
Fixed–income exchange-traded funds (ETFs) are gaining ground, due to incrementally higher yields and greater investor comfort levels. A strong product development opportunity exists for managers offering active fixed–income exposures, given the white space for fee-competitive, attractively priced products, according to the latest Cerulli Edge—U.S. Asset and Wealth Management Edition.
Issuers attribute expected future fixed–incomeETF asset growth to greater uptake by advisors and institutional investors—66% cite greater advisor familiarity as a top-three asset growth driver in the next 24 months, and 55% say the same for greater institutional use. Meanwhile, 38% point to both higher yields and advisors’ need to access lower-cost, fixed–income exposures.
Fixed–income product development among issuers is now taking priority over even the more sizable U.S. equity asset class, with 66% of managers citing fixedincome as a primary product development focus and 57% citing U.S. equity.
Cerulli expects fixed–income ETF product development to follow two avenues, with some products becoming more targeted and offering access to niche allocations. At the same time, other new fixed–incomeETFs will reflect mutual funds via more diversified exposures meant to offer a tax- and price-efficient way to access fixed–income exposures for the long run.
Combined with greater product development focus amid existing white space in fixedincome versus the far more product-saturated equity space, a strong and attractive asset-gathering opportunity exists for fixed–incomeETFs.
“Issuer openness to offering transparent active fixed–income strategies creates room for the revenue generation associated with active exposures—even if managers will still have to lower prices in the fee-competitive ETF industry,” says Daniil Shapiro, director. “This optimism is underscored by the perception of a virtuous cycle by which a greater variety of quality and appropriately priced exposures help make fixed–incomeETFs a go-to for a broader set of investors,” he concludes.
Despite economic challenges, 75% of mid-sized business owners expect their revenue to increase and 71% are planning to hire over the next 12 months, according to the inaugural Bank of America Mid-Sized Business Owner Report. The study is based on a survey of more than 300 mid-sized business owners (MSBOs), with $5 million to $50 million in annual revenues, and focuses on their business and economic outlooks.
“The strength of mid-sized businesses is essential to the health of the U.S. economy,” said Raul Anaya, President of Business Banking at Bank of America. “Preparation, optimism, and flexibility are traits of successful leaders in this environment, with investments in the workforce and digital transformation topping their current list of priorities to remain resilient and position their businesses for growth.”
MSBOs maintain a positive outlook, as 75% plan to expand their business and 67% expect the national economy to improve over the next 12 months. Additional insights into mid-sized business operations and financing in the current environment include:
Macroeconomic challenges in recent years, including inflation, the threat of a recession, and supply chain issues, are driving companies to make operational changes, such as raising prices (45%), revaluating cash flow and spending (37%), increasing employee wages (35%), and reducing business costs (33%).
90% of MSBOs plan to obtain funding to finance their businesses over the next 12 months, including through business credit cards (43%), traditional bank loans (38%), personal savings (27%), personal credit cards (25%), and venture capital funding (21%).
Perspectives on financing are not one size fits all. For example, 59% of businesses say they’re looking to obtain financing to weather rising interest rates, while 23% say the rising interest rates make them less likely to seek financing.
Among the more than half (54%) of MSBOs who plan to apply for a bank loan or line of credit in the next 12 months, they plan to use these funds to: invest in new technology (43%), invest in new equipment (37%), and market/promote their business (35%).
Digitization on the Rise
Over the last 12 months, 90% of MSBOs have adopted digital strategies to further optimize their businesses and operations, with new digital tools helping them to save time (48%), increase customer satisfaction (43%), manage cash flow (43%), stay organized (41%) and reach new customers (37%). Additional ways innovation is at play within mid-sized businesses include:
87% plan to further utilize automation and artificial intelligence to stand out from competitors (45%), assist with hiring (45%), and streamline payroll and bookkeeping (43%).
As the use of digital wallets and cashless payments continues to grow in popularity, 76% of MSBOs anticipate that all their transactions will eventually be digital.
71% say the marketing of their business is now done primarily online or through digital-first channels.
88% see cybersecurity as a threat to their business, and as a result are further investing in digital security systems (65%) and storing less business information online (39%).
“The digital landscape is complex and fast-moving,” added Anaya. “Staying on top of the latest innovations can help business owners create efficiencies, manage risk and unlock value that gives them a competitive edge.”
Employees are the most valuable asset of any company, and current labor shortages have challenged business owners looking to attract and retain talent. Our report found that many MSBOs struggle to find skilled, experienced employees. To attract qualified candidates, many MSBOs are increasing salaries (43%), offering more PTO (40%), strengthening retirement benefits (36%) and introducing new employee training and resource groups (34%).
Given the complexity and competitiveness of this labor market, MSBOs are also employing strategies that emphasize their commitment to retaining their existing employees. Four out of five (78%) business owners say the following actions over the last year have led to a meaningful impact in employee morale and/or retention:
Increasing paid time off (PTO) (39%)
Offering cost-of-living bonuses (38%)
Providing additional healthcare benefits (37%)
Augmenting retirement benefits (34%)
To read the full report you can access to the following link
Photo courtesyIsabel Campillo, Carmen Garcia & Cristina Rubio, Capital Strategies team
To compete effectively in China’s mutual fund market, foreignmanagers in China will need to demonstrate the advantages of their investment methods and find their niche areas.
China’s RMB26 trillion (US$3.6 trillion) mutual fund market continues to attract global asset managers, and eight wholly owned foreign fund firms have been set up in the market to date.
Backed by professional research teams, as well as extensive global investment experience, foreignmanagers can provide innovative solutions to meet the diverse needs of investors.
Foreignmanagers can use these strengths in areas that are relatively new to China, such as pension funds, index funds, sustainability-themed funds, and Qualified Domestic Institutional Investor (QDII) funds. They can also rely on their expertise to provide investors with more personalized and scientific programs, such as quantitative strategies and robo-advisor platforms.
Foreign fund managers with established global brands have no problem attracting investors’ attention. However, no matter how strong their financials, investment philosophies, and risk control systems are, global managers in China still need to provide excellent performance and service.
Many local fund managers have started to refine their investment processes in recent years, and they are increasingly focused on the stability of investment processes and portfolio risk management.
Most foreign fund managers have entered the Chinese market through joint ventures, with only a few starting their activities in the form of solely foreign-owned or foreign-controlled businesses in the past three years. This means they tend to have a smaller domestic customer base and relatively weak fund distribution channels compared to local companies. Foreignmanagers that are lagging in traditional distribution partnerships with banks may find it expedient to partner with other distributors. Cerulli believes that enhancing cooperation with top securities firms focused on wealth management and online platforms will bring about opportunities for growth.
Foreign fund managers also face fierce competition from local firms in attracting and retaining talent. Still, they have managed to recruit star managers who are familiar with the domestic capital market and possess local investment experience.
Local talent who choose to join foreignmanagers tend to do so for culture reasons, as the work pressure is generally less intense in foreign firms, and they provide more attractive benefits and better work-life balance.
“The entry of global fund houses has intensified competition in China’s asset management industry, but offers opportunities for the entire industry to develop,” said Joanne Peng, research analyst with Cerulli Associates. “For foreign mutual fund managers to succeed in the market, they will have to work on their ability to achieve stable returns and control the risks of their products.”
