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The Investment Funds Industry

Top Papers on ETFs, fund fees, active vs. passive, fund performance and other fund industry issues

Within the investment funds industry, actively managed funds face a number of obstacles, including increased competition, fee compression, and the rise of ETFs (just to name a few). These challenges all increase the pressure on active funds to achieve a positive risk-adjusted performance versus a benchmark index.   

But how well are these active funds faring over time?  How are ETFs and other passive vehicles being used by market participants today?   Will diseconomies of scale continue to plague the fund industry? Or will new fund distribution methods / entering new markets help to fuel asset growth going forward?  These issues and more are discussed within the papers listed below. 

investment funds industry


FEATURED PAPERS


Is there another Woodford waiting to happen? (MSCI blog, Jul 2019)

Should investors be worried about liquidity constraints for UCITS funds in Europe, given what happened with the Woodford Equity Income fund recently?

Collective Investment Trusts Reduce DC Plan Costs (AB, 2019)

For compliance reasons, this paper is only accessible in North America and South America

CIT usage is increasing, as plan sponsors continue to use CITs to provide transparency to plan participants and to lower plan costs within defined contribution pension plans.


EXCHANGE-TRADED FUNDS


ETFs: U.S. Institutions’ New Tool of Choice for Portfolio Construction (iShares, 2019)

For compliance reasons, this paper is only accessible in the United States

Amongst the institutional investors surveyed for this study, this year is the first time that there have been more U.S. institutions investing in equity ETFs than in individual stocks. Several reasons are given for the recent uptick in ETF utilization.

Guide to ETFs (BlackRock, 2019)

For compliance reasons, this paper is only accessible in certain geographies

The index investing evolution has spawned a broad range of vehicles and indices for institutional investors to choose from. This report highlights ways that institutions are using ETFs across multiple asset classes to improve portfolio outcomes.

The rise of active ETFs (Fidelity Intl blog, Nov 2018)

For compliance reasons, this paper is only accessible in the UK & Europe

The actively managed ETF market is growing quickly, especially in Australia. Active ETF investors can benefit from intraday execution, a simple transaction process, and other conveniences.

ETFs’ Versatility Shines in Volatile Times (iShares, 2019)

For compliance reasons, this paper is only accessible in the United States

Robust inflows from other assets and into ETFs last year may have occurred not in spite of market volatility and drawdowns, but rather because of these factors.

ETFs in Insurance General Accounts (S&P Dow Jones Indices, 2019)

This is the fourth annual report covering ETF usage within insurance general accounts. It explores the dynamics of the industry, and the many ways that over 1900 insurance companies utilised ETFs in 2018.


FUND PERFORMANCE


Cheaper is Not Better: On the Superior Performance of High-Fee Mutual Funds (2017)

This study shows that, after adjusting for exposure to investment and profitability factors, before taking into account expenses, high fee funds actually outperform low fee funds, and after fees they perform equally as well.

Persistence and Skill in the Performance of Mutual Fund Families (Amundi AM, 2019)

For compliance reasons, this paper is NOT accessible in the United States

Amundi examines the research surrounding investment performance at the 'fund family' level and asks if the fund performance of select fund 'families' is persistently superior to that of their competitors. After controlling for noise, the authors find that very few fund families exhibit true skill.

Does Past Performance Matter? The Persistence Scorecard (S&P Dow Jones Indices, Jul 2019)

It is said that 'past performance does not predict future results.' The S&P Persistence Scorecard evaluates what percentage of top performing managers manage to actually remain at the top.

The Historical Record on Active vs. Passive Mutual Fund Performance (2019)

Fund selection and screening may play an important role in the active vs passive debate. This study finds that after weeding out the non-competitively priced active funds, the difference between active and passive fund performance is not statistically significant.


INVESTMENT FUNDS INDUSTRY


Canadian Investment Funds Industry: Recent Developments and Outlook (Strategic Insight, 2019)

For compliance reasons, this paper is only accessible in certain geographies

This IFIC report details some of the changes that have recently taken place within the Canadian investment funds industry.

Canadian Mutual Fund Investor Survey (The Investment Funds Institute of Canada, 2018)

For compliance reasons, this paper is only accessible in certain geographies

This survey attempts to identify the opinions, expectations, and behaviors of Canadian mutual fund investors and to track these characteristics over time.

Trends in the Expenses and Fees of Funds (ICI, March 2019)

This paper by the Investment Company Institute details the latest trends in the expenses and fees of investment funds in 2018.

Fund Industry Concentration: The Good, The Bad, and The Unknown (Broadridge, 2019)

Scale undoubtedly matters in the investment industry, but the question arises as to whether the degree of scale is limiting competition and innovation. This paper by Broadridge explores further.

Mutual Fund Tradeoffs (revised Jun 2019)

This study analyzes tradeoffs in the characteristics of active mutual funds, such as liquidity, fund size, expense ratio, and turnover. Some evidence of diseconomies of scale exists among active managers.

Standardization of Funds Processing in Europe (EFAMA, 2018)

EFAMA's report expounds on recommendations for efficient processing of fund orders in Europe.


FUND DISTRIBUTION


Benchmark Your Global Fund Distribution 2018 (PwC)

PwC ranks and benchmarks the top 100 investment management firms (within Europe and globally) on their cross-border distribution.

Changes and Opportunities in the European Cross-Border Fund Distribution Industry (Deloitte, 2018)

Deloitte examines the cross-border fund distribution model, which has been a success because of the development of key cross-border hubs like Ireland and Luxembourg.

Investment Fund Distribution in Asia: Challenges & Opportunities (Deloitte, 2018)

In this report, Deloitte provides info about local tax policies and regulations, business culture, and market developments for asset managers branching out into Asian markets.