February 10, 2012
50% of Money Market Clients Fear NAV Fluctuation
Adding to the outcry against new rules for money-market funds, Fidelity Investments has warned regulators that more than half of its money-fund clients would move some or all of their assets out of the investments if the net asset value of the funds were allowed to fluctuate.
That warning from the largest U.S. money-market fund manager came as the SEC considers two plans for tightening regulation of the $2.7 trillion fund industry.
One proposal would allow the value of the funds to float, rather than being fixed at $1 per share as it is now. The other would require investors to stagger withdrawals.
Fidelity said a poll of customers found 52% of retail investors surveyed would invest less, or stop investing altogether, if there were a waiting period.
Jason Weyeneth, an analyst at Sterne Agee Asset Management, said that SEC rule changes would hurt money market managers. But he also said the likelihood of new rules being implemented is reasonably low, given the industry's outcry and the prospect of legal challenges.
Fixed-Income ETPs Experience Record Inflow
January saw a significant jump in capital flowing into fixed-income exchange-traded products, according to the latest "ETP Landscape" report published by the BlackRock Investment Institute.
These products set a new global monthly record of $9.0 billion of inflows in January 2012, soundly besting the previous record of $6.7 billion set in January 2009.
"We see a quiet revolution building in the asset class as more and more investors learn how to use fixed-income ETFs to build portfolios that combine low risk with the potential for yield," said Peter Fisher, senior managing director and head of BlackRock's Fixed-Income Portfolio Management.
The fixed-income movement is only one part of a larger flow of funds into ETPs of all types. The global exchanged-traded product industry had its best month of January ever with $34.1 billion of net inflows, representing a 144% increase in inflows over the previous record set in January 2011 and up 116% from December 2011.
"Just like equity-based ETFs, fixed-income products are becoming very popular," said Mel Herman, president and chief executive of XTF, an ETP research firm. "As demand for fixed-income products increases, ETFs will continue to gather assets at the expense of mutual funds."
Vanguard Targets Gen Y Looking to Retire in 2060
Vanguard has launched a new target retirement fund for Generation Y investors that is intended to start them on the road to successful investing.
The Vanguard Target Retirement 2060 Fund provides age-appropriate exposure to both domestic and international stocks, as well as domestic bonds all wrapped up in a single low-cost, index based vehicle. The fund will feature broad diversification among major asset classes and low management costs.
It is targeted toward Gen Y investors, young adults in their 20s entering the workforce, whose goal it is to retire in or within a few years of 2060. The asset allocation of the funds becomes more conservative as they approach the target date.