BrokerDealers Balk and Walk From Top ETF Adviser Reply

F-Squared Investments Receives Wells Notice From SEC, and Brokers Back Away

Extract courtesy of WSJ and reporter Chris Dieterich and Corrie Dreibusch

Three large brokerage firms are distancing themselves from money manager F-Squared Investments Inc., amid regulatory scrutiny of whether the firm overstated its track record.

RBC Wealth Management and Raymond James Financial Inc. RJF +0.28% have set limits on how much new business its advisers can conduct with F-Squared, according to people familiar with the policies. Wells Fargo Advisors has put the firm on “watch,” essentially a caution to advisers who either have invested or are considering investing clients’ money with the firm, people familiar with the matter say.

F-Squared, which oversees $27.7 billion, said in a filing submitted Friday that it had received a so-called Wells notice from the Securities and Exchange Commission indicating the commission is considering bringing a civil case against the company. The SEC notice isn’t a formal allegation of wrongdoing and gives the company a chance to respond.

Late last year, the firm told clients it was being investigated by the SEC, and earlier this year the company said the regulator’s investigation found the firm’s historical returns overstated performance. F-Squared said it has “taken significant steps in recent years to improve its controls to ensure that these sorts of problems will not recur,” a spokesman for F-Squared told The Wall Street Journal on Wednesday.

What’s Next? ETF for Wall Street Women Reply

MarketsMuse post courtesy of extract from Investors Business Daily..Editors clipped original headline: “Wall Street Women Touch Each Other: BrokerDealer ETF Gals Form “WE”

Linda Zhang, Windhaven Investment Mgt.

“When you put 40 smart and gorgeous women together, great things will just happen,” said Linda Zhang, senior portfolio manager at Windhaven Investment Management in Boston.

Earlier this year, Zhang helped to found Women in ETFs (WE), a platform for women in the industry to connect, support and inspire each other. The idea came about after she ran into an old colleague — Joanne Hill, head of institutional investment strategy at ProShare Advisors — during an Inside ETFs conference in Florida in 2013.

“We looked around this huge conference, there were very few of us who were women,” said Zhang, who is WE’s vice president. “We were convinced there were other people like us. We thought perhaps we can start something.”

Zhang and Hill discussed their idea with Sue Thompson, head of institutional asset management and RIA for BlackRock. Thompson, an industry veteran, responded excitedly. Soon, others came on board: Michelle Mikos, ETF business development director at Invesco PowerShares, and Deborah Fuhr, managing partner at ETFGI, a research firm in London.

On July 31, WE announced its nine-member board of directors. Besides Zhang, it includes Thompson and Hill as co-presidents, Fuhr as external organization liaison, and Mikos as secretary. Industry legend and securities attorney Kathleen Moriarty — nicknamed “SPDR Woman” for her role in the SPDR S&P 500’s ( SPY ) debut in 1993 — also serves on the board.

In recent months, WE has organized professional development events and launched a website as well as a LinkedIn group . The organization now has chapters in Boston, Chicago, New York, Philadelphia, San Francisco, Washington DC, Toronto, London, Paris and Frankfurt.

The Chicago chapter will launch in conjunction with the fifth annual Morningstar ETF Conference in that city on Sept. 17.
Read more: http://www.nasdaq.com/article/women-in-the-etf-industry-launch-a-group-of-their-own-cm381955#ixzz3AvkOuzeh

 

ETF Industry’s Spiderwoman Spins New Web To Advance Bitcoin ETF Reply

marketmuse.com blog post courtesy of extract from bloomberg.com and Christopher Condon

Tyler and Cameron Winklevoss are fighting for approval from regulators for their proposed bitcoin exchange-traded fund. They stand a chance because Spiderwoman is on the case.

So nicknamed for her work on State Street Corp.’s “Spider,” the first ETF when it came to market in 1993, Kathleen Moriarty is the lawyer attempting to shepherd the Winklevoss Bitcoin Trust through the U.S. Securities and Exchange Commission. The twins, famous for their dispute with Facebook Inc. founder Mark Zuckerberg, aim to roll out the first ETF that invests in a virtual asset, an idea that has its skeptics.

“She brings instant credibility to a less-than-credible investment product,” Todd Rosenbluth, director of mutual fund and ETF research at S&P Capital IQ.

International ETF Launches Lead Growth of Exchange-Traded Funds; A Chinese Menu Reply

Below courtesy of extract from today’s ETF.com and their reporter Heather Bell.

Year-to-date through the end of July saw 118 fund launches versus 86 during the same time period last year. However, what’s notable about the increase in launches is the fact that it is driven almost entirely by international equity ETF. In the first seven months of 2014, 55 ETFs targeting that space made their debut versus a mere 25 international equity funds in the first seven months of last year. Among this year’s launches, there are some very clear themes in international equities.

At least 18 of those international equity ETFs could be considered smart-beta or factor-based funds, ranging from the Market Vectors International Quality ETF (QXUS) to the iShares MSCI Europe Minimum Volatility ETF (EUMV) to the JPMorgan Diversified Return Global Equity ETF (JPGE).

Currency Hedging In Vogue

Want GoPro? Go to These ETFs.. Reply

Courtesy of Benzinga via MarketWatch

The hotly-anticipated initial public offering of GoPro GPRO +8.52% this week is one of the largest consumer electronics debuts of the decade.

Shares surged more than 30 percent on Thursday from its IPO opening price of $24 per share, as the company raised $427 million in cash.

The initial success of GoPro may soon pave the way for entry into a number of exchange-traded funds in the near future as well.

The most likely ETF to get the first shot at adding this high definition video maker is the Renaissance IPO ETF IPO +0.09% . This fund allows new publicly-traded companies to be added to its index on the fifth day of trading, and subsequently removes any stocks that have more than two years of history. 

Sec Lending and ETFs: Reading Between The [Disclosure] Lines; A Good Primer Reply

Extract courtesy of Morningstar/ Abby Woodham reporter

“..A well-run index fund is typically characterized by its ability to effectively track its index, lagging only by the amount of its expense ratio. In theory, it should not be possible for an index fund to come any closer to its benchmark’s return–but some do, including funds that utilize full replication of their index’s holdings. A handful of funds even beat their benchmark while perfectly replicating its holdings. How can this be? In many cases, this is an example of securities lending at work…”

“..Mining for Data
There are a handful of ways to get more information on the securities-lending practices of the ETFs in your portfolio. If you notice that your ETF (which is employing full replication) lags its benchmark by less than its expense ratio, it may be an indication that the fund is engaged in securities lending. Morningstar also publishes a calculation called the “estimated holding cost” that directly measures the performance of a fund relative to its benchmark over the past year. There’s a good chance that an ETF with an estimated holding cost that is lower than its expense ratio is also engaged in securities lending.”

For the full article (which necessarily incorporates subliminal promotion of products/services delivered by the ‘masthead’, please click here

Pre-Thanksgiving Special: Custodians Flip The Bird to RIA Customers Seeking ETF Best Execution Reply

  Courtesy of RIABiz and reporter Lisa Shidler

MarketsMuse Editor Note: Kudos to Lisa “Lois Lane” Shidler for her insightful expose profiling how custodians to RIAs excel at squeezing lemons from customers who they must think are lemmings. Though Ms. Schilder neglected to spotlight the fact that custodians systematically sell their customer orders to select principal trading firms (e.g KCG) who cherry-pick orders they can exploit for trading profit, her insight i.e. the practice of imposing exorbitant trade-away fees on those very same customers who seek to secure the real best prices via independent execution only firms is a topic worthy of sharing this story with industry regulators. Too bad those latter folks don’t get it…perhaps because they’re beholden to the biggest custodians in the industry?

Here are a few excerpts:

The big four RIA custodians are now charging advisory firms giant new fees — in the tens of thousands in some cases — relating to some ETF purchases.

Schwab Advisor Services, TD Ameritrade Institutional, Pershing Advisor Solutions LLC and Fidelity Institutional Wealth Services are levying what are known as “trade-away” fees to RIA firms that buy exchange traded funds through a broker-dealer other than the one owned by the custodian. The advisor typically chooses to use these third parties because they believe that RIA custodians are executing trades poorly along the bid-ask curve and forcing them to make ETF purchases at unacceptably high prices.

At first blush the fees look fairly benign. The fee at Fidelity is a $20 fee per account per trade. TD Ameritrade charges $25 per account. Pershing’s fee ranges from $8 to $20 per account depending on the volume of the trade. Schwab declined to disclose its fee through its spokesman, Greg Gable.

These fees have put RIAs like Chris Romano, director of research and trading with Fusion Investments Group LLC in Pittsburgh invests, in a bind in certain instances.

Though his firm manages about $139 million in assets, the bulk of them are institutional and banks custody them. Fusion advises for other RIAs but those assets are held away. In short, his firm manages just $11 million of mostly ETFs with Fidelity’s RIA custody platform, which means Fidelity’s $20 fee is too costly for the size of trades that he does.

“We don’t even consider trading away [in effort to get best execution] at Fidelity because of the high ticket trade away fee,” Romano says. “On the smaller account sizes, it can be a really significant fee. If the fee is $20, that can really add up.”

The Buffet ETF Reply

Courtesy of WallStreet Cheat Sheet

Warren Buffett is one of the most successful investors in history. The chief executive officer and largestshareholder of Berkshire Hathaway (NYSE:BRKA) has navigated numerous bull and bear markets, becoming a multi-billionaire in the process. As a result, he is also one of the most closely followed investors. Courtesy of a new filing, individual investors have a peek at how Buffett is investing.

The Oracle of Omaha is best known as a value investor who takes large positions in well-established companies, waiting for Mr. Market to value them properly. His recent filing with the SEC reaffirms that image. Berkshire Hathaway raised its stake in Suncor Energy (NYSE:SU) and Verisign(NASDAQ:VRSN), but its biggest investments include some of the most popular blue chips known to Wall Street. Here’s a look at Berkshire’s top ten stocks, according to dollar value at the end of September. To continue reading, please click here to visit WallStreet CheatSheet

iBillionaire Index To Track Big Buck Bets; ETF in the Works Reply

Courtesy of Hung Tran/IndexUniverse

MarketsMuse editor: In the category of “what will they think of next?”

A new index tracking the success of billionaire investors went live today, and a related “Billionaire ETF”—perhaps a bit like the Global X Guru ETF (GURU | C-48)—appears to be in the works as well.

iBillionaire Inc. today launched a new index designed for investors to track the investment portfolios of luminaries such as Warren Buffett, Carl Icahn and George Soros. The New York-based firm said in a press release it’s also designing an iBillionaire ETF to boost investors’ portfolios “like a billionaire,” according to the firm.

The iBillionaire Index, like Global X’s $251 million ETF ‘GURU,’  is devised from 13F filings and is composed of the top 30 large-cap equities listed on the S&P 500 in which the billionaire investors have made the most bets. The index will be calculated and distributed by the New York Stock Exchange.

For the full article, please visit IndexUniverse.com

ETFs Now Can Be Placed in Retirement Plans Reply

Courtesy of Tom Steinert-Threlkeld

 

MidAtlantic Trust Company said it had resolved record-keeping problems that have kept exchange-traded funds from being part of holdings in 401(k) and other retirement plans.

The state-chartered trust company said it has resolved a problem with fractional shares that result from trading in ETFs that have kept such funds from being kept in retirement plans. The firm said it will buy and sell whole shares in the market and hold fractional shares as necessary. This will allow “dollar certain” transactions that until this have prevented the information systems that keep track of funds from recognizing and tracking ETF shares.

Shares will be bought at end-of-day prices, allowing same-day settlement for record-keeping purposes. Mutual funds historically have determined the value of their assets at the end of each trading day, for their investors. ETFs, however, follow the three-day settlement cycle of equities markets.

In postings to its Web site, MidAtlantic said this will “allow record keepers the ability to handle ETFs using the same systems and processes they already have in place for trading mutual funds.’’

A technology unit of the company, Mid Atlantic Financial Platforms, has introduced what it calls the ETFxChange, to resolve the record-keeping issues and spur their use in retirement plans.

Shares of ETFs from BlackRock’s family of iShares products, as well as ETFs from PowerShares, Wisdom Tree, State Street and Vanguard also can be handled by the system. Stadion Money Management in Watkinsville, Ga., confirmed that it will use the platform on behalf of its customers.

Roughly 90% of the assets under management at Stadion are placed into exchange-traded funds, according to vice president and portfolio manager Will McGough. But, until now, participants in the plan only see that a portion of their assets are held in the Stadion 2010 Target Date Fund, for instance. Now, investors will see the individual ETFs being bought and sold, as McGough or another manager allocates the purchases or sales across all participants.

Two-thirds of the assets placed in funds managed by Stadion are held in qualified retirement plans, McGough said.

MidAtlantic also launched a related ModelxChange that allows money managers, investment advisors and plan record-keepers to create and maintain investsing models for 401(k) plans that mix ETFs with mutual funds.