Today's Top Stories Also Noted: Spotlight On... Private equity funds eye 401(k) assets News From the Fierce Network:
Today's Top News1. Equity ETFs show their strength
The stunning surge of the S&P 500 and other major indexes to record highs has prompted a rise in inflows to equity products. Exchange-traded funds (ETFs) have been among the big winners. Investors bought $70.1 billion in ETFs in the first quarter of 2013, according to BlackRock data, as noted by the Financial Times. More than 90 percent of the inflows went to equity-tied ETFs. Fixed income ETFs fared decently as well, taking in more than $10 billion for the eighth consecutive quarter. All in all, assets under management by ETFs have roughly doubled to more than $2 trillion over the last few years. By comparison, assets under management by hedge funds now total roughly $2.5 trillion to $2.7 trillion. So are there any losers as this trend plays out? As of now, it's pretty clear that the strong inflows into equity ETFs have stolen some thunder from stock mutual funds. But these funds have experienced strong growth nonetheless. Inflows in the first two months of the year hit about $140 in open-ended mutual funds alone. Bond funds seemed to hold their own even better than stock mutual funds. Obviously, clients as of now still do not associate fixed income investing with exchange-traded products, though that is starting to change as ETNs gain in prominence. For more: Related Articles: Read more about: Mutual Funds, ETFs
2. Cohen's advisor explains conspicuous consumption
In the days following Steven Cohen's historic $616 million settlement with the SEC over insider trading charges, the founder of SAC Capital was right back in the news for some very conspicuous consumption. News reports surfaced that Cohen had bought a Picasso for $155 million (he actually paid $150 million) and that he had closed on the purchase of a $60 million estate in the Hamptons. Some people took umbrage with what appeared to be a consciously timed spending spree, one meant to inform the world that the $616 million settlement was no sweat off his back. Some speculated that it was part of an attempt to shield assets from the government. But DealBook reports that "Sandy Heller, Mr. Cohen's art adviser, said this week 'that the sale was completed in early November of last year, a few weeks before the insider trading cases against SAC Capital entered a more serious phase with the indictment of one of his former employees.'" All in all, while Cohen's team does not want to minimize the effect of the $616 million settlement, it's doubtful that it will wreck his finances. It's not like he had to cancel the art or real estate deal. Of course, he still faces possible charges. So the saga is hardly over. For more: Related Articles: Read more about: SAC Capital, Steven Cohen 3. Goldman Sachs, JPMorgan to benefit from bank pullbacks
There are times when banks withdraw significantly from certain markets, to the delight of competitors. One good example is playing out right now. Bank of America (NYSE:BAC), by dint of its disastrous Countrywide purchase in 2008, has been forced to invest massively in foreclosure remediation, which has imposed some huge opportunity costs. The bank was in poor position to capitalize on the current uptick in new mortgage business, and that has opened the door to others, particularly Wells Fargo (NYSE:WFC). Another example is when, in the aftermath of the financial crisis, Morgan Stanley (NYSE:MS) decided to ratchet back in trading activity, which opened the door to Goldman Sachs (NYSE:GS) to carve out even more market share. For a while, the gilded bank feasted on fat spreads and higher commissions. A similar dynamic may be playing out now, with even more upside for select banks. Goldman Sachs president Gary Cohn, as noted by the Financial Times, told reporters in Brazil: "We are seeing capacity come out of our competitive landscape for the first time in 50 or 100 years." He continued: "We are seeing the big international banks, outside of ourselves and JPMorgan, really taking pretty substantial steps back from the market and we haven't seen that in the entire history of banking." This is a surprisingly bold statement, given that executives rarely like to speak directly about competitors. But there's no doubt that big banks, especially in Europe, have been buffeted by lots of powerful headwinds, which has them eschewing risk aggressively. The ranks of scaling back banks include Credit Suisse, Barclays, Deutsche Bank and of course UBS, which seems to want to dramatically scale back in investment banking and capital markets, are all taking steps to reduce trading risk. You do have to wonder if JPMorgan (NYSE:JPM) will join the ranks of risk reducers, at least in the short-term. It has all but gutted the CIO unit that was responsible for the London Whale "hedging" fiasco, and that capacity ultimately may not return to the same degree. For Goldman Sachs, however, this is great news, as it once again finds itself in the sweet spot. For more:
Read more about: Bank of America, Morgan Stanley 4. Sallie Krawcheck's advice on women executives
Sallie Krawcheck, who rose far at two premiere banks before stepping aside, has an interesting take on what it takes for women to succeed on Wall Street. She says the secret is sponsorship. You might be thinking, "Yeah, we all need a mentor to move ahead." But Krawcheck draws a distinction between mentorship and sponsorship in an interview with the New York Times: She notes that, "Sylvia Hewlett at the Center for Talent Innovation has been doing some very interesting work on the importance of sponsorship. For years, we've talked about mentors. Responsibilities are different for mentors. A mentor is someone you go to, you have a cup of coffee, you give them advice, you shoot the breeze for a while and away you go. A sponsor is someone who pulls people along. Very successful people have sponsors. In fact with Sheryl Sandberg, if you look at her, her sponsor was Larry Summers. So there were powerful people in her career, and in my career, who proactively supported and pulled us along." She says her sponsor at Sanford Bernstein was Chuck Cahn. At Citigroup, "there was a period of time when Sandy Weill was as well," she noted. Her prescription makes a lot of sense. But in practice, it would likely be rather useless to start up formal sponsorship programs for high-level promotion purposes. Frankly, such programs would likely get about as much respect as mentorship programs, which exist at many companies. Sponsorship is no doubt a powerful force in the executive suites, but it usually happens organically and spontaneously. For more women to find sponsors, the best prescription would be to get more women promoted to C-level positions so they could legitimately serve as sponsors. For more: Related Articles: Read more about: Wall Street, Sallie Krawcheck 5. Bank of America summons top managers to hike revenue
The top banks have done yeoman's work in putting the financial crisis in their rear view mirrors. The effects are still lingering, but the hemorrhaging has slowed dramatically. Much of the progress has been on the expense side, as all banks have wielded the axe in terms of headcount and other costs. On the revenue side, there's been much less progress. Some big cash cows in the industry were gutted in the financial crisis and immediate aftermath. The entire securitized gravy train that was powered by individual mortgages imploded, and that revenue hasn't returned. At the same time, the Durbin Amendment took a huge chunk of revenue out of consumer bank operations, and that revenue has yet to return. The big question for years has been "what's next?" But it has yet to be answered. Bank of America (NYSE:BAC) would like to get serious about hiking revenue. As noted by Bloomberg, revenue has dropped every year of CEO Brian Moynihan's three-year tenure, even as he made great progress in other areas. To reverse the revenue trend, Moynihan has convened 100 regional executives to a two-day conference in Chicago, where they will be held accountable for their efforts to jack revenue. The focus apparently will be on cross-selling. "Under Moynihan's plan, regional leaders will be graded and ranked on whether they meet targets in about 30 categories of referrals, said the people. One metric could be how many leads commercial bankers are sending to financial advisers, said one person. Referrals reached 1 million last year...The regional leaders, called market presidents, previously had a largely ceremonial title as a bank representative for activities including charitable giving in their city or state, according to the people. Most also have full-time jobs in areas including wealth management and corporate banking. Moynihan's push coincides with Bank of America's new marketing campaign, scheduled to be introduced this month, which emphasizes the ways customers can be served by deposit, credit- card, mortgage, wealth-management and investment-banking units, said the people." Cross selling as a retail strategy has had a mixed record in the industry. Just about every big bank pays homage to the concept, but the synergies have been disappointing at the sales level. Wells Fargo (NYSE:WFC) as of now is considered the industry leader. We'll see if Bank of America can unseat it over the next year or two. For more: Related Articles: Read more about: Bank of America, banks Also NotedSPOTLIGHT ON... Private equity funds eye 401(k) assets It's no secret that private equity funds are moving downstream in their efforts to find fresh capital. They have now turned to the 401(k) market, which currently holds $3.6 trillion on behalf of Americans, many of them nonqualified investors. Ideally, the private equity industry would like to "get on the shelf," that is, make their funds available to people via 401(k) platforms. The goal would be to make as easy to invest in a private equity fund as it is to invest in a mutual fund. We're a long ways from that. But some firms will see other products--such as traditional funds--make it quickly on to the shelf. Article Company news:
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Friday, April 5, 2013
| 04.05.13 | Equity ETFs show their strength
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