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Fund News Advisors Can Use: Sustainable Funds Attract Record Flows in 2020

Fund News Advisors Can Use: Sustainable Funds Attract Record Flows in 2020

In this week’s fund news, investors flock to sustainable funds, is sold, and advisors prefer a digital wholesaling relationship.

Sustainable funds were a bright spot in a difficult 2020, with these open end and exchange traded funds in this segment taking in a record $51.1 billion in net flows last year, more than twice the previous record set in 2019, according to Jon Hale, Morningstar’s director of sustainability research. These funds accounted for nearly a quarter of all fund flows in the U.S.

“Sustainable investing has become increasingly relevant because of the climate crisis and the growing criticism of the shareholder-primacy view of the corporation,” Hale writes. “The COVID-19 pandemic has underscored the need for corporations to focus on other stakeholders, especially workers. Sustainable investment supports the transition to a net-zero economy and to a stakeholder model that can create more value for shareholders, people, and the planet over the long run.”

The list of sustainable funds also continues to grow. There were 392 sustainable funds in the U.S. by the end of 2020, up 30% from 2019. That’s a fourfold increase over the past decade, Morningstar says.

That list does not include many funds that say they consider ESG factors when investing, although it’s not a central feature.

“Just two years ago, it was uncommon to find any reference to ESG in the offering documents of traditional funds,” Hale wrote. “Not anymore. Many funds now indicate in their prospectuses that they may consider ESG factors at some point in their investment process. This trend will likely continue, given the ESG commitments most asset managers are making.”

ETFS Capital Acquires

ETFS Capital, a London-based strategic investment company led by Graham Tuckwell, the founder of ETF Securities, has acquired, which provides news, analysis and education on exchange traded funds, from Cboe Global Markets. Terms of the deal were not disclosed.

Bats Global Markets, now part of Cboe, bought in 2016. In 2015, FactSet Research Systems bought’s data and analytics business.

Since the website’s acquisition by Cboe, it has grown its multimedia business to include webinars, events, videos and podcasts.

"All participants want more effective and innovative ways to share, analyse and understand the evolution of the global ETF industry, so we are acquiring and further investing in to make this a reality,” Tuckwell said, in a statement. " is also expected to benefit from the related businesses and expertise across our portfolio, covering data, analytics, index services and front office technology amongst others, to help unlock further innovation opportunities."

ETFS Capital also has stakes in ETF Stream, a European ETF website, and AltFi, a website for the global fintech community.

Betterment for Advisors Rolls Out Model Portfolios 

Without fanfare or a press release Betterment posted to its blog for advisors this week the availability of something long sought by wealth managers on the platform: portfolio creation.

Called custom model portfolios, advisors can now create their own ETF-based portfolios and get automated rebalancing, tax-loss harvesting, asset location, tax-optimized sales for withdrawals and even glide path rebalancing. Only ETFs are supported, at least for now, no mutual funds, single stocks, or other securities.

As stated in the post, Betterment will incorporate an advisor’s capital markets assumptions into the automated planning and projection features as well.

While advisors get access to custom model portfolios for no additional cost, doing so does require moving over $2.5 million in client assets, according to Betterment spokesperson Danielle Shechtman.

In her email response with additional details it was noted that participating firms are asked to commit assets within a 90-day timeframe “in order to justify the cost for Betterment to construct and maintain these portfolios.”

The Wholesaler Relationship Goes Virtual

The vast majority of advisors are communicating with mutual fund wholesalers remotely, according to a recent analysis by Cogent Syndicated, which surveys 400 advisors a month, and Escalent, a human behavior and analytics firm.

Forty-two percent of advisors indicated that they interacted with external wholesalers via the phone, 40% via email and 14% via videoconferencing. Just 4% of advisors met with a wholesaler in-person in October and November 2020.

And the data would indicate that advisors prefer that virtual relationship. On average, advisors rated the impact of these phone conversations a 7.6 on an 11-point scale. They rated the videoconference interactions a 7.4, and emails a 6.7. There was no noticeable difference in the ratings for these digital interactions from a year ago, when in-person meetings were more of the norm.

“This is strong evidence for a continued shift toward hybrid distribution models,” said Meredith Lloyd Rice, vice president at Escalent, in a statement. “Certainly, these types of remote interactions can present some challenges in developing deep, personal connections and may not be the right fit all of the time. However, many advisors appreciate the accessibility of virtual meetings.”


SPAK Hits $100M

The first exchange traded fund to invest in SPACs, or special purpose acquisition corporations, has gathered more than $100 million in assets under management in less than six months. The Defiance Next Gen SPAC Derived ETF (ticker: SPAK) was launched on Sept. 30, 2020.

In the last three months ending Jan. 31, the fund has returned a net 34.56%.

"Defiance's SPAK ETF allows investors access to the largest and most liquid SPACs in a diversified rules-based basket (60% post-merger, 40% pre-deal SPACs). These include big names like Bill Ackman and Chamath Palihapitya," said Sylvia Jablonski, chief investment officer and co-founder at Defiance ETFs.

SPACs, which are "blank check" companies designed to take companies public without going through the traditional IPO process, have become white hot, with SPAC activity at all-time highs. But in recent op-ed, recruiter Jonathan Henschen argues that the results are so far have been abysmal for investors.

TAGS: Mutual Funds
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