Author: Mike McLaughlin

Reflation

The Positioning Impact of Launching ETFs

Posted by Mike McLaughlin on Feb 03, 2016, in Thoughts , tagged with , , ,

Last week OppenheimerFunds rebranded the recently-purchased RevenueShares ETF lineup as the Oppenheimer Factor Weighted ETFs. Given that the firm is new to the smart beta ETF space, a simple question crossed my mind: how do they now introduce themselves as a firm?

Traditional (for lack of a better word) actively-managed, mutual fund-oriented firms face a number of important strategic marketing and positioning questions when entering the ETF space. But among the most fundamental is figuring out how to adjust the messaging of who they are and what they do.

In many cases there is an established, legacy messaging platform that emphasizes elements – active management, specific investment philosophy or process tenets – that fail to mesh seamlessly with the expanded product line. As a result the new ETFs appear to be more of an opportunistic “bolt-on” than something grounded in the core beliefs of the firm.

OppenheimerFunds’ illustrates one approach to trying to overcome this issue, namely via a tagline (The Right Way to Invest) and four key principles that focus primarily on themes that are vehicle and strategy agnostic. But there are several firms whose stories fail to match up with their newly-expanded offerings. They, and the anticipated entrants into the ETF universe, will need to reconsider how they primarily want to define themselves and communicate their capabilities to the market.

[ image courtesy of Tony Hall ]

How Good is T. Rowe Price’s Forecast?

Posted by Mike McLaughlin on Jan 15, 2016, in Thoughts , tagged with ,

T. Rowe Price recently announced a significant expansion of its advisor-focused Sales efforts. Per Ignites (subscription), the firm plans to:

  • Double the size of the 32-person broker-dealer Sales force
  • Add 4 internals to the RIA team in order to create a 1:1 external-to-internal ratio

These announcements always make a splash in the industry. People are interested in questions about the potential success of the effort – does a firm like T. Rowe Price have enough brand equity with advisors to warrant such an investment? does a 1:1 ratio make sense for RIA teams?

But the part that interests me most is the proposed timeframe of the build-out, which T. Rowe Price pegs as 2-3 years. Why? Because the time horizon:

  • is not so short as to make the plan a sure thing, as firms can generally accomplish short-term initiatives with relatively high probability
  • is not so long as to make the projection somewhat meaningless, as the specifics of a 10-year plan within a given firm tend to boil down to pure speculation

Three years is short enough for a firm to make a reasonable projection, and long enough where many things can change and impact the outcome. This makes the significant and public nature of T. Rowe Price’s plan interesting. Consider some of the things that could materially impact the expansion plan over 3 years:

  • a bull or bear market
  • strong or weak relative product performance
  • shifts in advisors’ and investors’ product preferences toward or away from T. Rowe Price’s offerings
  • management team stability or turnover
  • operationalizing and managing a much bigger Sales team

I’d imagine T. Rowe Price has modeled the various scenarios and is committed to the plan. But I also think that the non-controllable (and even some of the controllable) variables are potentially-impactful. So, over the course of the proposed timeframe there is at least a decent chance that the firm will markedly deviate from the plan as it is defined today.

It will be interesting to see, 2-3 years down the road, just how good T. Rowe Price’s forecasting proves to be.

Two Thoughts on Smart (or Strategic) Beta

Posted by Mike McLaughlin on Nov 17, 2015, in Thoughts , tagged with , , , ,

A few weeks back I commented in a story on OppenheimerFunds’ move into the smart (or strategic) beta realm. Let’s be generous and say that my quote was among the more generic in the story. So I thought I’d take a second to lay out two thoughts based on points within the article.

1. Smart beta WILL be successful

The parade of managers lining up to launch smart beta strategies is a pretty good indication, despite some mixed results in asset gathering. The simple fact though is that there is a sizeable gap between the philosophies of traditional active and passive strategies. There is no reason that strategies that include elements of both shouldn’t be successful as well. The idea that these strategies are solely a marketing gimmick is disingenuous.

If the asset management industry is a (somewhat uneven) barbell with passive at one end and active at the other, I believe the eventual (long-term) outcome is a more evenly-distributed pipe where the middle has significant or even as much traction as the endpoints.

2. Smart beta should align itself with active

To some degree I’ve always felt that the “passive” label for investments is a misnomer. These are still purposeful strategies designed by human beings based on their ideas. So while the day-to-day decision-making on holdings are removed from a portfolio manager, the underlying guidelines remain very much human. These are not robotic strategies divorced from the thoughts of people.

This is even more evident with smart beta strategies, which exist wholly because people think they can improve upon (or at least offer alternatives to) traditional passive. Many smart beta managers regret the prevalence of the word ‘beta’ in the category name; even so, few push to align these strategies explicitly with active. That should (and I believe will) happen more, especially since many of the market entrants are traditional active players. If nothing else, it’s a more accurate way to present what these strategies are.

[ Image courtesy of ValueWalk ]

Nothing New Under the (Visual) Sun?

Posted by Mike McLaughlin on Jul 23, 2015, in Thoughts , tagged with , ,

We recently completed a project on asset managers’ visual branding strategies: the way a firm’s logo, color palette, and imagery tells and reinforces the value proposition (or, in some cases, fails to do so).

Among the firms we focused on were AB and Deutsche Asset and Wealth Management. Why? AB’s massive rebrand from January 2015 represents the type of overhaul we simply don’t often see in the industry. And few firms talk as much and as publicly about their visual brand as Deutsche Bank.  … [read more]

Are We Overrating Millennials?

Posted by Mike McLaughlin on Jun 23, 2015, in Thoughts , tagged with ,

Millennials are a hot topic in the industry. We have done multiple millennial-centric projects this year, and every day seems to bring another conversation focused on the same set of questions:

  • How can we help millennials overcome their conservative, fearful attitudes about investing?
  • How should we leverage their (self-stated) interest in socially-responsible (ESG) investments?
  • And most importantly, how do we make sure we capitalize on the $41 trillion (or is it $59 trillion?) in wealth they will inherit over the decades to come?

This has made for interesting discussion and interesting work. Yet at the same time I can’t shake the feeling that the importance of millennials to asset managers over the next 10 years is being overrated.  … [read more]