Invesco

Best Blogs of the Week #275

Posted by Anu Heda on Aug 21, 2017, in Best Blogs of the Week , tagged with aberdeen, Invesco, MandG

Formats matter in blog posts. This week I highlight three important blog components. Not shockingly, high-quality posts have:

an excellent title
at least 1 compelling or different graphic
high-quality, concise writing

Best title comes from…

… Aberdeen for “Week in review: White House meltdown”

A compelling chart from …

… M&G for “Be wary of our obsession with anniversaries”

formats

High-quality writing comes from …

… Invesco for “Global fixed income: What market threats lie ahead?” with this

The good: The synchronized global cyclical upswing will likely continue, in our view. This would mean good growth with inflation generally below major central banks’ targets — a situation that would encourage policy normalization but without too much tightening.
The bad: In the longer term, however, the trends don’t look as positive. Adverse demographics and low productivity growth are likely to restrict economic growth prospects in developed and emerging markets.
The ugly: Key political and policy threats in the US, Europe and China represent downside risks to the current cyclical upswing.

A To-Do List for Marketing Smart Beta

Posted by Mike McLaughlin on Sep 12, 2016, in Thoughts , tagged with BlackRock, ETFs, Invesco, smart beta

Sound familiar?

A new category of investment products emerges as an attractive alternative to long-established strategies
Asset managers flood the market with product to appeal to the retail (advisor/investor) market
AUM takes off, with highly-optimistic long-term growth projections

Five years ago this was the storyline for liquid alts. And while the story is far from complete and optimism remains in pockets, the last few years have taken some air out of this high-flying balloon.

^{Source: Financial Times}

The path of liquid alts comes to mind based on the explosion of attention, products, and assets in smart beta. An ETF.com survey showed that 99% of advisors expected to maintain or increase smart beta usage in 2016, and BlackRock recently projected smart beta AUM to nearly quadruple by 2020.

The industry has gotten off to a strong start in marketing smart beta to retail audiences. Education is a central element, and firms have made good progress:

Establishing ‘smart beta’ as a baseline term, then using proprietary terminology to support proprietary offerings
Utilizing similar nomenclature and definitions for key factors (e.g., value, momentum, low volatility, etc.)
Differentiating smart beta strategies in general from traditional active and passive

Of course there is a long way to go with marketing just one of the myriad factors that will impact the long-run success of the category. So what areas represent the next opportunities for improving the retail marketing of smart beta? I see three:

1. Providing Market Context

Once the definition of the underlying components of smart beta are understood, the next step lies in helping advisors and investors understand the context surrounding factor performance. This is an important topic in part because of how the outcomes associated with individual factors vary over time (i.e., market conditions).

^{Source: Invesco PowerShares}

Much in the way we’ve seen asset managers map mutual funds to investor needs and desired outcomes, firms can begin to provide similar context on different factors and factor combinations (and therefore strategies). Even something as high-level as this table from BlackRock gives an advisor or investor a valuable anchor as they learn about smart beta.

^{Source: BlackRock}

The need for context relates directly to the next messaging opportunity – implementation.

2. Addressing Implementation

Where some progress has been made in putting context around the different approaches to smart beta, firms have been less successful in communicating how smart beta should be integrated into existing portfolios (which is actually something often done well on the institutional side). With liquid alts, most firms started with a simple message that referenced:

Improving diversification (via assets not correlated with traditional stocks and bonds)
Targeting a specific (and modest) allocation

A straightforward analog with smart beta is largely missing, and some of the concepts used today are likely too complex for much of the retail market.

^{Source: BlackRock}

Crafting a digestible, clear message on how to apply smart beta will help firms capitalize on the current wave of interest and assets.

3. Clarifying the Brand

I’ve touched on this before so won’t dwell on it here. And while it obviously doesn’t apply to every firm, the many established firms that have recently entered the ETF and smart beta space face a unique challenge in merging this effort with longstanding brand messaging.

As the lines between passive and active investing continue to blur, there’s an opportunity, or more frankly a need, for individual firms to recast how they want to position themselves in the minds of clients. Branding is a long-run consideration, but one that several firms have largely neglected (or deferred) so far.

^{[ banner image via Stephen Dann ]}

Best Blogs of the Week #244

Posted by Anu Heda on Sep 06, 2016, in Best Blogs of the Week , tagged with Invesco, State Street, Vanguard

Three excellent posts this week including a one-year post-mortem on the flash crash (Feels like many years ago).

Invesco – One Year Later– In the wake of last year’s volatility, many market participants pinned the blame on ill-conceived regulations and a lack of price visibility. Most agreed that something needed to be done to prevent another meltdown. One year later, has anything changed?

SSgA – 3 Reasons to Take a Look at Emerging Market Debt– But it’s important to understand that EM debt and EM equity are not the same. Over the past ten years, EM debt has more than doubled the return of EM equity, but with only one third the amount of volatility

Vanguard – 40 years of innovations in indexing – And the pitch for indexing wasn’t outperformance; it was to help investors minimize the cost of investing in a broad sense. If you think about it, not being broadly diversified has a cost, portfolio turnover generates transaction and tax costs, and, of course, active management advisory fees are a cost. Indexing hits at those headwinds straight on.

Dispersion for EM Debt via SSgA (not Flash Crash)

Best Blogs of the Week #243

Posted by Anu Heda on Aug 29, 2016, in Best Blogs of the Week , tagged with BlackRock, Invesco, Loomis Sayles

Negative interest rates? It’s been in the news quite frequently, but the Blackrock post here explains the topic better than I’ve seen elsewhere. Along with that post, three others worth highlighting this week as we approach summer’s end.

BlackRock – How do negative interest rates work? – who would buy a negative yielding security? Obviously not investors looking for income. However, there are institutions like some insurance companies and banks who hold government bonds for specific reasons, such as to meet regulatory requirements. These investors need to hold bonds for safety, no matter what the yield is.

BlackRock – Warming up to emerging markets – Within EM equities we prefer countries showing economic improvement or having clear reform catalysts, including India and ASEAN countries.

Loomis Sayles – The Connected Consumer: 3 Key Themes – I believe the future of the automotive industry will be defined by the ‘connected car’ – vehicles as an extension of our lives.

Invesco – What will real estate’s new sector status mean for investors? – Potential benefits include increased visibility, a larger investor base and a reduction in long-term volatility. We will closely monitor the REIT market for relative value opportunities that may arise from index and ETF changes, essentially nonfundamental drivers of performance, over the short term.

Two Ads, Portfolio Construction, and a Strategic Dilemma for Asset Managers

Posted by Mike McLaughlin on Jul 11, 2016, in Thoughts , tagged with active management, advertising, Invesco, portfolio construction, robo-advisors

A few years ago we worked with a large asset management firm to conduct a strategic review of the robo-advisor market. At the time our client simply wanted to learn more about the space and consider the implications, both good and bad, of these potentially-ascendant companies.

One topic we addressed during the work was portfolio construction. Specifically, the fact that for the most part asset managers held a mostly undefined role in it for advisors and investors.

While we’ve had this conversation many times since, it popped directly into my mind upon encountering two new “Uncommon Presentation” ads from Invesco. Each triggered very different reactions for me. First up, “It’s time to bench the benchmarks”:

This ad relays exactly the type of message I’d expect to see from Invesco or any firm with significant actively-managed offerings. It relays the need to build portfolios with more than just straightforward index (or low active share) strategies. The implication is for investors who buy into that concept to look at Invesco as someone who can offer solutions to plug into their portfolios. Makes perfect sense.

Next up, “Goodbye 60/40. Hello 50/30/20.”:

This ad leaves me less clear. The message is direct – investors need to shift from a traditional portfolio allocation to one that utilizes more alts – but the role Invesco can and will play is not. If the ad established Invesco as a leading alternatives provider, a firm that can help investors with the 20% allocation, that would fit. However, the ad is framed with and ultimately focused on overall portfolio construction (the 50/30/20).

This ties back to the issue we raised in the robo project: what role, exactly, does an intermediary-focused (i.e., non-direct) asset manager play in helping advisors and investors construct portfolios? At this moment, for the most part, I’d argue the answer is “not much”.

Of course maybe the ad is simply the jumping-off point for more discussion, which is fine. But I do think it illustrates two critical questions for most traditional, active, retail-centric asset managers to address:

Is it feasible for us to be viewed as a key resource in portfolio construction or are we too far down the road of ceding that ground to our distributors, direct firms, and new entrants like robo-advisors?
If it is feasible, what is our strategy?

The rash of robo-advisor acquisitions supports that idea that asset managers believe that becoming a more prominent resource for portfolio construction is feasible and necessary. But the messaging around these acquisitions has been carefully curated to be non-threatening to the status quo (i.e., “we’re doing this to help, not challenge, advisors”). And I don’t know that 20 different asset managers offering 20 nuanced robo platforms is an outcome, even in the short-term, that any single firm should view as favorable.

So when it comes to portfolio construction and the role asset managers wish to and can play in it, “what is our strategy?” is a more pressing question than ever.