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Morningstar joins race to provide direct indexing services
September 8, 2021--Acquisition of Moorgate Benchmarks follows similar deals by BlackRock, Vanguard and Morgan Stanley
The Chicago-based group operates across credit ratings, investment research and wealth management, and is an indexing specialist focused on developing customized, personalized indexes that are central to direct indexing.
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Source: FT.com
The Fed-Beige Book
September 8, 2021--Overall Economic Activity
Economic growth downshifted slightly to a moderate pace in early July through August. The stronger sectors of the economy of late included manufacturing, transportation, nonfinancial services, and residential real estate. The deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most Districts, reflecting safety concerns due to the rise of the Delta variant, and, in a few cases, international travel restrictions.
The other sectors of the economy where growth slowed or activity declined were those constrained by supply disruptions and labor shortages, as opposed to softening demand. In particular, weakness in auto sales was widely ascribed to low inventories amidst the ongoing microchip shortage, and restrained home sales activity was attributed to low supply. Growth in non-auto retail sales slowed a bit in some Districts, rising at a modest pace, on balance, across the nation. Residential construction was up slightly, on balance, and nonresidential construction picked up modestly. Trends in loan volumes varied widely across Districts, ranging from down modestly to up strongly. Reports on the agriculture and energy sectors were mixed across Districts but, on balance, positive. Looking ahead, businesses in most Districts remained optimistic about near-term prospects, though there continued to be widespread concern about ongoing supply disruptions and resource shortages.
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Source: federalreserve.gov
State Street Buying Brown Brothers' Unit for $3.5B
September 7, 2021--State Street Corp. has agreed to buy Brown Brothers Harriman & Co.'s investor-services business for $3.5 billion in cash, adding an operation that safeguards about $5.4 trillion in assets.
The deal includes the unit's custody, accounting, fund-administration, global-markets and technology-services businesses, the companies said Tuesday in a statement.
State Street is one of the world's top custody banks, holding customer assets for safekeeping, and overseeing other clearing and settlement functions for institutions. Boston-based State Street said it’s now targeting a pretax margin of 31% because of expected earnings growth from the acquisition.
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Source: thinkadvisor.com
ETF Traders Take $1 Billion Shot on Reviving the Reflation Trade
September 2, 2021--Exchange-traded fund investors are making another attempt at the reflation trade just two months after a fall in Treasury yields signaled its death.
Traders poured a combined $1.1 billion into the iShares U.S. Real Estate ETF (ticker IYR) and iShares TIPS ETF (ticker TIP) on Wednesday, according to data compiled by Bloomberg.
Over $900 million was also pulled from the iShares 7-10 Year Treasury Bond ETF (ticker IEF) in a bet both yields and cyclical stocks are headed higher.
While cyclical sectors dominated the leaderboard for the first half of 2021, they've lagged in recent months as the delta virus variant prompted concerns about the pace of the economic recovery. But Wednesday's flows suggest that investors are putting money behind the dormant reflation trade, according to cross assets strategist Charlie McElligott at Nomura Securities.
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Source: bnnbloomberg.ca
Congressional Budget Office-Inflation and Income
September 1, 2021--CBO addresses how household income is affected when inflation exceeds the growth of labor income, who pays higher taxes when inflation rises, and how high and unexpected inflation affects economic growth
This letter addresses the three questions that the Honorable Jason Smith asked about the effects of high inflation.
You asked how household income is affected when inflation exceeds the growth of labor income. Inflation has eroded the purchasing power of families. From the second quarter of 2020 through the second quarter of 2021, compensation per hour of work (as measured by the employment cost index for workers in private industry) increased by 3.1 percent.
Over the same period, the price index for personal consumption expenditures (which the Federal Reserve uses to define its 2 percent long-run goal for inflation) increased by 3.9 percent. The purchasing power of compensation for an hour of work has therefore declined by about 0.7 percent over the past year. A year ago, the Congressional Budget Office did not project that the erosion of purchasing power would occur.
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Source: CBO(Congressional Budget Office)
Traders Sour on Clean Energy as Bets Against Invesco ETF Surge
August 30, 2021--A hot Wall Street trade is cooling down as supply-chain chaos emboldens short bets against one of Invesco Ltd.'s clean-energy ETFs.
With the green industry facing all manner of logistical snafus, as many as 9.9% of outstanding shares in the $3 billion Solar ETF (ticker TAN) were on loan to short sellers last week, according to data from IHS Markit Ltd. That's the highest level since April, when short interest reached 10.1% just before the fund slumped 25%.
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Source: bnnbloomberg.ca
ETF pioneer Grossman urges asset managers to adopt direct indexing
August 30, 2021--Former iShares chief says investment houses are often slow to consider new technology.
Grossman said established investment houses must adapt to the phenomenon. "A lot of assets are tied up in traditional, actively managed and...
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Source: FT.com
CBO's Model and Projections of U.S. International Investment Holdings and Income Flows: Working Paper 2021-10
August 27, 2021--Projections from CBO's international financial forecasting model show the U.S. net international investment position rising modestly over the 10-year forecast period. Net international income is expected to rise as a share of GDP through 2023 before declining through 2031.
Summary
Since 1982, growth in the value of foreign investments in the United States has exceeded growth in the value of U.S. investments abroad and, as a result, the U.S. net international investment position has been negative and trending lower.
Even though the value of foreign investments in the United States has exceeded the value of U.S. investments abroad, the total income earned by U.S. investors on their foreign asset holdings has historically exceeded the total income earned by foreign investors on their U.S. holdings. The United States is able to earn positive net international income despite its negative net international investment position because the average yield on U.S. investments abroad has exceeded the average yield on foreign investments in the United States.
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Source: CBO (Congressional Budget Office)
Pressure builds on active funds fees after ETF price war
August 27, 2021--Overall expense ratios across all funds have halved over the past two decades
Fierce price competition between ETF providers who have knocked out fees for passive products is currently having a significant impact on actively managed funds, according to a new Morningstar study.
According to an annual survey, the average expense ratio consists of management fees and other ongoing costs to own a fund, from 0.93% to 0.41% of total investment....
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Source: FT.com
Regulators urge banks to assess risk in teaming with fintechs
August 27, 2021--Federal regulators on Friday issued new guidance to help community banks assess risk as they increasingly consider partnering with financial technology companies to meet customers' evolving digital preferences.
The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency released a guide suggesting that banks consider six key pillars of due diligence when evaluating potential fintech partners. Banks should assess a fintech's: business experience and qualifications; financial condition; compliance with laws and regulations; risk management and control processes; information security; and operational resilience, according to the guide.
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Source: americanbanker.com
