Tag Archives: jobs

Distinction Between Mutual Funds And Hedge Funds Is Eroding

The growth of liquid alternatives combined with an evolving regulatory framework is leading to a confluence between ’40 Act mutual funds and private hedge funds, according to Wulf A. Kaal, contributor to the forthcoming Elgar Handbook on Mutual Funds. In an expert from that guide, titled Confluence of Mutual Funds and Private Funds , Mr. Kaal makes the case that mutual funds are becoming more like hedge funds in terms of strategy, while hedge funds are becoming more like mutual funds in terms of regulation. In Mr. Kaal’s view, this calls into question the distinction between mutual funds and private funds. Eroding Distinctions While it’s true that mutual funds and hedge funds still occupy distinct segments of the market, employ some different strategies, serve largely different clients, and are subject to different legal rules, the gulf between the two types of funds is eroding. This is due to a combination of market forces, as retail investors seek out alternative strategies while institutions demand greater liquidity and transparency; and regulatory changes such as the Jumpstart Our Business Startups Act (the “JOBS Act”), which makes it easier for non-accredited investors to fund private, startup enterprises, including via crowdfunding. Alternative AUM Growth In terms of market forces, Mr. Kaal points out that, since 2005, alternative investments have grown twice as fast as traditional investments, in terms of assets under management (“AUM”). Although traditional investments, i.e. long-only stocks and bonds, have seen AUM grow from $37.1 trillion in 2005 to $56.7 trillion in 2013; in terms of percentages, the growth in alternative AUM from $3.2 trillion in 2005 to $7.2 trillion in 2013, is greater. While traditional investments’ AUM grew by a total of 52.8% during the period under review, alternative investments saw their AUM more than double. Rate of Growth Across Alternative Investments Mr. Kaal breaks down AUM growth across three alternative-investment structures: Alternative mutual funds Hedge funds Private equity He also lists the AUM growth for all mutual funds – i.e., mostly traditional assets – as a control group. His findings: While all four categories suffered AUM drawdowns in 2008, alternative mutual funds had by far the strongest growth in 2009, 2010, 2011, and 2012. Alternative mutual funds continued to grow in 2014, but at an abated pace. All three alternative categories showed positive AUM growth for all years, save 2008, while traditional mutual funds lost ground in 2011. Conclusion Market forces and regulatory changes are leading to a confluence between mutual and private hedge funds – but what are the implications of this confluence? Mr. Kaal lists several areas he expects will be impacted, ranging from mutual fund governance to the structure of federal securities law, and he opines that possible effects of this confluence could include “drastic immediate repercussions for market participants.” He concludes his paper by calling for continued monitoring, scholarly evaluation, and regulatory scrutiny of these developments. For more information, download the full report . Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.

U.S. Turns Hotbed Of Hiring: ETFs And Stocks To Surge

The U.S. labor market has been on a hiring spree, outperforming other economies across the globe. The economy added 292,000 jobs in December to add up to 2.65 million jobs for all of 2015. This represented the second consecutive year of strong job growth since 1999. Moreover, the unemployment rate held steady at a seven-year low of 5% for the third consecutive month. While wage growth remained tepid in December with average hourly wages declining by a penny to $25.24, it increased 2.5% for 2015, marking the best year for wage gains since the Great Recession. This shows that wage growth is definitely gaining momentum. The robust data shows that the U.S. is one of the healthiest economies in the world that has been able to withstand global uncertainty stemming from the China turmoil, a relentless slide in oil price and a strong dollar. Further, it has spread optimism into the economy, which is now likely to be able to handle another rate hike, though the Fed is unlikely to raise rates before March. Market Impact Following the upbeat job data, the U.S. stocks initially moved higher, halting a two-day rout that has wiped out $4 trillion from global equities this year. But the renewed slide in crude prices reversed overall gains, pushing the stocks in deep red at the close. Investors could take advantage of the beaten down prices and buy stocks and ETFs that are the largest beneficiaries of job gains. Below, we have highlighted some of the funds that will likely see smooth trading in the days ahead. ETFs to Consider PowerShares DB US Dollar Bullish Fund (NYSEARCA: UUP ) A healing job market and the resultant improving economy will pull in more capital into the country and lead to an appreciation of the U.S. dollar. UUP is the prime beneficiary of the rising dollar as it offers exposure against a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long US Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of the U.S. Treasury securities. In terms of holdings, UUP allocates nearly 57.6% in euro while 25.5% collectively in the Japanese yen and British pound. The fund has so far managed an asset base of $1.1 billion while sees an average daily volume of around 1.9 million shares. It charges 80 bps in total fees and expenses, and added 0.2% on the day following the jobs report. The fund has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. SPDR S&P Homebuilders ETF (NYSEARCA: XHB ) Solid labor market fundamentals along with affordable mortgage rates will continue to fuel growth in the recovering homebuilding sector, creating a buying opportunity in homebuilders and housing-related stocks. In addition, the slower and gradual rates hike will not impede the growth prospect of the sector, at least in the short term. The most popular choice in the homebuilding space, XHB follows the S&P Homebuilders Select Industry Index. In total, the fund holds about 37 securities in its basket with none accounting for more than 4.71% share. The product focuses on mid-cap securities with 65% share, followed by 25% in small caps. The fund has amassed about $1.5 billion in its asset base and trades in heavy volume of more than 3.5 million shares. Expense ratio comes in at 0.35%. XHB lost 1.7% on the day and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook. SPDR S&P Retail ETF (NYSEARCA: XRT ) Retail will also benefit from accelerating job growth and a moderate rise in wages that will increase the consumer spending power. XRT tracks the S&P Retail Select Industry Index, holding 101 securities in its basket. It is widely spread across each component as none of these holds more than 1.33% of total assets. Small-cap stocks dominate more than three-fifths of the portfolio while the rest have been split between the other two market cap levels. XRT is the most popular and actively traded ETF in the retail space with AUM of about $616.6 million and average daily volume of around 4.2 million shares. It charges 35 bps in annual fees and shed 3% on the day. The product has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a Medium risk outlook. Stocks to Consider Though several sectors will benefit from healthy hiring, the direct beneficiary is the staffing industry. The industry bodes well at least in the near term given the superb Zacks Industry Rank (in the top 10%) at the time of writing. Investors seeking to ride out the optimism could look at a few top-ranked stocks having a Zacks Rank #1 (Strong Buy) or #2 (Buy) with a Growth Style Score of B or better using our Zacks Stock Screener. Cross Country Healthcare, Inc. (NASDAQ: CCRN ) Based in Boca Raton, Florida, Cross Country is a leading healthcare staffing services’ company which primarily focuses on providing nurse and allied, and physician staffing services and workforce solutions. The stock is expected to deliver earnings growth of 26.9% for fiscal 2016 versus the industry average growth of 25.5%. The stock lost 0.9% in Friday’s trading session and currently has a Zacks Rank #1 with a Growth Style Score of ‘A’. Heidrick & Struggles International, Inc. (NASDAQ: HSII ) Based in Chicago, Illinois Heidrick & Struggles International is one of the leading global executive search firms. With years of experience in fulfilling clients’ leadership needs, it offers and conducts executive search services in every major business center in the world. The stock is expected to post earnings at a growth rate of 19.2% annually in fiscal 2016, which is higher than the industry average of 17.4%. HSII gained 0.3% on the day and has a Zacks Rank #1 with a Growth Style Score of ‘A’. Tarena International, Inc. (NASDAQ: TEDU ) Based in Beijing, the People’s Republic of China, Tarena International is a leading provider of professional education services in China with core strength in information technology professional education services including classroom training. Tarena has an incredible earnings growth projection of 69.8% for fiscal 2016 compared to the industry average of 17.4%. The stock was up 0.4% in the Friday session and has a Zacks Rank #2 with a Growth Style Score of ‘B’. Original Post

Lipper Fund Flows: Another Miss For Money Markets With $20.2 Billion Exit

By Patrick Keon The S&P 500 Index (+0.41%) and the Dow Jones Industrial Average (+0.20%) both recorded gains for the flows week. The overall positive performance by the indices for the week marked a significant turnaround from the performance at the start of the week; both indices retreated over 2.5% during the first two trading days. Then the markets rallied over the second half of the week: the S&P 500 was up 3.0% and the Dow appreciated 2.8%. Again, news and speculation about whether the Federal Reserve will raise interest rates in December dominated the market news during the week. There was sufficient economic data and public signals from individual Fed presidents for the market to take the view that the rate rise in December is becoming a foregone conclusion. Economic data released the prior week showed continued strength in the jobs market, with new unemployment claims remaining low and inflation starting to percolate as U.S. consumer prices rose in October. Both of these areas had been previously pointed to by Fed Chair Janet Yellen as key determinants in the Fed’s decision-making process. Four Fed presidents (New York’s William Dudley, St. Louis’s James Bullard, Richmond’s Jeffrey Lacker, and Cleveland’s Loretta Mester) publicly expressed during the week that December is the right time to start lifting rates. The near certainty of a rate increase was taken as a positive by week’s end and was seen as a strong sign the U.S. economy is continuing to improve. This past week’s net outflows for money market funds (-$20.2 billion) pushed their overall outflows for the year so far to $23.2 billion. The week’s activity in the group was varied; funds in Lipper’s Money Market Funds and Institutional Money Market Funds classifications had significant net outflows of $14.6 billion and $13.8 billion, respectively. Meanwhile, Institutional U.S. Government Money Market Funds and Institutional U.S. Treasury Money Market Funds took in $4.5 billion and $3.0 billion of net new money. Equity mutual funds (-$3.3 billion) were responsible for all the net outflows from the equity fund macro-group, while equity ETFs had positive flows of just over $1 billion. Mutual funds saw net outflows from both domestic equity (-$2.6 billion) and nondomestic equity (-$700 million) funds. Among ETFs, the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) (+$693 million) and the United States Oil ETF (NYSEARCA: USO ) (+$373 million) experienced the two largest net inflows for the week. Similar to the equity funds, mutual funds were responsible for all the net outflows for taxable bond funds (-$820 million), while taxable bond ETFs saw their coffers grow $1.2 billion. Investors ran away from lower-quality mutual funds; Lipper’s High Yield Funds and Loan Participation Funds classifications had $1.0 billion and $234 million of net outflows for the week. The Core Bond Funds category paced the ETFs, with the group taking in over $930 million of net new money. Municipal bond mutual funds had net inflows of $263 million-for their seventh consecutive week of positive flows. Funds in Lipper’s national municipal bond fund classifications (+$251 million) accounted for the lion’s share of these positive flows.