Data & Research December 16, 2009

Greatest Regulatory Impact in 2010: Fees

Financial firms surveyed by Cerulli Associates said examination of fees, such as 12b-1 reform, will be the greatest regulatory impact in the coming year.

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After fees, financial firms said the greatest regulatory impact will be a universal fiduciary standard for financial advisers (23%) and the Pension Protection Act (16%).

Cerulli conducted an end-of-the-year reader survey, with respondents comprising mostly product providers (75%), but also including broker/dealer firms (11%) and other technology providers (9%).

Now that market volatility has ironed out, the biggest business challenges facing surveyed financial firms have shifted. The surveyed firms cited client acquisition/retention as the greatest business challenge in the coming year (35%, compared to only 14% in 2009), followed by insufficient resources (21%). Last year, the biggest challenges were the economic downturn (27%) and volatile markets (25%).

The overwhelming majority of respondents expect the market to rise in 2010—but are split on what they plan to do with that expectation. The largest number of firms (43%) expect the market to rise, but will not build strategy on anticipated market action. Almost as many (39%) expect the market to rise and are building their firm’s strategy accordingly.

As far as products go, open-end mutual funds will be the primary product focus in 2010 for 87% of respondents, followed by managed accounts (63%), insurance products (28%), collective investment trusts (CITs) (19%), and exchange-traded funds (ETFs) (15%). Although passive investing and low-cost vehicles such as ETFs are attracting substantial assets, the mutual fund is still the dominant investment vehicle, Cerull notes.

More information about The Cerulli Edge—U.S. Asset Management Edition is available at www.cerulli.com.


Products December 16, 2009

Russell, Axioma to Launch Factor-Based Indexes

Index provider Russell Investments is teaming up with Axioma, Inc., a provider of tools for portfolio optimization and risk analysis, to create a series of factor-based indexes.

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According to the announcement, the Russell-Axioma Factor Indexes will measure stock performance in various market segments, and feature a broad range of products to track the common risk factors used in the Axioma Robust Risk Models. 

Using Russell’s index methodology as the foundation, Axioma will utilize its optimization expertise and suite of global Robust Risk Models with the goal of minimum factor tracking error, maximum targeted factor exposure, minimum turnover, and neutrality to all other characteristics. 

The Russell-Axioma Momentum Indexes—the first in the series—“track momentum returns closely while simultaneously exhibiting a number of desirable, practical features related to index implementation and non-momentum factor neutrality,” according to a press release.  The firms noted that the optimization methodology used to construct these indexes has been “tested extensively and validates the realized index characteristics and returns.”

Goldman Sachs is the initial client for the new Russell-Axioma Momentum Indexes.  

Initial products will include the optimized Russell-Axioma U.S. Large Cap Momentum Index, which will be based on the Russell 1000 Index. The initial launch also will include the Russell-Axioma U.S. Small Cap Momentum Index, based on the Russell 2000 Index, and the Russell-Axioma U.S. Momentum Index, based on the broad-market Russell 3000 Index.

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