Deals & People April 26, 2011

Riverside Plucks Plake from NISA

Riverside Risk Advisors, a boutique derivatives advisory firm, has hired Steven Plake.
Reported by

Plake is expected to broaden Riverside’s relationship with corporate and public pension plans, which the firm notes are increasingly using derivatives for financial planning purposes. 

“We are reaching out to pension funds, their consultants and investment managers in a derivatives advisory capacity,” commented Joyce Frost, a partner at Riverside Risk Advisors. “Steve will lead Riverside’s pension effort helping plans in evaluating transactions and assisting in the construction and execution of derivatives strategies, complying with fiduciary duties and working through Dodd-Frank transition issues,” she added. 

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Plake has five years of experience working with corporate and public pension and retirement plans developing derivative programs and structured products.  He provided deal management, documentation negotiation and structuring support on a range of investment strategies, including synthetic duration extension, portable alpha and stable value, according to the company.  In addition, Plake has routinely assisted pension and retirement plan sponsors in understanding and complying with fiduciary duties in the investment management context, according to the press release.

Prior to joining Riverside, Plake was at NISA Investment Advisors, a fixed income asset management firm specializing in managing pension plan assets. While at NISA, he played what was described as “an integral role assisting in the development, implementation and execution of hedging strategies for pension plans,” also serving as a member of the firm’s risk management and counterparty credit review committees.Plake holds a J.D. from Washington University in St. Louis and a B.S. from Cornell University.

Riverside Risk Advisors notes that pension plans use derivatives as a tool to reduce general interest rate risk in planning for retired employees’ benefits and to enhance returns on assets. Historically, derivative programs have been implemented in consultation between the pension plan’s consultant and underlying investment managers.

“As derivatives become both more complex and important for pension funds, trustees need independent expert advisers who have the depth of experience to truly help them assess the appropriateness and pricing of derivatives,” commented Edward Krawitt, Trustee, EMI Group Pension Fund.  

Data & Research April 25, 2011

Commitment from Retirement Plans Could Spark ETF Growth

Cerulli Associates analyzes the potential growth of exchange-traded funds in a new report.
Reported by

The report contends: “The next few years may be pivotal in terms of determining whether it is business as usual for ETFs, or whether these products experience massive growth, posing a grave threat to mutual funds.”

In its latest U.S.-focused monthly publication, Cerulli says there are several factors that would redefine the potential for ETF growth in the retail third-party channel, including: 

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  • Commitment of retirement plan sponsors to offering these vehicles; 
  • Decisions of regulators; and 
  • Dedication of asset managers, distributors, and advisers. 

In addition, the research says: “The biggest threat to mutual funds may not be ETFs’ touted advantages such as tax efficiency, but instead, it may be the ability of ETFs to market nontraditional assets. As investable assets are reallocated from domestic equity and fixed-income mutual funds to less traditional asset classes, many of those assets may shift from mutual funds to ETFs.”  

While ETFs are often promoted as a better mousetrap than mutual funds, they continue to grow at a more moderate pace than some originally predicted. In the last six months of 2010, mutual funds grew by $804 billion, while ETFs grew by $170 billion.   

Cerulli also pointed out that adviser allocation to ETFs remains relatively small. When looking across the channel spectrum, close to half (47%) of advisers are using ETFs which is much less than the 92% using equity mutual funds and 75% using individual securities.

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