Data & Research July 31, 2015

Alternatives, ESG Continue Gaining Traction

Asset managers and consultants alike continue to position their businesses for a rise in ESG investing.
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Alternative investments come under Cerulli’s scrutiny in the July 2015 issue of “The Cerulli Edge -U.S. Monthly Product Trends Edition,” which takes a look at alternative investing in the form of environmental, social, and governance (ESG) considerations.

As institutions pursue alternative strategies for both diversification as well as potential return, ESG investing continues to gain traction even while retirement plans grapple with how to incorporate ESG investing into their lineups when advisory opinions from the Department of Labor (DOL) can make it difficult to do so. 

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The United Nations Principles for Responsible Investment (UNPRI) remains a catalyst for the ESG/responsible investing movement, according to Cerulli’s report. Asset managers, consultants and asset owners alike use these principles as a starting point when beginning to consider factors in an ESG/socially responsible context. As of April, signatory assets under management totaled more than $59 trillion, with more than 1,380 signatories.

Although the marketplace owes a great deal of credit to the UNPRI for setting standards, it is not without some shortcomings. In one research discussion with a consultant who specializes in ESG-oriented investing, Cerulli learned that the reporting requirements for asset managers under the UNPRI are largely process-oriented. This can potentially lead to signatories looking to only “check the boxes” and claim they are following the UN’s guidelines in order to boost their ESG credentials.

As ESG investing gains an increasing share of media attention, new firms have entered the market looking to distinguish themselves based on their ability to identify possible ESG investing opportunities and truly abide by ESG-oriented practices, according to Cerulli’s report, which cites a firm that follows a systematic, intentional approach when choosing investments. As well as its investment management capabilities, it produces thought leadership through weekly/quarterly insights. Cerulli notes the importance of managers following a transparent process that details how they are integrating ESG factors in their investment process.

Other highlights of the research are:

  • Most exchange-traded fund (ETF) sponsors (70%) believe the alternative space shows unmet demand for ETF products.
  • Sponsors are optimistic about inflows into the alternative asset class: 50% of sponsors believe alternatives will experience inflows over next 12 months in the institutional channel.
  • Mutual funds ended the first half of 2015 with assets totaling $12.5 trillion, up only 2.7% from the December 2014.
  • ETF assets declined for the first time since January, falling by 1.7% in June.
More information about the July 2015 issue of “The Cerulli Edge -U.S. Monthly Product Trends Edition,” including how to purchase, is on Cerulli’s website.
Deals & People July 31, 2015

Cetera Confirms Winding Down of J.P. Turner

Cetera Financial Group confirms plan to close J.P. Turner brokerage. 
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Cetera Financial Group CEO Larry Roth tells PLANADVISER the firm “is winding down JP Turner in order to enable advisers at that firm to more rapidly access the full range of services and support our network offers through Pershing.”

Roth communicated similar statements across the financial press Friday—sharing the news that JP Turner would be shuttered only about a year and a half after Cetera’s parent company, RCS Capital Corporation (RCAP), first said it would move to buy it.

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The initial action by RCAP to purchase JP Turner came one day after RCAP announced the deal through which it initially scooped up Cetera. At the time, RCAP was already engaged in the acquisition of a number of other firms, including Summit Brokerage Services and Investors Capital Holdings. Together, the string of fast-paced acquisitions pushed RCAP’s advisory network above 9,000 producing reps and well into the top-five U.S. advisory networks by staff footprint.

The flurry of acquisition action was driven by then-RCAP Executive Chairman Nicholas Schorsch, who has received significant media attention in the last several years for piloting large acquisitions and reshaping the financial services industry, especially within the real estate investment trust (REIT) and investment advisory sectors. He has since suffered reputational damage after an accounting scandal at another firm he owned.

According to Roth, since they became part of the Cetera network, many JP Turner advisers “have voiced a strong desire to transition to the Pershing platform. After extensive review, it became clear that the most expeditious and seamless way for this to happen was to invite a significant number of these advisers to Summit Brokerage Services.”

Roth declined to share further details about why closing J.P. Turner would, in fact, be “the most expeditious and seamless way” for its advisers to access Pershing’s services, but presumably the choice was made by Pershing not to accept all the JP Turner advisers that wanted to get on board. Published media reports raise questions as to whether the issue was related to compliance or performance factors among the advisers not invited to join Summit Brokerage Services, but Roth has not confirmed any of this. 

Roth only added: “We expect this will be a seamless migration, and that the process will be completed by the end of October of this year. We emphasize that this transition is not part of a broader consolidation strategy, but rather, is intended to address a unique and clear demand from a significant number of J.P. Turner’s advisers.”

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