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Friday, April 1, 2022

April Fools For Fundsters
Guest Column by: Neil Bathon

Editor's Note: MFWire interrupts our regular news coverage to bring you this special annual April Fools' Day message from the folks at Fuse Research Network. If you need a few laughs and a break from the news, read on ...

Thomas Neil Bathon
Fuse Research Network
Founder, Partner
And yes, to be clear, this article is fake news. But what if ...

News You Can Use: Top News Items Selected by FUSE

Sales Analytics Projected Adoption Levels

FUSE has updated its projection of the adoption levels of sales analytics data in terms of its use to inform and guide the intermediary distribution activities of investment firms. Apparently, the inability of data teams to break through the 95% accuracy level continues to undermine the perceived value of the information.

Strategy Consulting

A recent study by ISS has revealed that FT's Ignites has moved ahead of McKinsey in terms of what services investment industry executives rely upon for strategic guidance. Many executives were reported to say that they find the concise nature of Ignites' headlines to be much easier to process than the endless slide presentations from McKinsey, Bain, and CapGemini. ISS' first-ever groundbreaking survey also revealed that FT reporters are seen as having at least as much practical experience as the analysts assigned to projects by large consulting shops. Neither group was credited with the ability to deliver assistance in tactical execution.

Guggenheim Adds to Its Collection

After a few years somewhat quietly establishing itself as a leader in fixed-income investing, Guggenheim Partners has decided to add to its collection of investment boutiques with the acquisition of Matisse Capital and Mondrian Investment Partners. Many industry experts believe that it will be difficult to have such different styles peacefully co-exist — that being Matisse's fauvism vs. Mondrian's more structured approach.

Seeking Research Firm

A consortium of investment banking organizations is reported to be seeking a market intelligence firm to sponsor a research initiate that will result in an independent and objective report on the need for a minimum of $750 billion in AUM in order to be seen as a successful investment management firm. The marketing impact of the Goldman Sachs report of 20 years ago, while incredible at first, has been undercut by (1) remarkable market returns that have fueled 72 percent of retail industry asset growth since 2019, and (2) so many firms in the $10 billion to $75 billion AUM range that continue to do quite well. Word is that all major research firms have declined to participate with only Dalbar still mulling over the offer.

Latest Algorithm from FUSE

FUSE has developed a proprietary algorithm (originally developed for Guinness Atkinson) that is able to accurately predict the impact associated with converting a mutual fund to an exchange-traded fund (traditional and semi-transparent). While the required inputs are extensive, the FUSE tech team has created a dynamic interactive dashboard that summarizes our recommendation in an easy-to-use client-centric report (see below).

FUSE ESG Retail Asset Growth

FUSE has refreshed its synthesis of all available market forecasts and projection for retail asset growth in ESG investment strategies. NOTE: Our research was completed prior to Russia’s invasion of Ukraine and with little acknowledgment that China violates the principles at the following levels – E (65%), S (95%), & G (50%).

Comparing Views of the Leading Market Intelligence Firms

On occasion, the prevailing wisdom offered by the leading business intelligence firms serving the investment management will diverge on specific issues. In the case of Direct Indexing, FUSE believes adoption will continue at a deliberate pace fueled by the assets of HNW clients that need specialized help with specific tax issues (basically what Parametric has been doing for years). Our competitors, we can only surmise, believe that mid-level FAs are going to change the behavior and business practice in an expedited fashion for the first time since May 1, 1975.

Morningstar's Latest Evaluation of Sustainable Investments

A new approach to evaluating sustainable investments has been announced by MStar as "ESGQ" in which those investors that are not certain as to either (1) their interest in firms that comply with someone's arbitrary sustainability standards, or (2) question the impact they actually have by investing in massive firms like Facebook and Amazon.

Next Wave of Customization

New SEC ruling on fact sheets will usher in the next wave of customization, as investors and advisors alike will all be able to have printed fact sheets created in the fonts and colors that match their preferences and create a feeling of personalization and connectivity. A spokesperson for the wholesaler trade group "I Carried The Bag" said the SEC has singled-handedly extended the tenure of our more experienced field wholesalers who had refused to visit FAs if fact sheets were only to be delivered electronically.

Hiring Now: ESG PR Specialists

Asset managers that have integrated ESG are facing a mounting public relations challenge. Half of surveyed asset managers report that they are hiring specialized ESG PR firms and/or dedicated staff to address the growing pushback from journalists, investors, and other stakeholders. An ESG PR expert (who spoke to us off the record and under the condition of anonymity) admitted that it isn't just concerns about issues in the press lately like Russia and China, but that every investment is under the microscope. They shared recent questions they received about portfolio holdings ranging from a large healthcare/consumer goods company purported to have known carcinogens in its shampoos to a restaurant chain specializing in beef, and even hospital chains because of medical waste.

DiCaprio Launches Inception Model Portfolio

DiCaprio Asset Management is launching a new investment solution for advisors, which is described as a model portfolio of model portfolios. The Inception Model Portfolio will be made up of model portfolios built by other third-party managers. The firm plans to get its MP-of-MPs added to broker/dealer's existing home- office model portfolios as a satellite component.

AAAMCO Ultrashort Financing Fund to Liquidate

The AAAMCO Ultrashort Financing Fund has filed to liquidate after failing to raise sufficient assets. When reached for comment, a representative from Austin Atlantic Asset Management Co. suggested that in hindsight its sales and marketing efforts may have been too reliant on investors finding them in the phonebook.

AnnaDelvey Fund Shutters

The AnnaDelvey Fund, formerly the AnnaSorokin Fund, has been shuttered. The high-end members-only arts fund spiraled out of control amid allegations of fraudulent seed money. There is speculation about a new fund launch domiciled in Frankfurt, Germany. Geared for the ultra-high-net-worth market, the VIP-Is-Always-Better Fund will invest in companies that "work for their success and earn their accomplishments." Nothing basic about that.

Digital Realty Trust to Launch 1st of Kind REIT (eDRT) That Invests in Property in the Metaverse

Digital Realty Trust is a data center REIT focused on the acquisition and rental of data center space for some of the world's leading players in tech in the physical world. Hoping to capitalize on real estate opportunities in the virtual world or metaverse, the firm is raising a fund that will buy "property," really just pixels, in The Sandbox, one of several virtual worlds that are currently online.

GF Selected as Sub-Advisor of EGO

Knowledge Leaders Capital hires GuruFocus (GF) as sub-advisor for a new fund, "Exclusively Good Opportunities Only ETF" under ticker EGO. Knowledge's CEO commented that selection of GF came down to their unique and sophisticated investment philosophy of "Buy Only Good Companies."

China's ESG Revolution

In an effort to alleviate the pullback in Chinese equities seen over the past several months, the CCP has announced it is passing new legislation allowing companies to add "ESG" to the names of their company. Firms such as Alibaba, NIO, Tencent, and others are expected to make the change in early April. BlackRock CEO Larry Fink said the new legislation was "genius," and his firm has begun working on a new lineup of China ESG Funds. Analysts speculate that the move could cause valuations to double or even triple, citing the success of Long Blockchain Corp, previously known as Long Island Iced Tea Corp, which rose 183% after changing its name in 2017.

Return to Office Avatar

Asset managers that want their employees in the office are trying a wide range of approaches from in-house baristas to wellness resources (yoga) to three full meals a day to entice employees to come back. Concerned about retaining talent as they shift away from the work-from home approach of the past two years, Facsimile Asset Management has announced a unique program/policy — they allow employees to use their personal avatar in work settings. Employees can remain comfortably at home while projecting a winning style (think "Dress for Success") at the office.

Wordle Stumps Users

ABRDN's latest marketing campaign in which it was a sponsored answer in Wordle failed spectacularly when only 4 percent of players managed to solve the puzzle. Your humble author, however, was part of the 4 percent as you can see in my latest posts on LinkedIn, Twitter, Facebook, and Instagram:

Blackstone Leads the Pack

Following Blackstone's success in intermediary channels, all other alternative investment managers have decided to build out their retail sales and marketing capabilities while all long-only traditional shops are now actively seeking lift-outs and joint venture opportunities with alternatives managers.

New Research Shows One-Quarter Returns Correlate to Happiness

Upending long-held conventional wisdom about investing (as well as about psychological well-being), new research from the Cramer Institute revealed that mutual fund returns over one quarter are 100 percent correlated to personal happiness. The tremendous importance of one-quarter results surprised industry pundits who had been emphasizing 3-, 5- and 10-year returns as preferable time frames for assessing investments. The Association of Mutual Fund Wholesalers (AMF-W) issued a press release in response to the research findings in which they stated that it has long been known by their members that superior short-term performance of the 3-month and 1-year variety (along with a 5-Star Rating) has been central to their happiness since the profession formally emerged when Vance Sanders joined with Eaton & Howard in 1979.

Take Our Investment Industry Quiz

In keeping with our commitment to inform and innovate, FUSE offers this brief quiz so clients can test how well they know the industry.

1. Which of the following is an actual thematic ETF that launched within the past six months?
    a. Anti-Depressant ETF (SSRI) — blend of VIX futures and pharma stocks to predict demand for Prozac and similar drugs
    b. Return on Character ETF (ROCI) — stocks in companies led by "high character" CEOs
    c. Double Negative NDQ 100 (NONO) — inverse of twice the inverse of the daily return of the Nasdaq 100

2. An original Netflix film centered on unlisted closed-end funds might succeed if it were:
    a. A romantic comedy called "Tender Offer"
    b. A sci-fi adventure called "Interval"
    c. Anything with Ryan Reynolds

3. The Department of Labor's current stance towards ESG funds in Defined Contribution plans is best described as:
    a. Warm though tentative
    b. Evolving yet baffling
    c. Surreal but melting

4. In multiple surveys, advisors say the main benefit of using third-party model portfolios is:
    a. Freeing up time to focus on advanced services like financial planning
    b. Freeing up time to watch Netflix movies about unlisted closed-end funds
    c. Freeing up time to take surveys about third-party models

For an opportunity to win a FUSE gold shirt, please send your answers to www.fuse-research.com/April1.

Neil Bathon is founder and partner at Fuse Research Network, a consulting and research firm that supports asset managers. 

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