Total money market mutual funds rose by $16.47 billion in latest week: ICI

Thu May 8, 2014 3:54pm EDT
Article from http://www.reuters.com/

(Reuters) - The Investment Company Institute on Tuesday issued the following money market mutual fund assets report:

"Total money market fund1assets increased by $16.47 billion to $2.59 trillion for the week ended Wednesday, May 7, the Investment Company Institute reported today. Among taxable money market funds, treasury funds (including agency and repo)increased by $6.96 billion and prime funds increased by $7.37 billion. Tax-exempt money market funds increased by $2.14 billion.

Retail:2 Assets of retail money market funds increased by$5.30 billion to $906.64 billion. Treasury money market fund assets in the retail category increased by $1.88 billion to $201.36 billion, prime money market fund assets increased by $2.20 billion to $517.37 billion, and tax-exempt fund assets increased by $1.22 billion to $187.91 billion.

Institutional:2 Assets of institutional money market funds increased by $11.16 billion to $1.68 trillion. Among institutional funds, treasury money market fund assets increased by $5.08 billion to $712.74 billion, prime money market fund assets increased by $5.16 billion to $899.97 billion, and tax-exempt fund assets increased by $920 million to $71.20 billion.

ICI reports money market fund assets to the Federal Reserve each week. Data for previous weeks reflect revisions due to data adjustments, reclassifications, and changes in the number of funds reporting. Weekly money market assets for the last 20 weeks are available on the ICI website.

1 Data for exchange-traded funds and funds that invest primarily in other mutual funds were excluded from the series. ICI classifies funds and share classes as institutional or retail based on language in the fund prospectus. Retail funds are sold primarily to the general public and include funds sold predominantly to employer-sponsored retirement plans and variable annuities. Institutional funds are sold primarily to institutional investors or institutional accounts purchased by or through an institution such as an employer, trustee, or fiduciary on behalf of its clients, employees, or owners. For a detailed description of ICIclassifications, please see ICI New Open-End Investment Objective Definitions."

Thu May 8, 2014 3:54pm EDT
Article from http://www.reuters.com/

Top Ranked Socially Responsible Mutual Funds

Article from http://www.zacks.com/stock/news/
Published on April 30, 2014

Back in 2008, some MBA students at the University of California, Berkeley, launched a Socially Responsible Investment (SRI) fund that has returned over 50% in six years. Performance of this fund, Haas Socially Responsible Investment Fund, is just an example of the potential of SRI funds.

The demand for SRI has been gaining strength in recent years and is most likely to grow. F&C Asset Management says environmental, social and governance (ESG) issues are now “material to long-term company performance”. The asset management firm believes investor values, management of risks and stronger codes and standards will drive responsible investing, which “continues to gather momentum globally”.

For investors interested in socially responsible investment, we have certain top ranked funds to suggest. Before that, let us take a look at what socially responsible investment is about and its performance so far.

Growth of SRI

SRI is indeed witnessing higher demand. A Forbes article last year said that $1 of every $9 in professional management in the US can fall under the SRI category. The Forbes article also reported that SRI investing has increased over 22% to $3.74 trillion worth of total assets under management (period not specified).

The Wall Street Journal reported “environmental and social issues have accounted for 56% of shareholder proposals, representing a majority for the first time” in 2014. The surge in number of socially responsible mutual funds itself echoes the growth story. Reportedly, there were over 50 mutual funds in this category in 1995. As of 2012, the number reached almost 500.

Changing Dynamics

Over the years, the SRI term has evolved to be also known as sustainable responsible investing. SRI investors now stand better chance of getting more returns banking on larger options of funds, diversification of investments and improved approach.

The number of funds has increased by a great margin and investors also get option to invest in Exchange Traded Funds. There are funds of all market capitalization and investors can also pick among domestic, foreign and global funds. In fact, investors get the option to invest in funds whose strategy and social responsibility agenda matches with that of investor financial objectives. The approach thus has improved.

Investments are now made not only based on social or environmental conscience. Now, there are funds that may invest in companies such as gun manufacturers or casinos.

3 Social Responsible Funds to Buy

It is obvious that investors are not only looking for social causes. iShares MSCI USA ESG Select Social Index Fund (KLD), which tracks equity performance of companies with positive environmental, social and governance (ESG) characteristics, has returned 108.4% in the last 5 years. Thus, the chance of earning is strong enough from these socially responsible funds. Here we will suggest 3 such funds that carry Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) and have provided decent returns.

Domini Social Equity Investor (DSEFX - MF report) seeks to provide total return over the long term. The fund invests a lion’s share of its assets in securities of mid to large domestic companies. Investments are made after evaluating the social and environmental standards in which the businesses are involved in.

Top holdings include Microsoft Corporation, Eli Lilly and Co and Apache Corporation

The fund currently carries a Zacks Rank #1 (Strong Buy). The fund has returned 2.3% year to date. Over the last one, three and five years, the fund has returned 22.1%, 11.2% and 18.8%, respectively.

Calvert Large Cap Core A (CMIFX - MF report) seeks to provide return higher than that of Russell 1000 Index. It invests a lion’s share of its assets in large-cap domestic companies whose financial, sustainability and social responsibility investment factors match the fund’s strategy. It is part of Calvert Investments, which is considered to be one of the largest SRI firms in the US.

Top holdings include Apple Inc., Johnson & Johnson and Capital One Financial Corp.

The fund currently carries a Zacks Rank #2 (Buy). The fund has returned 1.2% year to date. Over the last one, three and five years, the fund has returned 15.5%, 11.7% and 18.3%, respectively.

Parnassus Small-Cap (PARSX - MF report) invests in companies whose market capitalization is below $3 billion during the initial purchase. It is part of Parnassus Investments which claim their “investment philosophy is to own good businesses at attractive valuations”. Parnassus’ funds fund generally omits securities from alcohol, tobacco, gambling and even at times companies that engage in producing electricity from nuclear power.

Top holdings include Compass Minerals International, Inc., Gentex Corporation and Dominion Diamond Corp. The fund currently carries a Zacks Rank #1 (Strong Buy). The fund has returned -7.31% year to date. However, over the last one, three and five years, the fund has returned 17.0%, 3.5% and 16.1%, respectively.

Article from http://www.zacks.com/stock/news/
Published on April 30, 2014

Should you invest in multi-cap mutual funds?

Sanjay Kumar Singh, ET Bureau Apr 21, 2014, 08.00AM IST
From http://articles.economictimes.indiatimes.com/

Avantika Singh, a 23-year-old electronics engineer, has just begun investing in equities. Having already put money in a couple of large-cap funds with consistent track records, she now wants to invest in a mid- and small-cap fund. However, her uncle, a financial planner, suggested that she should not overlook the multi-cap category, which has an important role to play in an equity portfolio.

Retail investors like Singh need to have an allocation to multi-cap funds for various reasons. Why invest in multi-cap funds One reason to opt for this category is that different parts of the stock market tend to do well at different times. The data from 2006 onwards shows that while the large-cap index has done well in a given year, in the next, the mid- and small-cap indices have done the same.

"A multi-cap fund, which has exposure to all the categories, can benefit from the outperformance of any of these," says Taher Badshah, senior VP and co-head of equities, Motilal Oswal AMC, which has recently launched Motilal Oswal MOSt Focused Multicap 35 Fund.

Two, retail investors tend to invest on the basis of recent performance. If, over the past six months, mid-cap stocks have done well, they will tilt their portfolios towards these funds. Fund managers of multi-cap funds are better placed to decide whether to invest more in large-caps or in mid- and small-caps, based on objective criteria like prospects of individual stocks and valuations. They, thus, prevent 'recency bias' from creeping in.
Three, a multi-cap fund is less affected by lack of liquidity when the markets tank. When the markets are rising, investors bet aggressively on mid- and smallcap stocks. When the environment turns adverse, liquidity dries up in these stocks. However, multi-cap funds with the right mix of large-caps and mid- and small-caps are not affected as much.

"To meet redemption requests, the fund manager can sell large-cap stocks. He does not have to sell mid- and small-caps at distressed valuations, as happens in portfolios that are heavily loaded with these stocks," says Vishal Dhawan, chief financial planner, Plan Ahead Wealth Advisors.

How much should you allocate? When you begin to build a long-term equity portfolio, start with products that offer the least risk and move up the risk ladder. So, 30-40% of your equity portfolio should go to large-cap funds. Next comes the turn of multi-cap funds, which should take up another 30-40%. Mid- and small-cap funds will take up the balance that is left after a 10-20% allocation to international funds.

Explaining the rationale behind a 30-40% allocation to multi-cap funds, Dhawan says, "When you invest in equity, you have to take a couple of decisions: one, how much will you allocate to equity versus fixed income? How much will you allocate to different market segments? By investing a good part of your portfolio in multi-cap funds, you delegate the second decision to an expert, the fund manager."

Points to remember While investing in multi-cap funds, keep the following points in mind: Cash allocation: Does the multi-cap fund remain invested in equity at all times or does it take large cash calls? Taking a cash call means that the fund manager moves to cash when he thinks the market may decline, and to equity when he thinks it may move up. 

 Avoid funds that take large cash calls for two reasons. One, taking such calls has an element of market timing, and nobody has ever timed the market right for a considerable period. Two, whether to move to equity or cash is an asset allocation decision that should be taken by the investor or his planner, not the fund manager.

If the fund manager takes high cash calls, the asset allocation decision takes place at two levels.

Consider an investor, who has a negative view on equity, decides to move 30% of his portfolio to fixed income and leaves 70% in equity. His fund manager also decides to move 30% in cash and has only 70% of the fund portfolio in equity. This means that the investor's effective exposure to equity is now only 49%. If the cash call goes wrong, there is a double impact on his portfolio.

Hence, stick to funds that have a less than 5% allocation to cash at all times. Fund manager's limits: Within the multicap category, some fund managers are allowed to go entirely to large caps or entirely to mid- and small-caps. Others are allowed to move to a particular category up to a certain limit.

While the former type of funds can earn higher returns, they can also falter badly if their calls go wrong. Choose a fund that matches your risk appetite.

Expectation mismatch: Multi-cap funds hold a mix of large-cap and mid- and smallcap stocks. In most years, they will produce middle-of-the-road performance. In a year when mid- and small-caps have done well, they will lag behind this category, while doing better than large-caps. The reverse could also happen in certain years.

So, understand why these funds have fared well or badly, and don't fret about their performance.

Sanjay Kumar Singh, ET Bureau Apr 21, 2014, 08.00AM IST
From http://articles.economictimes.indiatimes.com/

Actively managed mutual funds continue to receive a failing grade

Peter Watson, Dollars & Sense|May 08, 2013 - 2:55 PM
From http://www.insidehalton.com/opinion/columns/article/

Why do people invest in a manner that consistently gives them inferior investment returns?

There are two basic but very different approaches to investing. The most common and least successful is to invest in products that use active managers. The second, lesser-used way, is the passive management approach, which mimics an index or provides a broad market exposure.

Standard and Poor’s has been tracking the success of active managers for years. Active managers make ongoing investment decisions on behalf of their clients, who usually hire them by purchasing the mutual funds they manage. Within a mutual fund, active managers decide what stocks to buy and sell and the timing of those transactions.

Mutual funds charge investers fees to delegate investment decisions to an expert, the mutual fund manager, but the outcome is most often less than favourable.

The science of investing has been studied and written about by the academic community for the last 50 years. The conclusion is active managers only outperform the underlying market they invest in about one in every three years. When they outperform, the gains are lower than their shortfall during the years they underperform.

Standard and Poor’s reports the same information and break it down into shorter time periods.

In 2012, 41 per cent of active managers of Canadian Equity funds beat the S&P/TSX Composite Total Return. When we extend the holding period, we see only 10 per cent of active managers beat the index over the past five years. In the U.S., 12 per cent of managers beat the S&P 500 Total Return as measured in Canadian dollars during 2012. During the last five years only five per cent outperformed the index.

Consider the Standard and Poor’s information as a report card for active managers, who do not get a passing grade. Canadians have approximately $800 billion invested in mutual funds and most are actively managed.

The Standard and Poor’s report summarized the performance by stating, “The only consistent point we have observed over a five-year horizon is that a majority of active managers in most categories lag comparable benchmark indices.”

Investment decisions and their performance are vitally important to our well-being as investment dollars help finance our children’s post-secondary education and our own retirement. If active money management doesn’t add value when comparing the performance results to the markets in which they invest, then why pay any form of cost to continue to invest this way?

Now is the time to answer that question and re-evaluate how you invest.

Submitted by Peter Watson, MBA, CFP, R.F.P., CIM, FCSI., Certified Financial Planner
May 08, 2013 - 2:55 PM
From http://www.insidehalton.com/opinion/columns/article/