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.
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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.
Products April 25, 2011

New Retirement Plan Analytic Platform Ready for 408(b)(2)

Castle Rock Innovations, LLC (CRI) has rolled out a servicing platform that it says addresses the Department of Labor’s 408(b)(2) fee disclosure requirements.
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According to a press release, AXIS Retirement Plan Analytic Platform (AXIS) is designed to service all retirement plan types through a single web-based interface and data repository, and can interface with any system of record supporting retirement plan data feeds. Additionally, the AXIS platform provides features to edit and generate reports for filings and report plan expenses, with tools that allow retirement plan managers and fiduciaries to view their business across multiple recordkeeping platforms.

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Chicago-based Castle Rock, which describes itself as a provider of technology-based solutions for the retirement industry, said that the patent pending AXIS is a web-based software service “that supports the ability for Broker Dealers, Product Manufactures and TPA’s to support these new regulatory fee disclosure reporting requirements.”  The AXIS platform “provides complete coverage from brokerage platform to retirement plan platform and provides the ability for advisors to identify and establish plans outside the traditional turnkey environments,” and that by “providing a single view and the ability to manage reporting risks the AXIS platform allows fiduciaries to handle the ongoing daily tasks of monitoring and reporting fees to plans efficiently and effectively.”

Tom Loch, Senior Vice President of Castle Rock Innovations, LLC, noted "We spent the time to understand the real pain that the industry would go through to meet the new reporting requirements. We found that the Broker Dealer community did not have a systemic capability to identify, collect and establish data from various partner systems for the purpose of managing plan level fee data and generating a comprehensive Fee Disclosure Document for their plans. We also learned that many Broker Dealers are very concerned about identifying and tracking plans that are sold and serviced outside of the traditional manufactures environment.” 

Loch noted that the firm “…focused our efforts within our servicing platform in its ability to collect and transform data into single data repository and to provide an interface for managing, collecting and reporting plan level fees from many system sources. Our second focus was to build the data processing engine necessary to track changes to fees and the work flow processes to report them efficiently based upon the 60 day reporting rule."

The AXIS Platform is scheduled for commercial release May 2011.

Castle Rock Innovations is a privately owned and operated corporation with headquarter in Chicago Illinois and offices in CT, NY, NJ, MA, FL and TX.  Additional information is available at http://www.castlellc.com. 

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