New Data Shed Light on Mutual Fund Time Horizons

Short-termism is a loaded phrase in debates over investment time horizons, often used to criticize investors and corporate managers deemed overly focused on near-term gains at the expense of long-term value. One argument is that U.S. mutual funds, as significant investors, are preoccupied with quarterly earnings, which feeds the quarterly anxiety of corporate boards of directors. As such, short-termism is a contagion that can spread from funds to firms. Its proponents, on the other hand, highlight short-term investors’ ability to unlock firm value and counter corporate management’s long-term bias.

In a new project, The Long and The Short: Portfolio Turnover Read more

Will Swing Pricing Save Sedentary Shareholders?

Starting in November 2018, U.S. public, open-ended mutual funds will have the option to adjust the daily pricing of the fund—the net asset value or NAV—to account for and recoup large transaction costs.  Currently, the fund, and therefore its remaining shareholders, absorb those costs generated by existing shareholders. This quiet, technical change in the regulation—swing pricing—is a part of the SEC’s sweeping mutual fund Liquidity Management Rules, adopted in 2016.

Swing pricing is an anti-dilution tool protecting shareholders staying in a fund—the sedentary shareholders—by guarding their investment from transaction cost erosion, which by 2014 estimates total $10-17 billion annually.  This … Read more

Institutional Investors’ Appetite for Alternatives

The emergence of alternative business entities[1] like benefit corporations, which facilitate pursuit of profit and purpose in the same endeavor, challenges the strict dichotomy between for-profit and non-profit corporations. Most alternative entities, including well-known brands like Warby Parker and Etsy—both certified B corps—have been privately-owned and thus untested in financial markets,[2] until now. Last month, the online consortium of unique and hand-made goods known as Etsy, made headlines announcing its SEC filing initiating an IPO to raise up to $300 million.

If Etsy retains its B corp certification or elects to reincorporate as a Delaware benefit Read more