October 12 Roundup: Mutual Fund News & Opinions

mutual fund news

Bigger Rewards from Small Caps

Traditionally, small caps mutual funds and ETFs would not get much notice among those looking for dividends or income from their holdings. Instead, investors bought into this corner of the market for growth, more robust growth while at the same time increasing riskiness.

However, an article at Fox Business says,

“The dividend growth strategy can also be applied to targeted small- and mid-cap asset categories, which may help investors gain exposure to the potential growth potential of smaller companies while mitigating some of the risk with a more conservative dividend play. Consequently, investors are able to focus on higher quality companies in these smaller capitalization segments without giving up on growth.”

In other words, finding reliable dividend payers among small caps and mid caps means finding small- and medium-sized companies that can offer growth with less than the usual risk. In some cases, that may mean enjoying the best of both worlds: income and growth together.

Still, we seem to be in early days when it comes to this development, but it would be worth staying aware of opportunities here.

More Price Cuts for ETF Fees

According to an article in ThinkAdvisor, signs of a price war are emerging among ETF providers, in response to a regulatory initiative,

Just two days after BlackRock slashed fees on its iShares Core ETFs, Schwab trimmed fees on a handful of its index ETFs, heating up the competition in the already low-cost ETF arena.

Paul Ellenbogen, head of global regulatory solutions at Morningstar, said the latest moves “could be the beginning of a price war,” which was likely sparked by the DOL fiduciary rule that take effect in early April 2017.

Fee reductions for ETFs could not only increase competitive pressures within the ETF universe, but also put additional pressure on mutual fund companies, which have long enjoyed higher margins, mainly because of active management (versus the passive management of ETF companies).

Bond Fund Owners: What Effects Might Oil Prices Have on Your Holdings?

If you own mutual funds that hold or did hold oil and gas stocks, it won’t be any secret to you that the sector has taken a beating from the worldwide price plunge that began almost two years ago.

But, if you own bond funds, the oil price crash could affect you, even if you don’t have any funds with holdings in the energy sector. This from an article at MarketWatch,


“On paper, non-energy firms might be expected to benefit from lower energy costs. Think of companies that rely on transportation, where lower prices at the pump can be a boon.

“But another phenomenon upstaged the benefits of cheaper energy costs and it is tied to some interesting dynamics in the market.

““We find evidence of a liquidity spillover, whereby the bonds of more liquid non-energy firms had to be sold to satisfy investors who withdrew from bond funds in response to falling energy prices,” said Brandon Li, senior analyst in the New York Fed’s markets group, and Asani Sarkar, an assistant vice president in the bank’s research and statistics team.

“Selling those holdings potentially drove down prices and drove up yields (yield and price move inversely), widening spreads to lower-risk bonds.”

A word of caution, this news is worth noting, but should not drive any decisions to buy or sell bond funds. Review your original criteria for buying the funds you did, and stay with them until something changes in those criteria.

The Editor

Robert F. Abbotttop mutual funds is a freelance writer; see his profiles and analyses of value stocks at GuruFocus.com . He is also the author of Big Macs & Our Pensions: Who Gets McDonald’s Profits?

In this book, you will:

  • Discover the Ownership Revolution, and what it means to your retirement funding.
  • Find out how much of your lunch bill is a profit for McDonald’s, and who gets those profits.
  • Learn how corporate profits fuel one of the greatest social programs ever developed.

Click here to read a free preview at Amazon.com


Robert Abbott

Robert F. Abbott has been investing his family’s accounts since 1995, and in 2010 added options, mainly covered calls and collars with long stocks. In his other writing, Abbott explores how the middle class has come to own much of big business through pension funds and mutual funds, what management guru Peter Drucker called the Unseen Revolution. In Big Macs & Our Pensions: Who Gets McDonald's Profits?, the first of a series of booklets on this subject, he looks at the ownership of McDonald’s and what that means for middle class retirement income. In an eclectic career, Robert Abbott was a radio news writer and announcer, a newsletter writer and publisher, a farmer, a telephone operator, and a construction worker. When not working, he has been a busy volunteer, which includes more than a decade of leadership roles at the Airdrie Festival of Lights, one of North America’s leading holiday light displays. He lives in Airdrie, Alberta, Canada.