Family Office Manager Pay Increases, Capital Continues to Flow to MM Funds and an ETF 'Fee War' Breaks Out in this Week's Edition...
Take a Lap Around the Industry
Brookfield Raises $12 Billion for New Private Equity Fund (WSJ)
Sam Bankman-Fried's Trial Begins, Opening Arguments Presented (WSJ)
First SPAC Launch in Middle East Attracts $200M in PIPE Funding (Bloomberg)
Kaiser Workers Go On Strike, Disrupting Healthcare Operations (NYT)
Family Offices Boost Pay to Retain Top Talent
A new compensation report from Morgan Stanley's Single Family Office Advisory group provides insights into salary trends within family offices. The survey of over 400 family offices found strong salary growth, with 90% giving pay increases last year, outpacing the broader U.S. job market. The report also shows family offices increasingly using more sophisticated compensation strategies like long-term incentive plans and deferred bonuses to attract top talent. Factors driving pay include geography, skills demand and investment performance. The data reflects the professionalization and specialization of family offices, now requiring advanced skills in areas like investments and wealth management. As family offices grow more complex, compensation is a key factor in recruiting and retaining the talent needed to meet families' financial and investment goals. The report provides valuable benchmarking to help family offices make strategic compensation decisions.
"Employers across nearly any industry today can see that the talent and compensation landscape is rapidly evolving. Our research amplifies the importance of having data that breaks down trends through a lens specific to family offices."
Valerie Wong Fountain, Morgan Stanley
Private Funding Pulse Check
Automata, a global biotechnology company providing robotic automation solutions, has secured $40M in a Venture funding round led by Copenhagen, Denmark-based A.P. Møller Holding
In a recent Seed round, Wicklow Capital participated in a $3.1M investment in Sparx, a multi-faceted platform that provides SaaS management, cloud optimization and insurance brokerage
Cox Enterprises has participated in a $15M Venture funding round for Canvs AI, an insights platform using AI to transform open-ended text into critical business insights
Otter Inspirations, LLC has engaged in a $5.5M Series A investment in Cognota, a Toronto, Ontario-based platform for corporate Learning and Development teams
Higher Rates Drive Steady Inflows into Money Markets
The Federal Reserve's series of interest rate hikes since mid-2022 has led to a steady stream of inflows into money market funds, as investors seek higher returns on their cash holdings. As seen in the provided chart, both retail and institutional investors have shifted funds into these lower-risk, short-term investments. This trend accelerated in early 2023 following the failure of Silicon Valley Bank, which prompted many depositors to move funds into money markets amid broader banking sector tensions. Institutional investors similarly sought the relative stability of money markets during that period of volatility. However, even after that crisis passed, retail investment inflows have continued on a month-to-month and week-to-week basis, likely due to higher yields available.
"Investors remain wary of continued Fed hikes...There’s a lot of negative sentiment and investor psychology reacting to rising rates, and the desire is to sit on the sidelines."
Jeff Klingelhofer, Thornburg Investment Management
Millennials Buck Retirement Readiness Trend, Per Vanguard Study
A new report from Vanguard Group offers a glimmer of retirement hope for millennials, who have long worried that they will never be able to afford to retire. The report found that older millennials, those currently between the ages of 37 and 41, are on track to retire with income that more closely matches their spending needs compared to Generation X and late baby boomers. This is largely attributed to changes in the retirement industry over the past decade, including the rise of default enrollment in 401(k) plans, automatic contribution rate increases and diversified target-date funds. While millennials face high student debt burdens and uncertain Social Security benefits, Vanguard says adjustments in how retirement savings are invested and drawn down will help enable a more financially secure retirement. However, Vanguard warns that millennials across income levels still face a gap between what is saved and what is needed in retirement, a gap that will likely widen if Social Security benefits are cut in the coming years. More details on the methodology and implications of Vanguard's retirement readiness findings are included in the full report.
"Vanguard attributes millennials’ brighter outlook to changes in the retirement industry including a push to automatically enroll workers in plans; default more workers into defined contribution plans at 5%; automatically increase the percentage of pre-tax salary deferred each year; and make diversified target-date funds widely available."
Suzanne Woolley, Bloomberg
Fee War Bleeds ETF Issuers Dry: Up to Half of Funds Unable to Cover Costs
According to Citigroup's analysis, a considerable number of the more than 3,300 exchange-traded funds (ETFs) listed in the United States struggle to meet their yearly operational expenses due to the continuous pressure on fees within the ETF industry. The report estimates that between one-third and one-half of ETFs lose money for their issuers, assuming fixed costs of $200K to $350K and variable costs up to 7.5 basis points. As ETF providers compete for market share, they have steadily reduced expense ratios across asset classes. While this benefits investors, it squeezes margins for ETF issuers. Even small fee reductions can attract millions in new fund inflows. However, it becomes difficult to profit from ETFs priced at just a couple basis points. As a result, many lower-cost, passively managed ETFs likely lose money despite strong asset gathering. To offset losses from low-fee products, ETF providers try to launch higher-margin thematic or active ETFs carrying fees of 50 basis points or more. But these "hot sauce" funds account for a small portion of industry assets. Ultimately, the ETF fee war threatens to make the business unprofitable for all but the largest players like BlackRock and Vanguard. Asset managers must walk a fine line between gathering assets and generating adequate profits from their ETF lineups.
"In a maturing industry, there are still profits to be had, but success is not necessarily widespread...Typically, strategies with higher associated fees tend to have greater percentages of covering their operating costs or earning more significant fees for their issuer."
Waverly Advisors acquires SoundPath Investment Advisors, marking Waverly's expansion into Mississippi with its first office in the state
SoundPath was founded in 1988 and rebranded in 2022. Julius Ridgway, Doug Muenzenmay, and Eddie Carlisle will serve as Co-Regional Directors
The deal increases Waverly's assets under management to approximately $7.2B
This is Waverly's eighth acquisition since taking an investment in 2021 from Wealth Partners Capital Group and HGGC's Aspire Holdings to support its M&A growth strategy (BW)
Written by:
Andrew Popp | Sr. Research Associate
FINTRX delivers an industry-leading suite of private wealth data and research solutions to the alternative investment space and private capital markets. Engineered to help clients identify and access family office and RIA capital intuitively, the FINTRX platform ensures accurate and updated data and research on 850,000+ private wealth records globally. To subscribe to our newsletter and see previous versions click below.
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