A press release entitled, "Invesco announces Combination with OppenheimerFunds," tells us, "Invesco Ltd. (IVZ) ... announced a combination with OppenheimerFunds, a strategic partnership with Massachusetts Mutual Life Insurance Company (MassMutual) and a $1.2 billion common stock buyback program." Invesco is the 13th largest manager of money funds with $57.8 billion, while Oppenheimer is the 29th largest manager with $8.0 billion. A combined Invesco/OppenheimerFunds would still rank 13th (below SSGA) with $65.8 billion. We review this deal, as well as a couple of recent advertisements from money funds and ultra-short bond funds, below.
Invesco President and CEO Martin Flanagan comments, "The combination with OppenheimerFunds and the strategic partnership with MassMutual will meaningfully enhance our ability to meet client needs, accelerate growth and strengthen our business over the long term.... This is a compelling, highly strategic and accretive transaction for Invesco that will help us achieve a number of objectives: enhance our leadership in the US and global markets, deliver the outcomes clients seek, broaden our relevance among top clients, deliver strong financial results and continue attracting the best talent in the industry."
He adds, "We have long held OppenheimerFunds' people and strong investment performance track record in high regard.... OppenheimerFunds' culture and commitment to high-conviction investing complement our own, and the combination will create significant opportunities for the talented professionals of both companies."
The WSJ, in "Invesco to Buy OppenheimerFunds From MassMutual," explains, "Invesco Ltd. agreed to buy rival Massachusetts Mutual Life Insurance Co.'s OppenheimerFunds Inc. unit for $5.7 billion, adding to a string of acquisitions that have transformed the firm into a $1 trillion money manager." Normally, the integration and/or merger of funds related to advisor combinations takes a number of months, but we'll be watching to see how quickly they move on their money fund lineups.
In other news, we noticed a two-page sponsored content ad in the most recent issue of Pensions & Investments featuring DWS's new ESG Liquidity Fund. The piece, entitled, "Liquidity management gets responsible," says, "Most plan sponsors searching for investment managers include some questions about the managers' approach to environmental, social and governance investing in their standard RFP. While these initiatives have long been associated with equity mandates, they are becoming increasingly used in fixed income as well."
It continues, "In Europe, to be sure, ESG has been a fixed income feature for some time. Today it is appearing in a variety of U.S. fixed income strategies. And while institutional investors grapple with the specter of rising interest rates, a pick-up in inflation and climbing stock prices, clients are also seeking to address the issue of responsible investing."
Fiona Bassett of DWS comments, "In the U.S., the ESG market is still relatively nascent.... We believe the U.S. is underserved in this respect across all segments, especially in fixed income, and in particular on the short end of the curve. This has become very apparent in our discussions with clients."
Finally, the piece adds, "One of the reasons fixed income is becoming a hotbed of ESG investing is the increasing level of data that issuers are releasing into the market. This is at least partially a result of money managers seeking to build ESG analysis into their investment processes." (For more, see our October 17 Link of the Day, "SustainableInvest on DWS ESG Fund," our Sept. 7 News, "DWS ESG Liquidity Goes Live; Federated Explains Prime Private Fund," and our August 13 News, "DWS Converts Variable NAV to DWS ESG Money Fund, First ESG Offering.)
We also noticed an advertisement for Northern Trust's "RAVI" ETF being run on WSJ.com." The landing page for this ad says, "FlexShares Ready Access Variable Income Fund (RAVI) is an actively managed ETF that attempts to help short-duration fixed income investors maintain liquidity and reach for higher potential returns, without undue volatility.... Liquidity doesn't have to water down your returns. Today, short-term investors who want to maintain liquidity must separate their needs for principal stability vs. income."
The info page also contains a link to a white paper entitled, "Rethinking Ultra-Short Duration Investing," which tells us, "The financial crisis and its aftermath significantly changed the landscape for ultra-short duration fixed income a.k.a. 'liquidity investing.' Though market dynamics remain in flux, especially globally, there is no going back to the markets, regulation or products of old. As investors became more aware of the shifting dynamics, they began to identify and prioritize their objectives for liquidity investments -- and created a need for new vehicles that manage liquidity assets."
It explains, "Due to new global regulations for banks and money market funds as well as supply-and-demand changes, money market yields are extremely low -- sometimes even going negative. In the current environment, investors and central bankers have come to view these low yields on top-quality, short-dated fixed income paper as being the new normal. And as many of the recent money market regulatory reforms continue to be implemented, many investors will continue to see increased risks or lower yields on their short-term investments. If they have not already done so, it is time for investors to reexamine their liquidity strategy and investigate new vehicles that better match their goals risk tolerances."
Northern's paper comments, "Investors are developing a sharper understanding of the tradeoffs among safety of principal, income and access to funds in managing liquidity. Many now recognize a single product solution may no longer be viable. The regulatory and ultra-low rate environment is forcing them to be more open-minded about the broader menu of investment options available in today's liquidity investing marketplace."
It adds, "To help investors capitalize on the opportunities presented by the new paradigm, FlexShares introduced the Ready Assets Variable Income ETF, or RAVI, an ultra-short duration ETF with a variable NAV. Based on decades of Northern Trust fixed income investing experience, RAVI is designed for investing liquidity. We believe the fund's investment guidelines allow it to capture investment opportunities not available to investors in preservation products as it seeks to provide competitive income, ease of access and minimal principal volatility."
