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<ul><li>IT services company <keyword id="28721" type="General" weightage="20" keywordseo="cognizant" source="Orion">Cognizant</keyword> reported a healthy growth in revenue and profit for the June quarter.</li><li>While its attrition rates remained highest in the industry, the company says it has been hiring a new employee every 56 seconds.</li><li>Its attrition rates rose to 31% from 26% in the previous quarter, indicating no end to attrition.</li></ul>Nasdaq-listed Cognizant’s net profit grew 12.7% sequentially to $577 million in the second quarter ended June 30, while revenues grew by 9.5% on year in constant currency to $4.9 billion. This is the fifth consecutive quarter of revenue growth with highest quarterly revenue to date. Note Cognizant follows the calendar year as its financial year. While the company delivered healthy earnings performance, elevated attrition remains core issue amid the inflationary environment similar to <a href="https://www.businessinsider.in/business/corporates/news/it-is-attrition-rates-and-not-the-wage-hikes-dampening-indian-it-cos-earnings/articleshow/93120202.cms">Indian IT companies that is sacrificing on profits </a>due to rising wage hikes. “During the quarter, we maintained a disciplined approach on pricing, while managing supply constraints and labor cost inflationary pressure. While quarterly bookings performance was below our expectations, our 1.2x book-to-bill supports our revenue growth outlook for 2022,” said Jan Siegmund, chief financial officer at Cognizant. In fact, the company lowered its full year revenue growth guidance to 8.5-9.5% in constant currency at $19.7-19.9 billion, from the 9-11% growth it guided in the previous quarter. Cognizant has the highest attrition rates in the industry and to tackle that it has also been hiring aggressively to an extent that it now claims a new employee is hired every 56 seconds. Its attrition rates rose 31% from 26% in the previous quarter, indicating no near end to the attrition war in the IT space. It added over 900 employees sequentially and 40,100 staff since the same quarter last year, raising the headcount to over 3.41 lakh employees amid the intensely competitive labor market. <div type="image" title="Copy of top 10 company" height="900" width="1200" msid="93189368" hostid="261"></div> Amid the talent war, Cognizant commits to retaining employees by investing in employee benefits programs. “In a period of unprecedented labor market conditions characterized by elevated attrition and significant wage inflation, we focused on our client commitments and delivered balanced financial results in the second quarter. As we position the company for sustained success, we will continue to invest in our talented employees, our clients and our capabilities,” said Brian Humphries, CEO of Cognizant. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/indias-favourite-tea-time-snacks-such-as-samosas-aloo-bhujia-parathas-have-gone-global/articleshow/93186525.cms">The world is not enough for Indian snacks as the humble samosa has gone global</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/sbi-card-doubles-its-profit-as-its-customers-increase-spends-by-80/articleshow/93186947.cms">SBI Card doubles its profit as its customers increase spends by 80% – but FY23 off to a slow start</a>

Cognizant reports 12.7% profit growth QoQ, but lowers revenue guidance for the year

New Delhi, Nov 20 () US-based IT major Cognizant has named Mark Taylor as the head of Cognizant Interactive.
 In an email to employees, Cognizant Digital Business President Malcolm Frank said Taylor has joined as the new Senior Vice President and Global Practice Leader of Cognizant Interactive.
 Taylor joins the company from Capgemini, where he most recently served as Global Customer Engagement Lead. He will be based out of the Hudson Yards office in New York and will report to Taylor.
 According to Cognizant website, Interactive brings together five key capabilities to deliver a suite of offerings, including strategy and design, content, marketing and social as well as platforms and technology.
 Taylor brings decades of industry expertise across a variety of sectors, particularly in consumer products, retail and financial services.
 Mark's career-long passion for the customer will be invaluable as Cognizant helps clients transform their customer relationships from the old world of marketing to the new world of customised consumer experiences, Frank said.
 "Our positive performance and growth in the Interactive practice is a testament to the strong leadership and commitment provided by Deepthi Prakash and Santhosh Sreemushta. Both will now report to Mark and continue to develop our strategy and profit and loss (P&amp;L) management in the practice," he added. SR SR ANS
ANS

Mark Taylor to head Cognizant Interactive

<ul><li>Cognizant first-quarter earnings were in the green but worst is yet to come with the full impact of the ransomware attack on its systems to be reflected in the coming quarters.</li><li>Management explained that there are multiple costs — including legal and consulting — associated with the investigation. </li><li>Even now, Cognizant expects that it will take at least until the end of the month to completely restore its systems.</li></ul>Cognizant’s first-quarter earnings were in the green, up by 3.5% in constant currency terms, but the shadow of the Maze ransomware attack on the company’s network still looms large. “We do anticipate the revenue and corresponding margin impact to be in the range of $50 to $70 million for the quarter [Q2],” said Cognizant’s Chief Financial Officer (CFO) Karen McLoughlin during the earnings call. <div type="Article" hostid="261" msid="75616476" title="Cognizant CEO Brian Humphries warns of a tough 2020— plans to hire 20,000 freshers this year" mstype="2" mssubtype="0"></div> “With the ransomware attack now contained… We are now substantially work from enabled,” added CEO Brian Humphries explaining that the vast majority of revenue impact will only be reflected in the next quarter’s earnings and continue to bear down in the coming year. “[The] ongoing remediation cost will institute through subsequent quarters,” he said. The issue with ransomware attacks, in comparison to other malware, is that the impact goes beyond mere monetary compensation. The company’s reputation takes a hit, clients back out and there’s a huge opportunity cost while security experts try to get systems back online. “We expect to incur certain legal, consulting and other costs associated with the investigation, service restoration and remediation of the breach,” explained McLoughlin. It’s going to take till the end of the month for Cognizant to completely get its systems back online and fully functional, according to Humphries. The ripple effects of a ransomware attack Cognizant isn’t the only company to get hit by Maze ransomware. The malicious software has been blamed for extorting a number of large organisations in the past year. However, the attack on Cognizant is likely the most prolific till date. “Unlike its predecessors, the group behind Maze ransomware delivered on its promises in late 2019 — more than once,” said global cybersecurity company Kaspersky. For instance, in November, when Allied Universal refused to pay up, the criminals <a href="https://www.bleepingcomputer.com/news/security/allied-universal-breached-by-maze-ransomware-stolen-data-leaked/">leaked 700MB of internal data online</a> including contracts, termination agreements, digital certificates, and more. The blackmailers said they had published just 10% of what they had stolen and threatened to make the rest available publicly if the target did not cooperate. <div type="Article" hostid="261" msid="75271532" title="Cognizant's ransomware attack is making peers like TCS and Infosys nervous — and they are beefing up security" mstype="2" mssubtype="0"></div> For an IT services company like Cognizant, there’s a ripple effect that goes beyond simply paying the ransom. In addition to locking the company’s files behind a bitcoin paywall — sensitive information was stolen like targets for mergers and acquisitions, profit and loss reports, as well as medical records. “Ransomware attacks often rely on victims making a few basic mistakes that are often quite uncomfortable to confront,” explains Paul Ducklin, the Principal Research Scientist at Sophos. And, as is the case with most blackmail, paying the blackmailers doesn’t necessarily ensure that information won’t be leaked. All you have is a pinky promise from a bad-faith actor that they will keep their word — and Cognizant’s clients seemed to be aware of this little complication. “Some clients opted to suspend access to their networks. Billing was therefore impacted for a period of time, yet the cost of staffing projects remained on our books,” said Humphries. The approach that hackers take is called ‘steal, lock and inform’ because they understand the impact this will have on the company’s reputation. “The attack encrypted some of the internal systems, effectively defaming them and we proactively took other systems offline,” added Humphries. There’s no reset button, there’s no way to get the information back and it takes time to determine how much data has been lost since attackers erase any directories or back-ups a company may have in place. “Backing up data is just a hygiene step that needs to be taken by every data storing facility mandatorily, however it is not enough,” said Saurabh Sharma, a Senior Security Researcher for Kaspersky. See also: <a href="https://www.businessinsider.in/business/news/cognizant-q1-net-falls-16-7-pc-to-usd-367-mn-sees-challenging-demand-environment-in-2020/articleshow/75616476.cms">Cognizant CEO Brian Humphries warns of a tough 2020— plans to hire 20,000 freshers this year</a> <a href="https://www.businessinsider.in/business/news/lockdown-hyundai-rolls-out-200-vehicles-from-chennai-plant-on-first-day-of-resuming-operations/articleshow/75642579.cms">Hyundai rolls out 200 vehicles from Chennai plant on first day of resuming operations</a> <a href="https://www.businessinsider.in/india/news/coranavirus-cases-in-punjab-news-and-updates/articleshow/74771047.cms">Punjab board to promote class 10 students without final exams due to Covid-19 crisis</a>

The Cognizant Maze ransomware saga will show its full impact for many months to come

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Getty ImagesA worker inside an Amazon warehouse.</div></div></div><ul><li>The former postmaster general of the US Postal Service "unequivocally stated" that the <a href="http://www.businessinsider.com/category/amazon">Amazon</a> contract is profitable.</li><li><a href="http://www.businessinsider.com/trump-amazon-post-office-deal-2018-4">Earlier this week,</a> President Donald Trump said that <a href="http://markets.businessinsider.com/stocks/amzn-stock">Amazon</a> is "costing the United States Post Office massive amounts of money." </li><li>According to the ex-postmaster general, Amazon is actually playing a key role in improving the USPS' financial performance. </li></ul> The former head of the US Postal Service is taking on President Donald Trump's campaign against the USPS' <a href="http://www.businessinsider.com/category/amazon">Amazon deal. </a>"Only fools, or worse, are saying that our money losing Post Office makes money with Amazon," Trump tweeted <a href="http://www.businessinsider.com/donald-trump-tweet-amazon-post-office-retailers-2018-4">Monday</a>. "THEY LOSE A FORTUNE, and this will be changed." Trump doubled down with <a href="https://twitter.com/realDonaldTrump/status/981168344924536832">another tweet</a> on Tuesday, saying Amazon is "costing the United States Post Office massive amounts of money for being their Delivery Boy."However, according to Patrick Donahoe, who served as the postmaster general from 2010 to 2015, that's simply not true. Donahoe "unequivocally stated that the Amazon contract is profitable for the USPS" while in conversation with UBS analysts, according to a note released by the bank on Thursday. The former postmaster general broke down the fact that the USPS' business is split between mail - like letters and magazines - that only the government service could deliver, and "competitive products," or packages that rivals like FedEx or UPS could deliver. Package delivery legally needs to cover operating costs and 5.5% of USPS' fixed costs. According to Donahoe, package products are covering "meaningfully more" than the 5.5% allocation. Last year, shipping-and-package revenue jumped by $2.1 billion, an increase of 11.8% over the previous year. According to the USPS, much of that growth was thanks to e-commerce.<h2>Trump's $2.6 billion counterargument</h2><div class="KonaFilter image-container display-table"><div><div class="image on-image">Getty ImagesUS Postal Service employee Arturo Lugo delivers an Express Mail package during his morning route on February 6, 2013 in Los Angeles, California.</div></div></div>Last year, the USPS reported a net loss of $2.7 billion on $69.6 billion in revenue. Critics, such as President Trump, argue that Amazon should increase the prices of package delivery to cover these loses. <a href="http://www.businessinsider.com/trump-amazon-post-office-deal-2018-4">A report by Citi last year </a>found that if the USPS were to cover its costs by increasing package-shipping prices, each package would cost an average of $1.46 more to ship. Amazon would be one of the companies hit hardest if the USPS were to increase prices - Citi analyst Christian Wetherbee estimated that a price hike would cost Amazon $2.6 billion.However, if the USPS were to increase prices, it could lose out on business to competitors such as UPS and FedEx - something that Donahoe acknowledged when speaking with UBS. The business-to-consumer "package market is dynamic and the USPS is likely very cognizant of potential risk to package volumes if they significantly raise rates," Donahoe said, according to analyst Eric J. Sheridan.The USPS' low fixed costs and mandate to deliver mail to Americans makes it an ideal option for Amazon's "last-mile" delivery, or a package's journey from a fulfillment depot to its final destination. While FedEx or UPS avoid last-mile deliveries in many cases as they tend to be unprofitable, the USPS can complete deliveries at a lower cost. Amazon's contract with the USPS reportedly expires this October. However, despite Trump's battle against the company, Donahoe indicated it was unlikely that the USPS would substantially raise prices in an updated contract. "USPS is cognizant of the importance of private shippers like Amazon and the role they have played in improving the organization's financial performance," according to the UBS note. <a href="http://read.bi/retail-2018"></a> <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/how-all-you-can-eat-restaurants-make-money-2018-3">How all-you-can-eat restaurants don't go bankrupt</a></h3> <div> </div> </div>

Ex-postmaster general defies Trump by 'unequivocally' stating that Amazon's contract is profitable for the US Postal Service

With <keyword id="6355055" type="COUNTRY" weightage="20" keywordseo="USA">USA</keyword> checking upon the immigration rules and the wave of automation already hitting the shores of IT hubs in India, instances of IT employees being handed over pink slips are rampant. While a year back, pink slips were given to employees for under-performance. But not now! Companies are asking employees to take four months’ salary and resign. In worst cases, they are being forced to put down their papers giving two months’ notice. Not just that, some tech employees in Electronic City <keyword id="6354321" type="CITY" weightage="100" keywordseo="Bengaluru">Bengaluru</keyword> are in the fear that those who don’t resign would be terminated by June. Besides, there hasn’t been any increment this year. Bengaluru has got the glory of IT capital since the 80s. Branded as Indian <keyword id="6357722" type="COMPANY" weightage="20" keywordseo="silicon-valley">Silicon Valley</keyword>, Karnataka hosts around 3,000 IT companies, of which 750 are MNCs. Swanky offices, plush buildings and fat pay checks have made Indian middle class hooked to pursue career in IT soon after graduation. The city that shaped itself as a job creator is now facing the brunt of reality. Cognizant, which houses 1,50,000 Indian employees in its Bengaluru chapter has reports of 6000-10000 people being downsized. "Being the IT hub with many jobs in software services, Bengaluru will be the most affected in the current round of layoffs,” <keyword id="2421766" type="UNKNOWN" weightage="20" keywordseo="Alka-Dhingra">Alka Dhingra</keyword> of Team Lease employment solution told The Economic Times. While spokesperson of various IT companies unanimously site Visa regulations and automation responsible for job loss, employees refuse to buy. An IT company employee told ET that the number of visas being issued is the same as before. Moreover the threat of automation, he said, is for BPO sector and manufacturing units and not as much to the core developers. The inference that can be drawn is the companies are downsizing to increase their profit margins. Besides, they want freshers to do the same type of job than mid-level executives, which would again save these companies thousands of dollars. A software company employee, in conversation with the ET alleged that the HR department of his company has threatened to snatch his id card if he doesn’t resign in a week. He is now planning to relocate to other cities for jobs. IT industry is no more a luring sector for freshers who thought landing on a job is easier than they think. “One needs to keep in mind that there may also be a bigger reverse migration from the West, following incidents of racism and terror attacks. Additionally, any crisis management strategy would be hampered by the lack of data. Currently, we don't know how big the crisis is” Narender Pani, professor at the National Institute of Advanced Studies told the ET.

Identity cards snatched and forced to leave: The IT company woes in Bengaluru are now real

At the point when security takes a secondary lounge to turning a quick profit, you're taking a bet and could conceivably lose it all. Any business can turn into the casualty of a <a href="http://www.businessinsider.in/Anonymous-Annihilating-Corporations-and-Government-Since-1999/articleshow/53173485.cms">cyberattack</a> or security breach without the correct arrangements and strategies set up to battle data fraud and related theft. 
 As a <keyword id="138263" type="UNKNOWN" weightage="20" keywordseo="startup">startup</keyword>, you have a lot to consider. In any case, one that that must not be overseen is data security and assurance. Lamentably, numerous startups don't viably organize data security or depend on apparatuses that are lacking for the task, putting their organization at danger from the start. 
 
Since sufficient data security is indispensable to the very survival of your organization, it's essential that you stay away from a few normal slip-ups. While completely securing your data and system includes a venture of time and cash, when you consider the potential results of not securing your most critical resource, those are assets well spent. 
 
The Blurry Border between Personal &amp; Professional devices 
 
Bring your own device (BYOD) has picked up prominence in recent couple of years, particularly in the startup space. No one likes to carry multiple cell phones and continually use diverse operating systems to check email and oversee schedules. Nonetheless, the security danger is frequently dominated by expediency. Representatives' own devices have entry to and store private corporate data. At the point when a representative leaves an association, that data is still present on their device and can be accessed. As far as data security is concerned this is a noteworthy mistake. 
 
Not enough <keyword id="3538512" type="TECHNOLOGY" weightage="20" keywordseo="Exit-Protocols">Exit Protocols</keyword> 
 
Data slips and security ruptures are more basic with organizations that depend generally on outsourced specialists or freelancers, unless they join a foreordained exit procedure. Data loss, as secret data sharing, account access and other, is not hard to occur when personal corporate data remains put away on the gadgets of these individuals; they are not all that security-cognizant on their personal devices, or they even disregard having the data put away in any case. You should secure your organization's and your customer's data by planning future with your legal team. 
 
SSL Issue 
 
SSL (Secure Sockets Layer) are easily established from the very startIt reassures your users and upgrades the security level of your interchanges. SSL secures eCommerce transactions and numerous applications. It has proven to be a flexible security arrangement, giving assistance to authentication and encryption using computerized certificates. 
 
Employee Training 
 
Employee training is consistently peddled as one of the top methods of ensuring data security and preventing breaches. Preparing employees in the fundamentals of data protection, their role in keeping data secure and how to identify dangers is imperative, yet numerous new companies avoid this, accepting that employees recognize what to do or that a single instructional course is enough. Employee training needs to be more comprehensive and progressing-- with clear policies and expectations, to help ensure data security. 
 
<keyword id="297349" type="TECHNOLOGY" weightage="20" keywordseo="data-encryption">Data Encryption</keyword> 
 
<a href="http://www.businessinsider.in/Heres-how-the-US-government-plans-to-break-the-encryption-on-your-smartphone/articleshow/51742351.cms">Encrypting data</a> is a standout amongst the best approaches to avert exposure in case of a data break. Encrypting data both amid capacity and amid exchange is essential, yet such a variety of little organizations avoid this progression because of a misconception of the multifaceted nature of overseeing encryption or the confused conviction that it's a bit much. New applications make it less demanding than any time in recent memory to scramble data and oversee keys, so even the littlest, most bootstrapped startup can bear to include this additional layer of assurance. 
 
Data security should be an essential worry of any startup from the get-go. It is not something that can be managed "later," or made do with purchaser grade instruments. To guarantee the accomplishment of your business and counteract pointless costs that could hopelessly hurt your organization, make data security and insurance a need and maintain a strategic distance from these mistakes.

Fail to spot these
Security Layers and lose all your data

<ul class="summary-list"><li><keyword id="4513420" type="PERSON" weightage="60" keywordseo="ark-invest">ARK Invest</keyword> is ill-prepared for a market downturn, according to Robby Greengold, CFA.</li><li>Wood's <keyword id="10868787" type="UNKNOWN" weightage="60" keywordseo="ark-innovation-etf">ARK Innovation ETF</keyword> is backed by research from inexperienced analysts with "lax risk controls."</li><li>The ETF's size and concentrated holdings could make it difficult for Wood to sell in a downturn.</li></ul>Strategist Robby Greengold, CFA broke down why <a href="https://www.businessinsider.com/cathie-wood-ark-invest-etf-bio-tesla-portfolio-reddit-profile-2021-2">Cathie Wood's</a> ARK Invest could be in for some serious trouble during a market downturn in a <a href="https://www.morningstar.com/articles/1031702/ark-innovations-thematic-approach-is-ill-prepared-for-a-major-twist">Morningstar article</a> on Wednesday.The analyst illustrated key potential weaknesses in Wood's flagship exchange-traded fund, the <a href="https://markets.businessinsider.com/etfs/ark-innovation-etf-us00214q1040">ARK Innovation ETF</a>, including inexperienced analysts, lax risk controls, and an illiquid, bloated asset base."Thematic-investing specialist ARK Investment Management has been in tune with the market's unfolding narrative in recent years, but its lone portfolio manager, inexperienced team, and lax risk controls make it ill-prepared to grapple with a major plot twist," Greengold wrote. <h2>A one-woman show</h2>It's no secret <keyword id="10473418" type="UNKNOWN" weightage="60" keywordseo="cathie-wood">Cathie Wood</keyword>'s active exchange-traded-fund <a href="https://www.businessinsider.com/cathie-wood-news-stock-picks-investing-strategy-ark-etfs-career-2021-2">investing strategy</a> has been immensely successful since ARK Innovation's inception in 2014. Her fund has returned 495% to first-day investors since it began trading on October 31, 2014, and it's up 183% in the past year alone.Still, as Greengold pointed out in his article, Wood is the lone portfolio manager at her firm, and there isn't a deep bench to replace her when she steps down. Greengold questioned whether having only one portfolio manager at ARK could lead to problems in the future, especially given the fund's struggle to retain talent.Additionally, Greengold notes that during Wood's 2001 to 2013 tenure at AllianceBernstein, she "ran several strategies similar to this one that had high volatility, poor downside performance, and underwhelming long-term results."ARK Invest did not immediately respond to a request for comment.<h2>Inexperienced analysts</h2>Greengold was especially critical about the fund's inexperienced analysts. Very few ARK analysts have experience beyond an undergraduate degree and only about half of the current team signed on with any work experience, Greengold said. He noted this contrasts with the norm for equity analysts who typically have an undergraduate degree, some internship or entry-level work experience, and at least some progress towards investment credentials like a CFA.While Wood sees this as a benefit that allows her analysts to have unique perspectives, Greengold questioned their lack of experience. Although he did note Wood's team is more diverse than much of the competition, and prior research has shown that this leads to more creativity, innovation, and <a href="https://www.businessinsider.com/benefits-of-diverse-companies-2017-3">even profits</a>.Inexperience leads ARK to outsource much of its more technical analysis to what the fund calls "<a href="https://research.ark-invest.com/hubfs/1_Download_Files_ARK-Invest/Marketing_Material/ARK-Invest-Thematic-Investment-Process.pdf">theme developers.</a>" The firm says these include academics, entrepreneurs, and former ARK analysts. According to Greengold, ARK's "analytical edge remains unclear" given its strategy of hiring such outsiders for technical analysis,Analysts at ARK also operate differently. Unlike other firms who break up their analysts by sector, ARK analysts are given one or more technological specialties, like DNA sequencing or robotics, and then asked to become experts in their field. Greengold argues this setup "could lead to ultra-specialization and potential blind spots that better-resourced firms wouldn't miss."<h2>A lack of risk controls</h2>Greengold also expressed concern about risk management at ARK Invest, citing how Cathie Wood doesn't employ risk management personnel. The firm also has very few portfolio construction parameters that other firms use to stay within acceptable risk limits.And on March 29, 2021, "the fund removed prospectus language limiting the size of its top positions and its ownership percentage of individual companies' shares outstanding."Greengold worries this could lead to issues in a market downturn."Even a high-octane strategy like this one should be cognizant of the risks embedded in its portfolio and manage to a definable risk tolerance. It seems not to," the strategist said."Without risk-management professionals to stress-test the portfolio's risk exposures, estimate its potential losses during historical or hypothetical market environments, and gauge worst-case scenarios, the team is poorly positioned to prepare and react," Greengold concluded. <h2>A less than liquid portfolio</h2>Finally, ARK Innovation's portfolio has become less liquid and "more vulnerable to severe losses as its size has swelled," according to Greengold.Assets under management grew to over $23 billion in February. Additionally, the ETF has more positions in companies in which it holds at least a 10% stake than any other ETF.Retaining stakes in small companies makes it difficult to sell without materially impacting their stock prices. This forces Wood's ETF to exit and enter positions slowly over time, which, again, could be a problem in a downturn.Wood overcomes the lack of liquidity in her portfolio by holding what she calls "cashlike" large-cap names. That way, in a downturn, Wood could sell those stocks and concentrate her holdings in top conviction plays. The problem is, according to Greengold, that Wood followed a similar gameplan in 2008 at AllianceBernstein and her "large-growth-oriented separate account lost 45% before fees - substantially worse than the Russell 1000 Growth Index's 38% decline."Wood's <a href="https://markets.businessinsider.com/etfs/ark-innovation-etf-us00214q1040">ARK Innovation ETF</a> is down 11% this month as a <a href="https://www.businessinsider.com/stock-market-outlook-value-rotation-stocks-jpmorgan-barclays-stimulus-vaccines-2021-3">rotation</a> away from highly valued tech names and into value plays continues to drag on results.

ARK Invest is ill-prepared for downturn on analyst inexperience, lax risk controls, bloated asset base, strategist says

<div class="KonaFilter image-container float_right"><div class="image on-image"><a href="http://www.flickr.com/photos/78224393@N00/8499030135/">Flickr/Niels Linneberg</a></div></div>FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
<a href="https://advisors.vanguard.com/VGApp/iip/site/advisor/researchcommentary/article/InvComTaxTrap">It's A Myth That Index Funds Can Become Tax Traps During A Bear Market</a> (Vanguard)
It is often claimed that index mutual funds - funds that are created to replicate of an index - can become a tax trap during bear markets when fund managers are forced to sell their holdings and distribute profits in the form of capital gains. But Scott Donaldson of Vanguard's Investment Strategy Group dismisses the argument as a myth. 
"Typically, an index fund in practice carries a wide dispersion of share lots in each security - that is, groups of shares purchased at different prices, both high and low - that serve as a powerful defense against the risk that such portfolios will become 'tax traps'."
"...It's important to understand that a broad-market index fund has the ability to sell share lots that were purchased at high prices and realize losses that can then be used to offset gains elsewhere in the portfolio," Donaldson said. "Thus, a well-managed index fund can use its high-cost share lots (those purchased at high prices) to accommodate redemption requests. As a result, redemptions during a bear market can actually help a broad-market index fund remain tax-efficient."
<a href="http://www.businessinsider.com/howard-marks-2007-risks-are-back-2013-11">HOWARD MARKS: Heed This Omen, The Risks Of 2007 Are Back</a> (Oaktree Capital)
Oak Tree Capital's Howard Marks thinks "we're seeing another upswing in risky behavior." This he says was "spurred by central bank policies that depressed the return on safe investments." Marks says he sees the same characteristics now that he saw in 2007 before the financial crisis, though not to the same degree. These risks include 1. Global glut of liquidity. 2. Very little interest in traditional investments and investors are moving towards alternative investments. 3. Little concern about taking on risk. 4. Meager prospective returns. 
"In short, it's my belief that when investors take on added risks - whether because of increased optimism or because they're coerced to do so (as now) - they often forget to apply the caution they should," Marks writes. "That's bad for them. But if we're not cognizant of the implications, it can also be bad for the rest of us."
<a href="http://online.wsj.com/news/articles/SB10001424052702304337404579214280482911404?mod=WSJ_WealthAdviser_WhatsNews_3_3_RightBottom">Advisors Should Tell Their Clients About Donor Advised Funds</a> (The Wall Street Journal)<a href="http://online.wsj.com/news/articles/SB10001424052702304337404579214280482911404?mod=WSJ_WealthAdviser_WhatsNews_3_3_RightBottom"> </a>
Charitable giving is something affluent clients often care about yet advisors pay very little attention to donor advised funds (DAFs), writes Mark R. Mersman, financial advisor at Michigan-based USA Financial in a new WSJ column. Clients can set up a DAF and the put money into it and take a tax write off for the amount they have donated. They then tell the fund where to donate the money. 
But that isn't the only benefit of the DAF. "Instead of collecting tax receipts from multiple organizations, clients can collect one tax receipt for the DAF and still contribute to multiple charities," writes Mersman. "Also, clients can let the fund sit and grow indefinitely, meaning they don't need to grant funds to charities immediately if they aren't ready." But advisors should also warn their clients about the costs associated with DAFs and point out that they give up control once the donation is made.
<a href="http://www.businessinsider.com/chart-stocks-are-crushing-bonds-2013-11">Stocks Are Outyielding Bonds Everywhere</a> (BlackRock)
Investors chasing yield have been in a tight spot as government bonds and money market funds have delivered negative returns after accounting for inflation, according to BlackRock. But yields on international stocks are higher than those of government bonds.
<div class="KonaFilter image-container"><div class="image">Blackrock</div></div> <a href="http://www.businessinsider.com/burton-malkiel-on-the-6040-portfolio-2013-11">BURTON MALKIEL: Investors Sticking To The 60/40 Rule Are Likely To Get Badly Hurt</a> (CNBC)
Investors that stuck with the 60% stock and 40% bond portfolio model saw returns of 10% a year from 1990-2011, according to Elizabeth MacBride at CNBC. But that strategy might have lost its usefulness. Burt Malkiel, CIO of Wealthfront told CNBC that bond investors will be badly hurt.
"The correct allocation ought to depend on individual circumstances. It is definitely not the right kind of thing for everybody. What I had in my "Random Walk" for the last several editions is a quite different allocation. You should have more equity orientation. Another rule of thumb: Jack Bogle has often said bonds should be a percentage equal to your age. I don't agree with that, either.
"I think that allocation is particularly wrong today because we are in an age of financial repression. ... Europe and Japan are having trouble reining in budget deficits, and we have high debt in the U.S., too. (The governments) are deliberately keeping interest rates down. Even a U.S. bond index fund is not the right thing to do, because BND [Vanguard Total Bond Market ETF] is about two-thirds government or agency bonds."

VANGUARD: It's A Myth That Index Funds Can Become 'Tax Traps' During A Bear Market 

<div class="KonaFilter image-container display-table"><div><div class="image on-image">ReutersFacebook CEO Mark Zuckerberg.</div></div></div><ul><li>Big tech stocks like <a href="https://markets.businessinsider.com/stocks/googl-stock">Alphabet</a>, <a href="https://markets.businessinsider.com/stocks/aapl-stock">Apple</a>, and <a href="https://markets.businessinsider.com/stocks/fb-stock">Facebook</a> have come under pressure amid <a href="https://markets.businessinsider.com/news/stocks/facebook-amazon-alphabet-stock-price-regulatory-concerns-2019-6-1028249849">reports</a> of federal probes around antritrust issues and data privacy concerns.</li><li>It's unclear whether the companies' stock prices will suffer in the long run as uncertainty surrounds the scope of the probes.</li><li>But market strategists and legal experts are warning big-tech investors face major risks.</li><li><a href="https://markets.businessinsider.com/">Visit Market Insider's homepage for more stories</a>.</li></ul>Federal regulators are knocking at Big Tech's door.The US Federal Trade Commission will oversee any antitrust probe into whether <a href="https://markets.businessinsider.com/stocks/fb-stock?utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener">Facebook</a>'s practices hurt competition into the digital market, the Wall Street Journal <a href="https://www.businessinsider.com/ftc-oversight-potential-facebook-antitrust-probe-2019-6?utm_source=markets&amp;utm_medium=ingest">reported</a> earlier this month. The news sent the social network's shares plunging and dragged the entire technology sector lower.<a href="https://markets.businessinsider.com/stocks/googl-stock">Alphabet</a> and <a href="https://markets.businessinsider.com/stocks/aapl-stock">Apple</a> saw their stocks fall on similar press reports the same day that the US Department of Justice was preparing antitrust probes into each company. Meanwhile, Sen. Elizabeth Warren - the Massachusetts Democrat and US presidential candidate - <a href="https://www.businessinsider.com/elizabeth-warren-plan-to-break-up-amazon-facebook-google-big-tech-2019-3">proposed earlier this year</a> a plan to break up big tech companies including Amazon, Google, and Facebook.While it remains to be seen whether reported probes and proposals into antitrust matters and privacy concerns will mark a death knell for the likes of <a href="https://markets.businessinsider.com/stocks/fb-stock">Facebook</a> and Google parent <a href="https://markets.businessinsider.com/stocks/googl-stock">Alphabet</a> - as the exact scopes of the probes remain unclear - experts are warning against investors shrugging off possible risks.A bonus just for you: <a href="https://www.businessinsider.com/subscription/try-prime?ms?utm_source=markets&amp;utm_medium=ingest" target="_blank" rel="noopener" data-saferedirecturl="https://www.google.com/url?q=https://www.businessinsider.com/subscription/try-prime?ms&amp;source=gmail&amp;ust=1560609085229000&amp;usg=AFQjCNFn6kRKsv--pWAFzmE2aDxEpiaN_Q">Click here to claim 30 days of access to Business Insider PRIME</a>"From a strategic perspective, we believe that uncertainty is still too high to recommend investors avoid stocks in the regulatory spotlight," Goldman Sachs strategists led by Ryan Hammond said in a Tuesday note.They added: "But while the impact of regulation on today's stocks will be case-dependent, similarities among historical outcomes suggest that investors should reduce exposure to any stock that becomes subject to an antitrust lawsuit."The strategists pointed to past regulatory events, with shades of today's concerns, that ushered in material business losses.For example, <a href="https://markets.businessinsider.com/stocks/msft-stock">Microsoft</a>'s 1998 antritrust lawsuit ultimately led to a reversed court-ordered breakup and a settlement with the Department of Justice. The corporation then saw "substantially" lower sales growth following its 2001 consent decree that expired a decade later, according to Goldman. Meanwhile, they found <a href="https://markets.businessinsider.com/stocks/ibm-stock">IBM</a>'s antitrust lawsuit in 1969 kicked off a "steady decline" in revenue growth and margins. <div class="KonaFilter image-container display-table click-to-enlarge"><div><div class="image on-image"><a title_source="Goldman Sachs" title_caption="IBM's stock multiple reaction to regulatory events." class="zoomin" href="https://static-ssl.businessinsider.com/image/5d03e5ff6fc920065517d1a7-960/screen shot 2019-06-14 at 22220 pm.png"></a>Goldman SachsIBM's stock multiple reaction to regulatory events.</div></div></div>Other investment firms are highlighting similar risks of which investors should be cognizant, even as the extent of various regulatory bodies' probes is a wildcard.As issues like data security and the overall health of technology platforms becomes increasingly prevalent, companies face a "higher cost of doing business," Morgan Stanley strategists wrote in a late-May report."Outside of China, the risk of regulation limiting foreign investment in local companies may present a headwind to international growth and profitability for some of our companies," they wrote. Read more: <a href="https://markets.businessinsider.com/news/stocks/facebook-stock-price-reaction-to-zuckerberg-reportedly-aware-privacy-issues-2019-6-1028274446">Facebook shares drop sharply after unearthed emails reportedly show Mark Zuckerberg is aware of 'problematic privacy practices'</a>On the company level, the firm said the cost of compliance and regulatory overhang will remain a risk for Facebook and Alphabet, while Amazon may face "growing protectionist regulations" eating into potential international growth."Each government has its own nuanced approach to these issues and our universe may have to adapt to an environment in which protectionist/nationalist behaviors drive decision making as national regulatory and tax regime differences become more stark," the strategists wrote, adding that political rhetoric leading up to the 2020 US presidential election may inject volatility into the space.<div class="KonaFilter image-container display-table"><div><div class="image on-image">APGoogle CEO Sundar Pichai.</div></div></div>Some experts are skeptical big-tech companies will face breakups, but say risks still abound.Court mandated break-ups have been infrequently implemented in US history and are unlikely to be seen here, according to Glenn Manishin, a managing partner at ParadigmShift Law and a former trial attorney for the DoJ's antitrust divison. He worked on the US vs. AT&amp;T and Microsoft cases.Facebook runs the highest risk of a split relative to other big-tech companies given its Instagram acquisition, followed by Google, Apple, then Amazon, Manishin said on a conference call this week with Instinet analysts.Read more: <a href="https://www.businessinsider.com/news-publishers-congress-testify-regulate-tech-giants-facebook-google-2019-6">The news industry is joining the attack against big tech companies like Google and Facebook</a>Specifically, the fact that Google's case started in the FTC and is now in the DoJ could have negative implications given the latter unit's focus on monopolization claims and the former's focus on unfair methods of competition. The risks hanging over big tech were underscored this week when Makan Delrahim, the assistant attorney general in the Department of Justice's antitrust division, <a href="https://www.businessinsider.com/makan-delrahim-doj-no-need-new-antirust-laws-big-tech-2019-6">addressed the matter at a conference</a> in Tel Aviv, Israel."The Antitrust Division does not take a myopic view of competition," Delrahim <a href="https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-antitrust-new-frontiers">said</a>. "Many recent calls for antitrust reform, or more radical change, are premised on the incorrect notion that antitrust policy is only concerned with keeping prices low. It is well-settled, however, that competition has price and non-price dimensions."Read more: <a href="https://www.businessinsider.com/makan-delrahim-doj-no-need-new-antirust-laws-big-tech-2019-6">A top DOJ official just outlined why the agency has everything it needs to go after Big Tech - and Facebook, Google, and Amazon should be nervous</a>The DoJ has "the tools we need to enforce the antitrust laws in cases involving digital technologies," he added, and said US antitrust law is flexible enough to apply to "markets old and new." This sent alarm bells off for Nicholas Colas, a veteran analyst and co-founder of DataTrek Research. Investors should get ready to hear Delrahim's name "a lot more," he told clients in a note this week."It's hard to read this speech and not think the Justice Department is lining up its arguments for a showdown with Big Tech," Colas wrote. "What comes from that is anyone's guess."Now read more markets coverage from Markets Insider and Business Insider: <a href="https://markets.businessinsider.com/news/stocks/heineken-carlsberg-fever-tree-stocks-fall-on-bad-weather-2019-6-1028280973">Heineken and other drink stocks just got whacked after a warning bad weather in Europe will curb beers in the sun</a><a href="https://www.businessinsider.com/stock-picks-to-buy-high-sales-market-share-goldman-sachs-2019-6">GOLDMAN SACHS: Buy these 17 'superstar' stocks, which dominate sales in their industries and have been crushing the market</a><a href="https://markets.businessinsider.com/news/stocks/trump-tariffs-hurting-consumer-economic-outlook-umich-survey-says-2019-6-1028280871">Americans are increasingly worried that Trump's trade wars will damage the economy and eliminate jobs</a>Get the latest Google stock price<a href="http://markets.businessinsider.com/stock/GOOG-Quote"> here.</a> <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/steve-from-blues-clues-today-video-2017-1">'Blue's Clues' is making a comeback with a new look and new host. Here's what the original host, Steve Burns, did after he quit the show.</a></h3> <div> </div> </div>

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