Products June 4, 2020

Investment Product and Service Launches

Northern Trust and BlackRock partner on investor services and Allianz Investment Management launches new ETFs.

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Art by Jackson Epstein

Art by Jackson Epstein

Northern Trust And BlackRock Partner on Investment Services

Northern Trust has entered into an alliance with BlackRock to deliver operations, data and servicing capabilities to mutual clients.

The relationship with BlackRock currently supports mutual clients and is an extension of Northern Trust Whole Office, an approach that integrates Northern Trust’s global asset servicing platform with partners, facilitating client access to new technologies, services and solutions.

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“Our Whole Office ecosystem delivers global asset owners and asset managers scale, efficiency, flexibility and optionality, ultimately enabling more informed investment decision making,” says Pete Cherecwich, president of Corporate & Institutional Services at Northern Trust. “We have a long-standing relationship with BlackRock and are excited to be working with them as part of our Whole Office strategy. The alliance connects Northern Trust’s fund accounting, fund administration, asset servicing and middle office capabilities to BlackRock’s Aladdin platform, creating greater connectivity between asset manager and asset servicer.” 

The alliance with BlackRock builds on a series of Northern Trust partnerships and strategic investments to provide solutions that span the investment lifecycle, including outsourced trade execution for asset managers and owners, a digital and service platform for global asset allocators, currency management and FX algorithmic trading, integration with industry trading platforms, collateral optimization, risk analytics and digital innovation for asset servicing.

Allianz Investment Management Launches New ETFs

Allianz Investment Management LLC, a wholly owned subsidiary of Allianz Life Insurance Company of North America, has launched the AllianzIM U.S. Large Cap Buffer10 Apr ETF (NYSE Arca: AZAA) and the AllianzIM U.S. Large Cap Buffer20 Apr ETF (NYSE Arca: AZBA).

“Our ETF [exchange-traded fund] offerings seek to provide a clearer path of return expectations by providing a level of downside protection over a defined time period,” says Brian Muench, president of AllianzIM. “The ability to remain invested in broad based equities while reducing downside risk in an ETF vehicle is creating strong interest from financial professionals.”

Now offering lower-cost buffered outcome ETFs, the AllianzIM ETFs seek to match the returns of the S&P 500 Price Return Index up to a stated cap, while providing downside protection (through the buffer) against the first 10% and 20% of S&P 500 Price Return Index losses for AZAA and AZBA, respectively. 

AllianzIM’s Buffered Outcome ETFs are offered at an expense ratio of 74 basis points, with portfolio management conducted in-house by AllianzIM. The initial outcome period of the ETFs will be June 1 to March 31, 2021; thereafter, subsequent outcome periods are expected to be 12-months with each outcome period reflecting a new stated cap commensurate with prevailing market conditions, allowing investors to remain invested with downside protection. 

Data & Research June 4, 2020

Surprising Findings in Savings Analysis Suggest Salary Matters Less Than Assumed

A new analysis published by EBRI in collaboration with J.P. Morgan suggests a person’s spending habits, rather than their salary, seem to have the biggest influence on whether they are a low saver or an average saver.

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The Employee Benefit Research Institute (EBRI) and J.P. Morgan Asset Management have published a detailed new white paper, dubbed “The 3% difference: What leads to higher retirement savings rates?”

According to EBRI and J.P. Morgan leadership, this white paper is the first in a forthcoming series that will draw on a newly established, shared EBRI/J.P. Morgan database that combines 27 million 401(k) participants with JPMorgan Chase & Co.’s banking database of 22 million consumers.

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“Bringing together these data sets allows us to analyze the real relationship between spending and saving, without having to rely on assumptions or projections,” says Lori Lucas, EBRI president and CEO. “In our inaugural research, we ask, why do some people save more than others, even when they have equivalent income?”

Indeed, the paper shows that, despite having similar salaries, the middle 50% of the research population save about 3% more of their salary at all ages than the bottom 25% of savers.

“This 3% difference in savings behavior, if sustained over time, could ultimately explain some of the meaningful gap that exists between the current retirement plan account balances of middle-savers and low-savers,” Lucas says.

Jack VanDerhei, EBRI research director, points to findings showing that for all income groups, the median savings percentage increases with age.

“The category of high-savers saw a much bigger increase over their working lives, though, going from 8.5% of salary saved at age 25 to 14.7% by age 65,” VanDerhei says. “On the other hand, the low-savers start at a much more modest 2.0%, rising to 3.1% by age 65.”

What’s going on here? According to the white paper, greater salaries are a big part of why the high-saver cohort can so dramatically ramp up its savings rate over time.

“However, it is very interesting and somewhat surprising to see that the salaries of middle-savers and low-savers are very close to each other, and the average salaries of the two groups converge over their working lives,” VanDerhei says. “That’s the major finding here. There’s only a 6% difference in the median salary for middle-savers versus low-savers at the start of their careers, and it diminishes over time. That should be really eye opening. It shows the influence of spending behaviors on savings can outweigh the influence of salary.”

Katherine Roy, chief retirement strategist, J.P. Morgan Asset Management, notes that spending as a percent of salary is meaningfully higher for low-savers versus middle-savers. Roughly 74% of salary is spent for the youngest group of low-savers, versus 70% for middle-savers. The gap remains pretty steady until age 45 to 50, when the spending levels basically merge.

Zooming into the data, it is clear that low-savings households are spending more on the food/beverage category, as well as on housing/transportation. Travel spending is more in line for the two groups, and in fact, middle-savers actually spend more on travel.

The EBRI and J.P. Morgan leaders say these findings will be explored in forthcoming research, because it is important to ask about the specific factors that might influence the increased spending of certain groups. They say it will also be important to compare dual-earner households with single-earner households.

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