Products January 27, 2023

Investment Product and Service Launches

Vanguard offers multi-sector income bond fund; Hub starts HR technology consulting practice; Vestmark launches six direct-index separately managed accounts; and more.

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Vanguard Adds Multi-Sector Income Bond Fund to Lineup

The Vanguard Group Inc. announced it has added the actively managed Vanguard Multi-Sector Income Bond Fund to its fund lineup to offer investors diversified exposure to fixed-income credit sectors.

The fund, managed by the Vanguard Fixed Income Group, provides clients with a flexible, risk-controlled approach that enables portfolio managers to seek opportunities across various sectors and credit qualities, according to the Valley Forge, Pennsylvania-based firm.

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“Vanguard Multi-Sector Income Bond Fund provides investors access to our world-class fixed income investment talent through a low-cost strategy with high alpha potential,” Sara Devereux, Vanguard’s global head of fixed income, said in a statement.

The Vanguard Multi-Sector Income Bond Fund can invest in a wide range of fixed-income asset classes but will offer exposure to U.S. high-yield corporate securities, U.S. investment-grade securities and emerging-market debt of all credit quality ratings. By appropriately weighting these three allocations within the fund’s custom benchmark, Vanguard aims to provide greater performance transparency than solely using a broad fixed-income benchmark, according to the firm.

The fund has an estimated expense ratio of 0.40% for investor shares and 0.30% for its Admiral class, compared with an average expense ratio of 0.66% for industry peers, according to Vanguard and Morningstar research.

Hub Starts HR Technology Consulting Practice

Hub International Limited has expanded and formalized its focus on human resources consulting and HR technology services by announcing a consulting practice of 35 specialists called People & Technology Consulting.

The insurance brokerage consolidator providing employer solutions in insurance, benefits, retirement and wealth management, among other services, announced that the new division will help clients with HR strategy, as well as with the processes and the technology to drive performance and business results.

Andrea Goodkin will lead the new division as executive vice president and practice leader, according to Chicago-based Hub. Goodkin will work with Michael Booth, Hub benefits national sales leader, on the growth of the new practice.

“People & Technology Consulting is a people business, dedicated to helping clients tie everything together, whether it’s absence management, HR consulting or HR technology services to help transform their organization further and faster with innovative resources and tools that engage with their people on a deeper level,” Goodkin said in a statement.

The new practice will work with employers of all sizes, according to the firm. 

Vestmark Launches 6 Direct-Index Separately Managed Accounts

Vestmark Inc. is launching six direct-index, separately managed accounts called Focused Index Portfolios, in collaboration with S&P Dow Jones Indices, and licensing select equity benchmarks from the index provider. The SMAs will be available through Vestmark Manager Marketplace, according to the announcement.

Of the six new SMA strategies, three are based on new, custom indices from S&P Dow Jones Indices that select constituents from the large-cap S&P 500 Index and the S&P 500 Catholic Values Index, according to Wakefield, Massachusetts-based Vestmark. Each index is constructed to measure the performance of a subset of securities from an underlying index, and each is selected and weighted to reflect the Global Industry Classification Standard Industry Group coverage and weighting of the underlying index, the announcement stated.

Additionally, Vestmark will launch three SMA strategies based on longstanding indices from S&P Dow Jones Indices that provide insight on specific segments of the market, including dividend payers, ESG and international developed markets.

“We are excited to create these index-based SMA strategies designed to be offered at lower minimums in order to open this type of approach to a broader range of investors,” Robert Battista, senior vice president and managing director of Vestmark Advisory Solutions, said in a statement.

The six Focused Index Portfolios available through Vestmark are being offered with investment minimums as low as $100,000, according to the firm. The strategies also enable advisers to choose certain stock exposures, such as Vestmark’s strategy based on the Dow Jones U.S. Dividend 100 Index, comprised of large-cap stocks.

Putnam Launches Fixed-Income and Non-U.S. Equity ETFs

Putnam Investments announced it is expanding its investment offerings across asset classes with five actively managed exchanged-traded funds listed on the New York Stock Exchange.

Putnam launched three fixed-income ETF portfolios, as well as two non-U.S. equity strategies sub-advised by Putnam affiliate PanAgora Asset Management Inc. Putnam is the sponsor and investment adviser on the five new ETFs, which employ an environmental, social and governance focus, according to the Boston-based firm.

“We think it is increasingly important to offer clients a range of investment products across asset classes delivered through a choice of product wrappers, such as ETFs, mutual funds and separately managed accounts,” Robert L. Reynolds, president and CEO of Putnam Investments, said in a statement.

The new fixed-income and non-U.S. equity ETFs, along with the existing Putnam Sustainable Leaders ETF and Putnam Sustainable Future ETF, will serve as underlying investments for the firm’s planned ESG-focused target-date series, the Putnam Sustainable Retirement Funds, according to the announcement. That new suite is expected to be implemented in the coming weeks, the firm said.

Broadridge Releases ESG Disclosure, Data and Benchmarking Tool

Broadridge Financial Solutions Inc. introduced a web-based ESG disclosure and data analytics benchmarking tool offering timely, high-quality, cost-effective and transparent data and insights.

Broadridge’s ESG Analyzer will compare ESG practices across peers and industries, according to the New York-based financial technology firm. The analyzer allows companies to view their ESG metrics in one dashboard, as well as leverage artificial intelligence to access aggregated data.

“This is the perfect tool for management to understand their strengths and weaknesses on ESG issues, enabling them to see how they compare to peers and create a plan to improve their performance and disclosures where needed,” Joseph Vicari, vice president and ESG practice lead at Broadridge, said in a statement.

The ESG Analyzer compares more than 5,000 companies in North America in terms of company policies and disclosures from more than 385 ESG topics, including energy and climate change, community development, diversity, labor rights and leadership ethics, according to Broadridge.

Lincoln Brings Digitally Available Life Insurance Product to Market

Lincoln Financial Group has started offering an indexed universal life product, digital and automated from application to policy management, called Lincoln WealthAccelerate.

The insurance product, which provides access to a cash value component in addition to a death benefit, meets changing consumer expectations for their financial products to be digitally accessible and easy to use, according to the Radnor, Pennsylvania-based financial firm.

“Today’s life insurance customer is changing—they’re digitally savvy, expect faster and simpler processes and want flexibility,” Matt Grove, Lincoln Financial’s executive vice president and head of Lincoln Financial Network, said in the announcement.

WealthAccelerate is available to customers ages 20 to 55 with protection needs from $100,000 to $1.5 million. The product offers a permanent life insurance death benefit and options that cover critical and chronic illness expenses to meet a policyholder’s long-term care needs, as well as offering holders access to a policy’s cash value, according to Lincoln Financial.

Kwanti Adds Screener Feature for Financial Advisers to Find Best-Performing Assets

Portfolio and analytics company Kwanti has launched additional features to its screener program to help financial advisers and investment managers with prospect conversion, client retention, and model management.

Kwanti Screener’s new features will also help advisers screen for the best performing assets and find the right investment opportunities for clients, the San Francisco-based firm announced.

“Screener reveals best performing assets in seconds, sifting through millions of risk, performance, and allocation data points,” Christophe Gauthron, founder and CEO of Kwanti, said in a statement.

Kwanti users can now search exchange-traded funds, mutual funds, separately managed accounts, and individual stocks and narrow the list down based on specific criteria of their choosing, according to the firm.

The Markets January 27, 2023

LIMRA: Individual Annuity Sales Shatter Prior Record in 2022

The trade association found retail annuity sales were 17% higher than a prior 2008 record, driven in part by investors locking in higher interest rates as well as seeking safety from market volatility.

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At the start of 2008, the effective federal funds interest rate was 3.94% and poised to drop as the subprime crisis took hold and the Federal Reserve sought to reduce borrowing costs. In 2022, consistent rate hikes meant to tame inflation brought the rate to 4.1% by December.

In both circumstances, annuity sales were driven in part from investors fleeing to the safety of guaranteed returns from fixed annuity products, according to Todd Giesing, assistant vice president, LIMRA annuity research. In 2022, however, investors were doing so in a rising rate environment in which they could capture guaranteed returns from interest rates not seen in over a decade. The result, according to LIMRA research released Thursday, was the highest annuity sales on record and 17% higher than 2008 at a total of $310.6 billion.

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“We have had such a unique year and set of economic circumstances driving investors to annuities for protection,” Giesing said in an emailed response. “Investors have not seen a long duration downturn in the equity markets since the Great Recession. Combined with rising interest rates, bonds were not a safe haven, while fixed-rate deferred, fixed indexed annuities, and registered index-linked annuities had record sales years in 2022.”

Giesing says LIMRA suspects investors were reducing risk in their investment portfolios by using annuities as a bond alternative. The outcome was sales driven by fixed annuity sales of $208 billion, 49% higher than the record set in 2019, according to the Windsor, Connecticut-based trade association. 2022 also saw record-breaking sales for fixed-rate deferred, fixed indexed and registered index-linked annuities.

This unique environment has driven annuities even higher than the last record reported by LIMRA. Geising notes that “annuity sales were flying high in 2007 on the back of traditional variable annuities and this momentum continued into 2008.”

But as economic conditions shifted, so did the sales of individual annuity products, moving away from variable to fixed, he says.

The Retirement Income Vehicle

The retirement industry has long viewed guaranteed income annuities as one answer to the retirement income conundrum, but the insurance investment products have not made much headway within defined contribution retirement plans, according to industry watchers and available data.

John Faustino, head of Broadridge Financial Solutions’ Fi360, a financial technology firm that works with advisers and asset managers, believes the boom in retail annuities may help usher in more guaranteed income annuities within DC retirement plans. He notes that the Department of Labor in 2021 noted that they were interested in increasing retirement income options, which combined with their push toward low fees in retirement plan savings makes an in-plan option make sense.

“The department of labor is really focused on lowering costs as they know fees are a drag on retirement savings,” Faustino says. “It’s going to be higher cost if you’re rolling your money out of plan for to purchase an annuity, so if everyone is seeing this demand in the market go up it makes sense to try and offer it [in plan].”

Faustino’s Fi360 recently released guidance for advisers and plan sponsors on retirement income, including in-plan annuities, and later this year will be coming out with a comparative tool to compare options, he says.

Fixed, Not Variable

In the fourth quarter of 2022, total annuity sales were $87.2 billion, a 39% increase from the fourth quarter of 2021, and the third consecutive quarter in which annuity sales set a new record, according LIMRA’s U.S. Individual Annuity Sales Survey

“Insurers have been able to offer very competitive crediting rates while protecting the principal investment from equity market volatility, making FIA products more attractive to investors for the foreseeable future,” Giesing noted.

Giesing forecasts moderate sales increases to fixed income annuities in 2023, and then further growth through 2025.

One annuity that faltered in 2022 and which Geising expects to continue on a downward trend is traditional variable annuity sales, which fluctuate depending on market conditions. In 2022, traditional VA sales totaled $61.7 billion, down 29% from 2021 results, according to LIMRA.

“To put these results into perspective, annual traditional VA sales peaked at $184 billion in 2007,” according to the LIMRA report. “Given the current economic forecast and competitive pressures, there is little expectation that sales will improve significantly over the next several years.”

LIMRA’s preliminary fourth quarter 2022 annuity industry estimates are based on monthly reporting, representing 83% of the total market, according to the association. Final results will be available from LIMRA in March, after the earnings results of participating annuity carriers, the association noted.

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