Products February 3, 2022

Investment Product and Service Launches

Nasdaq Fund Network adds new 529 plan share classes; AllianceBernstein and Vestmark unveil custom municipal solutions platform; Vanguard bolsters roster of external advisers with new addition; and more.

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Art by Jackson Epstein

Art by Jackson Epstein

Nasdaq Fund Network Adds New 529 Plan Share Classes

Nasdaq Inc. has announced the addition of more than 550 new share classes for 529 plans within the Nasdaq Fund Network, a 68% increase during 2021 that more than doubles any previous year-over-year increase. The Nasdaq Fund Network provides searchable ticker symbols and daily pricing, which allow more transparency into 529 savings plans for investors across hundreds of retail brokers and media sources.

Nasdaq also added six new state plans to the Nasdaq Fund Network in 2021: BlackRock in Ohio, Nuveen in Colorado, My529 in Utah, Franklin Templeton in New Jersey, Fidelity in Connecticut and Voya in Wisconsin. Currently more than 1,300 529 plan share classes are registered on Nasdaq Fund Network, covering 12 states.

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“Working with Nasdaq to provide more transparency into our state plan 529 programs has been well received,” says Ron Hazel, vice president, college savings plan relationship manager and retirement key account management with Fidelity Institutional. “Advisers are looking for better ways to communicate with their customers and providing searchable symbols to view pricing data for 529 savings investment options allows them to do so.”

The firm says the growth in 529 plans registration reflects broader investor demand for market transparency and immediate access to information of their investments. With the creation of a ticker symbol for 529 plans through the Nasdaq Fund Network, advisers and investors are now able to easily access accurate and reliable daily pricing information, as well as historical performance through major search engines and financial news sites. Previously, accessibility to reliable and accurate daily price for 529 plans has been limited to specific sites.

AllianceBernstein and Vestmark Unveil Custom Municipal Solutions Platform

AllianceBernstein (AB), a research and global investment firm, has announced a new partnership with Vestmark Inc., a provider of wealth management solutions and services for financial advisers and institutions. This partnership leverages AB’s municipal technology, AbbieOptimizer, to bring the new Custom Municipal SMA Solutions platform to market.

AbbieOptimizer integrates research, pricing, trading and portfolio construction into one dynamic system that streamlines the design of customized muni strategies. Through this partnership with Vestmark, advisers and clients can create customized muni solutions through AbbieOptimizer’s capabilities.

“At AllianceBernstein, we are continually focused on investing in disruptive, innovative technology that delivers differentiated value to our clients,” says Jim Switzer, global head of fixed-income trading and head of municipal bonds at AllianceBernstein. “After building and utilizing AbbieOptimizer internally across our suite of municipal products, we are excited to partner with Vestmark in order to expand our technology and unique offerings with an even broader set of clients.”

The firm says the partnership with Vestmark combats many of the challenges facing the muni market. AbbieOptimizer allows AB to more efficiently source and engage municipal bond liquidity, resulting in faster funding times, better pricing and the ability to continuously tax optimize portfolios through separately managed accounts (SMAs).

The VestmarkONE platform provides direct connectivity to major custodians and their registered investment adviser (RIA) clients to get timely and accurate tax-lot data for efficient trading and optimization. This scalable joint solution allows advisers to create highly customized fixed-income solutions for SMA clients that reflect their specific preferences and tax situations.

As part of this partnership, advisers and firms using Vestmark’s Manager Marketplace will now have access to AbbieOptimizer as a custom solution on the platform.

Vanguard Bolsters Roster of External Advisers With New Addition

Vanguard has announced the addition of Ariel Investments to the firm’s roster of active managers. Ariel will join Cardinal Capital Management and Frontier Capital Management in overseeing the $1.2 billion Vanguard Explorer Value Fund.

“Vanguard continuously seeks out leading investment firms that demonstrate the expertise, diversity of thought and accountability needed to drive successful outcomes for investors,” says Dan Reyes, head of the Vanguard portfolio review department. “We believe that Ariel’s talented portfolio management team and patient approach to investing complements the fund’s strategy and existing advisers.”

Founded in 1983 as a small- and mid-cap value manager, Ariel was the first Black-owned mutual fund company in the United States. The firm has evolved into a global asset manager that offers a range of investment strategies seeking attractive intrinsic value through relatively concentrated portfolios. Ariel’s approach is rooted in an “active, yet patient investment philosophy” focused on uncovering mispriced companies whose true value will be realized over time. Vanguard believes this approach aligns with the fund’s mandate of providing investors with long-term capital appreciation through investing in small and midsized U.S. companies considered to be undervalued.

Ariel’s initial target allocation will be 10% of Vanguard Explorer Value Fund, with the balance of assets divided evenly between the fund’s two other tenured value managers.

GaiaLens Launches Real-Time ESG News Service

Data-led environmental, social and governance (ESG) platform GaiaLens this week launched its real-time ESG news service, GaiaLens Momentum, to capture and process all relevant news for more than 16,000 public companies. At launch, GaiaLens is running more than 100,000 internet searches per day on these companies, looking for significant company news and news on ESG themes linked to the U.N. Sustainable Development Goals (SDGs), standards set by the Sustainability Accounting Standards Board (SASB) and other key themes, such as modern slavery and gender equality.

GaiaLens Momentum gathers and processes news coverage related to public companies wherever it appears across thousands of traditional news sources, including national media, specialist investment and ESG trade media coverage, as well as relevant mentions on all key social media channels. Its searches include tweets from over 100 ESG thought leaders which are instantaneously analysed to see if any companies are mentioned.

GaiaLens applies a filter to remove any non-relevant articles. Then all remaining articles are put through rigorous processing including cleaning the body of the articles and adding the meta data such as the date it was published. Natural language processing (NLP) techniques are then used to score articles for relevance, quality and categorization.

GaiaLens will provide its clients with the news service in two different formats: either as a “news flow” in which all significant news linked to a company is provided, including articles and third-party influencer tweets; or as an “ESG Incidents” feed which captures all coverage linked to pre-identified live issues that companies are facing in the news.

DCALTA Partners With PivotalPath to Launch Hedge Fund Benchmarks

Consistent with its mission of enhancing retirement outcomes, the Defined Contribution Alternatives Association (DCALTA) has partnered with PivotalPath, a hedge fund consultant and analytics company to release a series of nine hedge fund indexes for defined contribution (DC) plans, such as 401(k), 457(b) and 403(b) retirement plans.

As a collective voice, DCALTA believes alternative investments such as hedge funds, private equity and infrastructure will become common allocations within DC portfolios, as they commonly exist in defined benefit (DB) pensions and endowments.

“With the ever-increasing adoption of target-date funds [TDFs] and near $10 trillion in defined contribution plans, there clearly exists a need for plan fiduciaries to rely on proper performance benchmarks,” says Jonathan Epstein, DCALTA president and founder. “For fiduciaries trying to accurately assess hedge fund market performance, the collection of consistent and quality data is paramount.”

In partnership with DCALTA, and through transparency, PivotalPath will help the DC community benchmark their hedge funds by being able to answer the following four critical questions: 1) What goes into the index? 2) What is the methodology used to construct it? 3) How is the information presented? 4) Is there is more to the index than the average?

“As a hedge fund consultant working with institutional investors, it is critical for our clients to accurately benchmark their hedge fund portfolios—something that has been quite difficult historically with available indices,” says PivotalPath CEO Jon Caplis. “Our clients rely on our indices because the information we provide ultimately determines their overall hedge fund asset allocation, and whether or not they invest in or redeem from a manager.”

Franklin Templeton Picks Ascensus to Host Managed Account Offering

Franklin Templeton has selected Ascensus to host its Personal Retirement Path managed account services offering.

“Through our partnership with Ascensus, we look forward to empowering advisers with the resources needed to create a path toward financial well-being at all stages of a participant’s savings journey,” says Yaqub Ahmed, head of retirement, insurance and 529 plans for the U.S. at Franklin Templeton.

Personal Retirement Path managed accounts deliver personalized portfolio management to help individual investors reach specific goals and are backed by Franklin Templteon’s proprietary Goals Optimization Engine.

Ascensus announced the expansion of its managed account services—which are supported by its technology and open-architecture platform with no proprietary investment requirements—in September 2020. Since then, it has continued to develop its infrastructure to give institutional partners and advisers more choices.

“The flexibility of Ascensus’ managed account services reflects our independent business model,” says Jason Crane, Ascensus’ head of retirement distribution. “We’ll continue to work with partners that complement our business model, philosophy and values while supporting unique investment management approaches and expanding relationships.”

Compliance February 3, 2022

Yum! Brands Partly Defeats Retirement Plan Eligibility Lawsuit

The plaintiff sued to seek recognition of his years of employment from 1995 through 2020 for purposes of calculating his retirement benefits.

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The U.S. District Court for the Central District of California has ruled in a lawsuit filed against Yum! Brands Inc., Taco Bell Corp. and various individual defendants.

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Technically, the ruling grants the defendants’ motion to dismiss the plaintiffs first through fifth causes of action, out of nine total causes, while declining to exercise supplemental jurisdiction over the remaining state law claims. It also denies as moot the defendants’ motion to transfer venue in the case, while likewise denying any further leave for the plaintiff to amend the case.

The underlying lawsuit arose when the plaintiff field suit to seek recognition of his years of employment from 1995 through 2020 for purposes of calculating his retirement benefits with three retirement plans, including a nonqualified deferred compensation (NQDC) plan, sponsored by the company. According to the complaint, common law employees were eligible for the plans per their governing documents. The complaint alleged that the plaintiff met the test for employee status per prior case law, but that Yum! impermissibly misclassified him as an independent contractor.

The lawsuit claimed that the man started employment as a recruiter for Taco Bell when it was owned by PepsiCo. It detailed how he stayed with the company when it was spun away and eventually acquired by Yum!. During his 25 years with the company, the plaintiff held the title of executive recruiter, according to the complaint.

The ruling from the court includes substantial discussion of what it takes for a worker to be defined as a benefit plan participant under the Employee Retirement Income Security Act (ERISA). As the order explains, ERISA defines a “participant” as “any employee or former employee of an employer who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or whose beneficiaries may be eligible to receive any such benefit.”

The ruling continues: “The Supreme Court has interpreted § 1002(7) to include a former employee who has ‘a colorable claim that she will prevail in a suit for benefits.’ Thus, to bring an ERISA claim, a former employee need only assert ‘a colorable claim that he or she is a participant’ in the relevant ERISA plan. The 9th U.S. Circuit Court of Appeals has held that whether a plaintiff is a plan participant is ‘a substantive element’ of his or her ERISA claim rather than ‘a prerequisite for subject matter jurisdiction.’ Accordingly, a dismissal for lack of statutory standing [under ERISA] is properly viewed as a dismissal for failure to state a claim rather than a dismissal for lack of subject matter jurisdiction.”

Weighing this standard, the court sides with the defendants.

“Even if the amended complaint pleads sufficient facts to allege that the plaintiff was a common law employee rather than an independent contractor, he does not state a colorable claim to vested benefits under the Yum! plans. Although the complaint contains a single allegation that the plaintiff was a participant, as defined by ERISA, the court need not accept as true such a legal conclusion couched as a factual allegation. In fact, the Supreme Court has rejected the notion that a ‘participant’ under ERISA ‘is any person who claims to be one.’ Further, this conclusory statement is repeatedly contradicted by allegations throughout the complaint that Plaintiff was not in fact a participant in the Yum! plans. … At bottom, the plaintiff’s ERISA claims are premised on the notion that he was wrongfully excluded from participating in the Yum! plans and thus did not participate in the plans.”

The District Court goes on to explain that, under 9th Circuit authority, a claim that a former employee plaintiff should have been included in a plan, but actually was not included in a plan, does not give the plaintiff a “colorable claim to vested benefits” for ERISA standing purposes.

Turning to the remaining causes of action, which cite state laws rather than the federal standards created by ERISA, the District Court declines to rule.

“In this case, judicial economy and comity counsel in favor of declining to exercise supplemental jurisdiction,” the ruling explains. “The case remains in its early stages—the parties have only filed one motion, and a scheduling order has not yet been entered. Further, the Court has not performed any substantive analysis of the state law claims that would need to be duplicated by a subsequent state court, should plaintiff choose to refile these claims. Judicial economy accordingly weighs in favor of declining to exercise supplemental jurisdiction.”

The full text of the ruling is available here.

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