Products February 17, 2022

Investment Product and Service Launches

Amundi U.S. expands global sustainable equity funds lineup; Build Asset Management launches new ETF; Retirement Plan Advisors expands solutions to include adviser managed accounts; and more.

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Art by Jackson Epstein

Art by Jackson Epstein

Amundi U.S. Expands Global Sustainable Equity Funds Lineup

Amundi U.S. has expanded its range of global sustainable equity funds with the announcement of the name change of one of its key funds. Specifically, the Pioneer Global Equity Fund is now under the new name of the Pioneer Global Sustainable Equity Fund, effective February 15.

The fund’s global core focus complements Amundi U.S.’s two existing global sustainable equity funds, the Pioneer Global Sustainable Growth Fund and the Pioneer Global Sustainable Value Fund. Together, these funds offer investors actively managed global growth, global value or global core strategies led by experienced portfolio management teams that incorporate environmental, social and governance factors into their investment process.

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The three funds are managed by members of Amundi U.S.’s global equity team.

“The change to Pioneer Global Sustainable Equity Fund formally recognizes the fund’s focus on investing in sustainable companies, which we believe will help continue to drive long-term performance,” says Marco Pirondini, U.S. head of equities and portfolio manager. “The ESG analysis we incorporate into the investment process of all of our global equity funds is an important tool to identify risks and opportunities and is an essential part of our team’s fundamental research at the company, sector and country level.”

The name change from Pioneer Global Equity Fund to Pioneer Global Sustainable Equity Fund, as well as the adoption of a new investment policy and enhanced strategies, formalizes the consideration of ESG factors as part of the fund’s investment approach. Under normal circumstances, the fund will invest at least 80% of its net assets (plus the amount of borrowings, if any, for investment purposes) in securities of issuers that Amundi U.S. believes adhere to the fund’s ESG criteria.

For purposes of the 80% investment policy, “ESG criteria” is defined as the exclusion of investments issued by companies significantly involved in the production of tobacco products and controversial military weapons consisting of cluster weapons, anti-personnel mines, nuclear weapons and biological and chemical weapons, and the operation of thermal coal mines.

In selecting securities, the portfolio management team focuses on companies with sustainable business models. Companies may demonstrate a sustainable business model by having a durable competitive and financial position that is expected to continue to create shareholder value.

Build Asset Management Launches New ETF

Build Asset Management, a developer of bond and risk mitigation investment strategies, has announced the launch of a new exchange-traded fund, known as the BUILD Bond Innovation ETF, or BFIX for short.

BFIX is a new class of bond allocation fund designed to address headwinds facing traditional bond allocation strategies. Low interest rates, heightened inflation and constraints to real economic growth challenge conservative investors that traditionally sought bond funds for capital preservation and modest growth. BFIX carries an investment objective of capital appreciation and risk mitigation.

“We designed BFIX with the voice of the American retiree and traditional bond investor in mind. These investors often wonder how they can achieve meaningful returns with a defensive mindset,” says John Ruth, co-founder and CEO of Build Asset Management. “We hope BFIX will serve as a timely compliment to a well-diversified portfolio for years to come.”

The ETF typically has 90% to 95% of its holdings in fixed-income assets, with the intent of providing downside risk mitigation over the long term. The fund seeks to maintain a moderate duration profile and requires investment-grade credit quality in the fund’s bond holdings. BFIX goes on offense with the remainder of the fund’s assets in an actively managed option overlay on U.S. large-cap equities, seeking a risk managed exposure to their price performance. The combination of this advanced options strategy and prudent fixed-income profile aims to weather broad market drawdown events while seeking upside potential.

Retirement Plan Advisors Expands Solutions to Include Adviser Managed Accounts

Retirement Plan Advisors LLC is expanding PortfolioPlus, its proprietary participant managed account solution, to include recordkeeper adviser managed account platforms. This expansion will bring customized investment advice solutions to even more public sector deferred compensation and defined contribution plans and their employees.

RPA brings decades of portfolio construction and public sector expertise to its PortfolioPlus program. The goal is to help public sector employees replace—for life—the income they made while working.

A managed account program provides customized investment solutions to retirement plan participants. As a person approaches retirement, their unique circumstances meaningfully impact their optimal investment strategy and allocation. Further, public sector employees frequently participate in defined benefit programs, fundamentally changing their retirement outlook. PortfolioPlus, designed specifically for public sector employees, incorporates these factors.

“Financial markets are volatile and uncertain, and behavioral science demonstrates that investors don’t manage their assets well on their own. Moreover, while target-date funds are great for younger employees—who should invest largely in equities and ride the ups and downs—as plan participants near retirement age, custom solutions often are better,” says Josh Schwartz, RPA president.

State Street Global Advisors Announces High-Yield Debt ETF

State Street Global Advisors, the asset management business of State Street Corp., has announced the launch of the SPDR Blackstone High Income ETF, known as HYBL. Sub-advised by Blackstone Credit, HYBL is an actively managed exchange-traded fund and invests in U.S. dollar-denominated high-yield debt securities seeking to provide investors with risk-adjusted returns and high current income. Blackstone is also sub-adviser of the SPDR Blackstone Senior Loan ETF.

As sub-adviser of HYBL, Blackstone will actively manage a portfolio of high-yield corporate bonds, senior loans and debt tranches of U.S. collateralized loan obligations using a top-down asset allocation approach coupled with bottom-up security selection that seeks to outperform a composite benchmark comprising 50% high-yield bonds and 50% senior loans. It seeks less volatility than the individual benchmark components over a full market cycle.

The top-down asset allocation approach evaluates macroeconomic, technical, fundamental and relative value factors to determine the allocation among the asset classes. The bottom-up security selection process relies on fundamental credit research to determine security selection within each asset class, while utilizing a systematic process in high-yield bonds to seek to capture credit risk premium by identifying and exploiting potential mispricing at the individual security level.

Morningstar and Hueler Offer Integrated Lifetime Income Service

Morningstar Investment Management LLC, a subsidiary of Morningstar Inc., and Hueler Income Solutions LLC are linking services so that retirement savers can incorporate guaranteed income products into their personalized advice plan through Morningstar Retirement Manager.

Managed accounts and adviser managed accounts, which deliver personalized investment advice to investors using the Morningstar Retirement Manager user platform, will now connect to Hueler Income Solutions, described as a marketplace of institutionally priced, customizable guaranteed income products. When a plan sponsor or fiduciary adviser indicates they want to make annuities available as an option to their participants, Morningstar Retirement Manager will recommend how much, if any, of each investor’s retirement portfolio balance to allocate to a lifetime income annuity based on the investor’s specific situation.

Hueler Income Solutions then interacts with the investor to provide real-time annuity quotes at institutional prices and offers personalized guidance to investors regarding the most appropriate annuity features to meet their personal circumstances.

“Many investors, especially those who are at risk of running out of money in retirement, could benefit from an annuity. However, the questions are numerous, from selecting an annuity, how much to annuitize, to various options investors are presented with during this process,” says James Smith, head of product and strategy, Morningstar Investment Management, Workplace Solutions. “This can be a great source of fear and anxiety for many investors as they seek to meet their retirement goals.”

By enabling Morningstar Retirement Manager to communicate with Hueler Income Solutions, investors are empowered to decide whether an annuity can fit into their financial plan.

Investors receive guidance from Hueler Income Solutions throughout the selection and purchasing process tailored to their specific needs. Morningstar Investment Management is notified once the annuity is purchased, where it then manages and allocates the remaining balance of the client’s retirement plan account through its managed accounts or adviser managed accounts services.

The Markets February 17, 2022

Participants May Be Hesitant to Invest in Lifetime Income Products

U.S. workers’ interest in putting money into investments that guarantee a portion of retirement income fell in 2021 from the previous year, a new survey shows. But experts say that data should come with some context.

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Plan sponsors that are busy building shelf space for guaranteed lifetime income investments should note that participant interest in putting retirement savings into such products fell somewhat in 2021, according to a survey of U.S. workers.

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The report, Franklin Templeton’s “Voice of The American Worker Survey,” shows that workers in 2021 were most interested in increased pay, with 51% choosing this option compared with 40% last year, and increased 401(k) matching (40% vs. 43% in 2020). Among U.S. workers, 29% are interested in putting money into an investment that guarantees a portion of retirement income in 2021, compared with 30% in 2020.

Jacquelyn Reardon, director of retirement marketing, U.S., at Franklin Templeton, says that the stat about interest in annuities and lifetime income products is likely a bit deceptive, and that it’s important to note some context, as “creating a reliable income stream for retirement is a key need.”

Reardon explains that participants have not disavowed lifetime income investments. “When asked to rank their most-preferred benefits, U.S. workers said, ‘putting money into an investment that guarantees a portion of retirement income’ ranked No. 3 for both years we’ve conducted this survey after only an increase in salary and an increased 401(k) match—the most traditional of benefits.”

Survey Says

The survey shows that more than eight in 10 employees (83%) would be interested in a deferred annuity benefit, with 50% saying they would contribute monthly and 30% saying they would consider contributing.

Annuities are lifetime retirement income products, guaranteed by an insurance company, that retirement plan participants can invest part or all their defined contribution plan balance in to create an income stream in retirement. Participants who annuitize their savings will receive a sum of money in exchange for purchasing the investment. Deferred annuities, unlike other types of annuities, pay out to the owner a regular income at some future date.

One piece of context that explains the survey response is that some participants have a barrier to access to guaranteed lifetime income investments, Reardon says. “Only 2% of employers currently offer access to this highly in-demand benefit,” she explains. 

Legislative Efforts

Lawmakers in Congress introduced the Lifetime Income For Employees Act, or the LIFE Act for short, earlier this month, a bill that would enhance the safe harbor on which plan sponsors rely when choosing an annuity provider and allow annuities to be a default investment in an employer-sponsored 401(k). The legislation, which was introduced in the House, is a follow-up to 2019’s Setting Every Community Up for Retirement Enhancement Act.

The SECURE Act provided a safe harbor for employers when the plan sponsor meets minimum fiduciary requirements in choosing an annuity provider, which relieves an employer of the liability for any losses that could result from the insurer’s inability to satisfy agreed-upon financial obligations.

The SECURE Act also empowered the Department of Labor to mandate that DC plan participants receive lifetime income illustrations on their retirement plan statements, which show what their monthly income amounts would be if their balances were annuitized.

Reardon adds that continued legislative efforts reflect more work ahead, and that once the groundwork is complete, the financial industry will follow.  

“Whether in-plan or out of plan, it’s clear the need for resources that support turning retirement savings into a reliable income stream are crucial,” Reardon says. “And it’s important for our industry to continue working toward creating solutions that meet this very important need.”

Advisers’ Take

Greg Adams, a consultant at Fiducient Advisors, says plan sponsors don’t yet need to include annuities in defined contribution plans.

“The need is not acute yet,” he says. “We don’t want to put more things into a retirement plan and complicate a retirement plan, just because there’s a new shiny object out there. Most of our plans outside the 403(b) sector don’t contain annuities at this point.”

Adams says he is watching the space and that the firm is monitoring options for different distribution strategies.

He is taking a wait-and-see approach to whether those solutions are ripe for being included in plans. Participants are interested in lifetime income products, but Adams explains that he wants to see how these work in practice before jumping into the deep end.  

“We need to see from a consulting and advisory standpoint how it’s actually going to work in practice for the participants,” he says. “We want to see that these products are actually creating additional value to the participants; we want to see how complicated they are to administer.”

Fiducient has done its homework on the products available, Adams adds.

“We’ve talked to some of the biggest ones out there about annuity offerings, guaranteed minimum withdrawal benefits, guaranteed income benefits, QLACs [qualified longevity annuity contracts], target-dates with decumulation offerings—things that are going to make it more intuitive and easier for participants to see what their retirement plan income is going to look like,” he says.

Nonetheless, Adams is concerned that annuities are not intuitive, are confusing for participants and are not transferrable.

“We need to see if they’re going to be portable across different recordkeepers,” Adams says. “If recordkeeper A has their proprietary annuity product and the plan sponsor decides to make a change, what happens with that annuity product?”

Additional legislation and guidance from federal agencies would help bolster the use cases for annuities in plans, he adds.

“We also need the regulatory environment to give us the guidance, the rules, the appropriate oversight from a fiduciary standpoint so that we can feel comfortable including these types of products in plans and make sure that we’re covering our fiduciary responsibilities,” he says. “We’ve seen a lot of development in the regulatory environment over the past few years with the SECURE Act—we’ve also got the RISE [Retirement Improvement and Savings Enhancement] Act that’s pending and there’s some retirement provisions in the Build Back Better Act and even a SECURE Act 2.0 that could start paving the way for these products.”

The learning curve will be significant for plan sponsors and participants to get accommodated to annuities and lifetime income investment planning, Adams explains.

“That was a conversation that happened outside of the retirement plan, that was something that occurred one-on-one with a financial adviser or a financial consultant that specialized in retirement income planning,” he says. “It’s a big unknown and even once we start, if we get to the point where we feel comfortable adding these to the plan, there’s going to be a huge learning curve that goes with it to get participants comfortable with it.”

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