Investment Product and Service Launches

Art by Jackson Epstein

Fidelity Launches Real-Time Fractional and Share Trading to Advisers

Fidelity Institutional will launch real-time fractional share trading for stocks and exchange-traded funds (ETFs) for wealth management firms.

The new capability, which allows advisers to build portfolios for their clients based on the amount they want to invest, is beginning to roll out this month to Fidelity Institutional clients.

“With our industry offering more personalization for investors, advisers have been looking for a way to more finely tune investor portfolios,” says Ryan Plotner, head of transaction and banking solutions at Fidelity Institutional. “With fractional share trading, we’re now giving advisers the ability to address that challenge.”

Fidelity will execute all fractional trades in real-time during market hours, meaning advisers and their clients will always know the share price.

Fractional share or dollar-based trades, which must be market or limit order types and are good for the day only, are available through Wealthscape.

This capability for advisers expands on Fidelity’s Stocks by the Slice offering for retail investors, which was launched last year.

“Fidelity is building on our significant experience and proven success in the trading space with this new offering, which will make it easier for advisers to efficiently invest their clients’ assets,” Plotner continues.

For more information, advisers can contact their Fidelity relationship manager.

BlackRock Rolls Out Private Market Tool

BlackRock has launched the Expected Return Analyzer.

Powered by BlackRock’s Aladdin technology, the Expected Return Analyzer draws on the BlackRock Investment Institute’s proprietary Capital Market Assumptions to show advisers how adding private markets or other asset class exposures to their clients’ portfolios can help meet their return targets.

The new tool is part of BlackRock’s commitment to increasing accessibility to alternative investments and helping advisers better understand the role alternatives can play in wealth portfolios to address their clients’ needs.

A BlackRock study indicates that the traditional 60/40 portfolio of stocks and bonds will not only fall short of the moderate returns of the past, but may increase investment risk as well. In fact, the study showed that the average adviser portfolio is about 25% more volatile than it was a year ago, even though it has retained the same 60/40 stock/bond split.

“In today’s low-rate world, there is a mismatch between investors’ return expectations and their exposure to private markets,” says Scott Reeder, head of the alternative investment team in BlackRock’s U.S. wealth advisory business. “With volatile equity markets and bond yields near record lows, alternatives can have an increasingly important role to play as clients look to enhance returns, reduce risk and build portfolio resilience. We believe that the allocation to private markets in wealth portfolios should increase from 5% today to 20% over the next several years.”

Advisers can help optimize their clients’ portfolios by uploading them into the Expected Return Analyzer. Based on those results, and the adviser’s inputs, the tool suggests alternative exposures that can help meet their needs based on asset allocation, projected performance and volatility. Once a proposed portfolio is selected, advisers can use the Expected Return Analyzer to model how different alternative portfolio allocations can help meet their clients’ investment goals.  

abrdn Presents New Industrial Metals ETF

abrdn, Aberdeen Standard Investments’ new Americas market brand, is building on its range of commodities exchange-traded funds (ETFs) with the launch of a new fund that will track an index of industrial metal prices.

The abrdn Bloomberg Industrial Metals Strategy K-1 Free ETF will seek to provide investment results that closely correspond, before fees and expenses, to the performance of the Bloomberg Industrial Metals Total Return Subindex. The index consists of four commodities futures contracts with respect to aluminum, copper, nickel and zinc.

abrdn head of ETFs Steve Dunn comments, “The world is at the early stages of a huge energy transition away from fossil fuels into more sustainable sources. Almost every renewable energy system uses large amounts of industrial metals, including electric vehicles, wind turbines, solar panels, grid level batteries and carbon capture systems. That huge, long term structural demand will drive significant new demand for industrial metals, a trend that this ETF opens investors up to.”

It is the first product to be launched in the U.S. under the new abrdn brand and forms part of the region’s growth plans. Those growth plans are centered on growing in the client solutions, passive alternatives, private markets and specialty equity spaces, while continuing to distribute a focused range of products manufactured outside the region and generating high-quality investment research on American markets for products managed elsewhere in the company’s network.

The new product will join the trend of “K-1 Free” commodities ETFs, which do not issue K-1 tax forms.

Vanguard to Lower Investor Costs Through Enhancements to its Target Retirement Series

Vanguard has announced it will lower costs, streamline investment options and enhance its target-date offer.

The firm will consolidate its lineup with the planned mergers of the Vanguard Institutional Target Retirement Funds into the Vanguard Target Retirement Funds (TRFs), which is expected to result in a lower expense ratio of 0.08% for each TRF following completion of the mergers.

Vanguard will also deliver additional cost savings to its 401(k) clients by lowering the minimum investment requirement for Vanguard Target Retirement Trust II program to $100 million from $250 million, allowing plan sponsors and their employees to access lower-cost target-date options.

In addition, the firm will launch a new retirement income solution, Vanguard Target Retirement Income and Growth Trust for each of its Target Retirement Trust programs, available to eligible defined contribution (DC) plans. The new trust’s higher (50%) equity allocation in retirement is intended for participants whose wealth, risk tolerance and/or additional sources of income allow for higher discretionary spending in retirement. The new trust is designed to be an opt-in alternative to the lower equity allocation (30%) of Vanguard Target Retirement Income Trust—most appropriate for participants whose primary investment objective is stable inflation-adjusted income to cover basic living expenses. As participants approach age 65, they will be provided with tools and guidance to help them determine which trust option best suits their needs.

“Vanguard will continue to innovate for clients, and our unique client-owned structure allows us to share our success with clients through lower fees,” says Tim Buckley, Vanguard chairman and CEO. “Through these changes, Vanguard continues to expand access to low-cost, diversified target-date solutions that help more investors achieve a financially secure retirement.”

State Street Expands Fixed Income ETF Offering

State Street Global Advisors, the asset management business of State Street Corp., has launched its SPDR Loomis Sayles Opportunistic Bond ETF (OBND). The fund provides exposure to a mix of investment-grade, high-yield, non-U.S. dollar denominated debt, leveraged loans and securitized issuers. OBND, an actively managed fund sub-advised by Loomis Sayles, was developed to help investors navigate ever-changing global credit conditions.

“The low interest rate environment is driving demand for non-traditional fixed income investments. OBND seeks to meet investors’ needs for both yield and diversification while providing the benefits of active risk management,” says Sue Thompson, head of SPDR Americas distribution at State Street Global Advisors.

The SPDR Loomis Sayles Opportunistic Bond ETF is actively managed and seeks to capture risk premiums in markets that it believes can offer strong risk-adjusted return potential over a full market cycle, using a multi-asset credit framework to gain exposure to a mix of credit-focused asset classes and sectors within a globally diverse investment universe. The portfolio managers use a top-down credit cycle approach and seek to generate returns at asset class, sector and security levels.

OBND is managed by the Loomis Sayles Alpha Strategies team, which currently oversees multi-asset investment strategies for institutional and retail clients worldwide. The portfolio management team includes Kevin Kearns, team leader and co-manager of the team’s multi-asset credit and income strategies, custom strategies and the Loomis Sayles Inflation Protected Securities Fund; Andrea DiCenso, co-portfolio manager of the team’s credit asset, world credit asset and emerging market debt blended total return strategies; and Thomas Stolberg, co-portfolio manager of the team’s credit asset strategies.

“As a team, we are passionate about combining what we believe is best-in-class fundamental and advanced quantitative research with leading-edge technology in support of meeting our clients’ goals,” says Kearns. “We are excited to join State Street Global Advisors’ distinguished SPDR franchise with OBND, which is an innovative solution for credit investors.”   

Nuveen Releases New ETFs

Nuveen has launched two new exchange-traded funds (ETFs): the Nuveen Growth Opportunities ETF (NYSE: NUGO) and the Nuveen ESG Dividend ETF (Cboe: NUDV).

The Nuveen Growth Opportunities ETF is actively managed by Karen Hiatt, Chartered Financial Analyst (CFA), and will seek to outperform the Russell 1000 Growth Index by investing in 40 to 65 high-conviction securities, making up approximately 10% of the broader index.

Nuveen says the Nuveen ESG Dividend ETF is the first environmental, social and governance (ESG) Dividend ETF in the industry to incorporate a low-carbon criteria. The fund is focused on providing yield and seeks to track an ESG-enhanced custom index developed by Nuveen’s Responsible Investing team.

“Our suite of differentiated ETFs brings to market Nuveen’s industry-leading expertise, from real-estate to high-conviction active strategies, to ESG-enhanced index funds that are informed by a five-decade track record in responsible investing,” says Jordan Farris, head of ETF product, Nuveen. “These funds have delivered upon their investment objectives since their launch in 2016 and continue to grow as investors increasingly seek unique exposures efficiently delivered in the ETF wrapper.”

A fee reduction of 10 basis points for seven of Nuveen’s enhanced index-tracking equity ESG ETFs (NULG, NULV, NUMG, NUMV, NUSC, NUDM and NUEM) and a reduction of 5 basis points for two of Nuveen’s enhanced index-tracking fixed income ESG ETFs (NUBD and NUHY) will also be made effective.

The addition of NUGO and NUDV brings Nuveen’s ETF suite to a total of 18 funds.

FTSE Russell Announces ESG Indexes

FTSE Russell has launched the Russell U.S. ESG Indexes, designed to integrate ESG into institutional-grade U.S. equity indexes.

The six new indexes are constructed using ESG screening criteria and the target exposure methodology ensures they match risk and return characteristics of the underling benchmarks.

Based on FTSE Russell’s widely used US equity benchmarks, the Russell 1000, Russell 2000 and Russell 3000 indexes, the new index series contains two sub-groups: the Russell ESG Screened Target Exposure Indexes and the Russell ESG Enhanced Target Exposure Indexes. Currently, the Russell U.S. indexes capture 98% of the U.S. investable market capitalization and are tracked by passive and active funds.

The ESG Screened versions are for investors who want to remove harmful products or controversial activities and still maintain broad U.S. market exposure. The ESG profile of the underlying index is improved by eliminating exposure to companies involved in the following business operations: controversial weapons, firearms, tobacco and fossil fuels. In addition, companies with the highest ESG controversies are excluded.

The ESG Enhanced versions are designed for investors seeking ESG score enhancement alongside the risk and return characteristics of the underlying benchmark. These indexes not only remove exposure to the same set of controversial business operations as the screened versions, but also incorporate sustainability issues by targeting specific ESG score improvement versus the benchmark. The ESG Enhanced indexes use Refinitiv ESG scores, a framework that measures a company’s ESG performance, commitment and effectiveness relative to its industry peers.

Tony Campos, head of sustainable investment, Americas, FTSE Russell, says, “When it comes to sustainable investment, choosing an appropriate index truly matters. The Russell U.S. ESG Indexes were developed for investors looking to incorporate sustainability considerations within a broad market portfolio without impacting the risk and return characteristics of the headline benchmark. Moreover, the two sub-groups were constructed with different client use cases in mind, giving investors options based on their preferences for ESG.”

FTSE Russel says soaring investor interest in ESG has translated to a growth in assets in the U.S., with up to $550 billion in assets under management (AUM) now in ESG/socially responsible investing (SRI) funds, an 88% increase since 2018, leading to new index developments, sustained inflows into passive ESG funds and the mainstreaming of ESG into passive investing. The Russell U.S. ESG indexes can be used by market participants to benchmark the performance of active ESG funds; as a replacement for core market cap weighted passive portfolios; as a building block in model portfolios; and in the creation of ETFs, structured products and index-based derivatives.

The indexes include the Russell 1000 ESG Enhanced Target Exposure Index; Russell 2000 ESG Enhanced Target Exposure Index; Russell 3000 ESG Enhanced Target Exposure Index; Russell 1000 ESG Screened Target Exposure Index; Russell 2000 ESG Screened Target Exposure Index; and Russell 3000 ESG Screened Target Exposure Index.