Investment Product and Service Launches

Art by Jackson Epstein

LifeYield Partners with Financial Tech Provider

LifeYield LLC has integrated with Orion Advisor Tech (Orion), a division of Orion Advisor Solutions and a provider of financial adviser technology and investment solutions. LifeYield’s integration draws on Orion’s client data to generate financial analytics highlighting opportunities to reposition assets for greater household tax efficiency.

Embedded in the LifeYield platform is the Taxficient Score, which helps advisers quantify the financial benefits of improved asset location. Using portfolio data already present in the Orion platform, LifeYield creates a report that includes the client’s Taxficient Score as well as suggestions on how to adjust asset locations to reduce client tax exposure. As an example, a $1 million household with a 50% fixed-income and 50% equity allocation could realize after-tax improved results of $325,000 over 15 years.

“LifeYield offers RIAs a potent tool to engage clients with clear, actionable reporting that saves them money with smart tax optimization,” says Jeff Kliewer, integration product manager at Orion. “With this integration, advisers on our platform can efficiently take advantage of LifeYield’s technology without breaking stride to switch applications, while eliminating redundant data entry.”

Orion users can serve multiple-account households with LifeYield’s analytics and tax optimization reports based on their household membership, holdings, and asset location. Those reports can manually be taken back to Orion’s trading platform, Eclipse, for swift execution.

“The next frontier for financial services is where investment products, accounts, adviser tools, and platforms are coordinated and optimized to improve investor outcomes,” says Steve Zuschin, executive vice president, Advisor Success at LifeYield. “LifeYield’s Taxficient Score, powered by Orion’s award-winning platform, enables advisers to better communicate the value of tax-smart household management and improved after-tax returns.”

Vanguard Changes Manager Structure of Value Funds

Vanguard has announced changes to the multi-manager structures of three value funds: The Vanguard Windsor II Fund, the Vanguard Selected Value Fund, and the Diversified Value Portfolio of Vanguard Variable Insurance Fund. 

Two new advisory firms will join Vanguard’s lineup of 24 external investment advisers. Aristotle Capital Management, LLC has been added to Windsor II Fund, joining existing advisers Lazard Asset Management, LLC, Hotchkis and Wiley Capital Management, LLC, and Sanders Capital, LLC. 

Aristotle Capital is a 100% employee-owned investment manager with $19.6 billion in assets under management. The firm employs a value-oriented investment style founded on fundamental research and investing in high-quality businesses. Howard Gleicher, CFA, and Greg Padilla, CFA, will co-manage Aristotle Capital’s portion of Windsor II Fund.

Cooke & Bieler, L.P. has been added to Selected Value Fund, joining existing advisers Donald Smith & Co., Inc., and Pzena Investment Management, LLC. The employee-owned partnership manages only U.S. domestic value equities totaling $6.2 billion, mainly on behalf of institutional clients. Mehul Trivedi, CFA, and William Weber, CFA, who are partners and career analysts, will manage Cooke & Bieler’s portion of the Selected Value Fund on behalf of the eight-person team.

Lazard Asset Management, LLC, and Hotchkis and Wiley Capital Management, LLC, two of the current managers of Windsor II Fund, have been added to Vanguard Diversified Value Portfolio. These restructurings also result in Barrow, Hanley, Mewhinney & Strauss (BHMS) no longer serving as an adviser to the three funds. Vanguard Quantitative Equity Group, which has managed less than 1% of Windsor II Fund’s assets for the last 10 years, has also been removed from the advisory team.

“We are pleased to add Aristotle Capital and Cooke & Bieler to the exceptional array of investment firms managing Vanguard funds, and are confident that their management approaches will benefit clients over the long-term,” says Dan Newhall, head of global oversight and manager search for Vanguard Portfolio Review Department. “We are grateful for BHMS’ contributions to the long-standing success of these funds and their commitment to our investors.”

Newhall noted that to protect the funds’ shareholders and minimize trading impact, Vanguard has repositioned the portfolios and transferred assets to the new advisory firms.

Vanguard Windsor II Fund’s expense ratios are expected to change to 0.26% from 0.25% for Admiral Shares and to 0.34% from 0.33% for Investor Shares. Vanguard Selected Value Fund’s expense ratio is expected to change to 0.33% from 0.36%. The expense ratio for Vanguard Diversified Value Portfolio is expected to change to 0.28% from 0.25%.

Northern Trust Expands Collateral Management Services

Northern Trust is expanding its collateral management services for over the counter (OTC) derivatives trading. The new functionality will enable asset managers and institutional investors to outsource key aspects of regulatory compliance to Northern Trust and optimize collateral selection, according to the firm.

Northern Trust’s Margin Segregation Service will include new capabilities that streamline complex processes for meeting uncleared margin rules, such as undertaking industry-standard electronic settlement messaging and providing advanced collateral reporting. Clients can pledge assets from their trading account and place them into segregated accounts for each broker, thereby retaining their investments with a single asset servicing provider for optimal efficiency, consolidated recordkeeping and oversight. 

Additionally, Northern Trust has partnered with risk and collateral management services company AcadiaSoft to provide an outsourced solution for collateral optimization calculating clients’ initial margin obligations, issuing margin demands to clients’ brokers, and determining if and when margin is to be transferred.

With this service, clients will have the ability to optimize collateral selection, using algorithmic technology to identify their best assets available to meet regulatory eligibility requirements. It will allow only optimal assets to be deployed to meet margin obligations.  

“Our clients’ use of derivatives often falls within the threshold of heightened global derivatives regulation, requiring resource-intensive tasks to support compliance,” says Judson Baker, derivatives product manager at Northern Trust. “By outsourcing these complex and onerous functions, they can draw on our expertise and advanced technology – negating the need for costly investment in their systems. They can also minimize the value of their assets locked up as collateral by using our optimization solution.” 

Collectively, these capabilities may enable Northern Trust’s clients to meet their obligations under the European Market Infrastructure Regulation (EMIR), the United States’ Dodd-Frank Wall Street Reform and Consumer Protection Act, and equivalent global regulations.

These capabilities will be part of Northern Trust’s comprehensive range of collateral, derivatives and liquidity management solutions. Clients can access these services globally, either on a component basis or as part of a broader suite of collateral management solutions.

Vanguard Decreases Expense Ratios for International Funds

Vanguard has announced lower expense ratios for three international income-oriented funds.

The funds are the $1.6 billion Vanguard International Dividend Appreciation Index Fund, the $1.5 billion Vanguard International High Dividend Yield Index Fund, and the $1.9 billion Vanguard Emerging Markets Government Bond Index Fund. Vanguard also reported lower expense ratios on four externally managed active equity funds.

The 2019 expense ratios are as follows:

In addition to expense ratio changes previously reported this year by Vanguard in fund annual reports, aggregate savings to clients now totals $41.7 million across 50 fund and exchange-traded fund (ETF) shares. 

In the case of Vanguard Windsor Fund and Vanguard Selected Value Fund, the expense ratio reductions were a result of incentive/penalty arrangements. Vanguard aligns the interests of its external investment advisory firms with those of shareholders by adjusting an external adviser’s base fee up or down to reflect the fund’s investment performance relative to the total return of an appropriate benchmark over a 36- or 60-month period.