Products February 28, 2019

Investment Product and Service Launches

HB&T creates a collective investment fund with Jensen Investment Management, while Principal and NDW launch a new ETF model portfolio.

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Art by Jackson Epstein

Art by Jackson Epstein

HB&T Creates CIF with Jensen Investment Management

Hand Benefits & Trust (HB&T) has launched a new collective investment fund (CIF) in collaboration with Jensen Investment Management. HB&T is a national provider of employee benefit trust products and services.

The Jensen Quality Growth Collective Investment Fund seeks to provide qualified institutional investors with the firm’s flagship Quality Growth Strategy, with the lower shareholder servicing costs associated with a CIF. The Jensen Quality Growth Strategy seeks to invest in quality businesses that can weather all economic climates and aims to provide attractive returns while mitigating downside risk.

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Created by the Hand Composite Employee Benefit Trust and sponsored by HB&T, the CIF will enable Jensen to service a wide range of institutional investors, especially in the defined contribution (DC) market where plan sponsors are seeking compliant and more cost-effective investment options, according to HB&T.

The Jensen Quality Growth CIF launched on February 1, and will be accessible to eligible retirement plans through most recordkeeping platforms.

Principal and NDW Announce ETF Model Portfolio

Principal has partnered with Nasdaq Dorsey Wright (NDW) to present the Principal NDW Factor Rotation model portfolio.

The dynamic factor portfolio, which is comprised entirely of Principal’s U.S. equity factor exchange-traded fund (ETF) lineup, aims to identify those factors that will perform well over the coming months. According to Principal, this is the first guided ETF model from NDW that utilizes both momentum and mean reversion, in an attempt to capture short-term continuation signals while simultaneously avoiding performance drag due to holding momentum names too long. 

A total of six ETFs are considered for selection in the model portfolio, including Principal’s US Mega Cap Multi-Factor (USMC), Sustainable Momentum (PMOM), Price Setters (PSET), Contrarian Value (PVAL), US Small Cap Multi-Factor (PSC), and Shareholder Yield (PY) ETFs. The model first went live on February 8. 

“Factor investing will continue to grow in importance and adoption,” says Paul Kim, head of ETF strategy at Principal Global Investors. “Our suite of factor ETFs benefits from decades of active and factor investing expertise, the rapidly growing body of academic research, and the many advantages of a rules-based implementation in an ETF. We are delighted that Nasdaq Dorsey Wright has developed a relative strength methodology incorporating our factor ETFs to help investors achieve their unique investment goals.”

There is no overlay model fee in addition to the underlying ETF fees, which range from 12 to 38 basis points. However, financial advisers can only access the model portfolio through subscription to Nasdaq Dorsey Wright’s platform.

As part of the collaboration, Nasdaq Dorsey Wright is responsible for all aspects of portfolio construction and ongoing management, including fund selection and asset allocation decisions. Dorsey Wright selects ETFs for use in the model portfolio based on its proprietary “relative strength matrix” system and a new indicator for measuring momentum sustainability.

In Practice February 28, 2019

Advisers Find Outsourcing Key to Growing Practices

Technology, investment management, and legal and compliance are the top three areas where advisory practices often turn to outside experts, according to Fidelity. 

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Outside specialists can provide a great deal of value to a financial advisory practice, according to the Fidelity Financial Advisor Community: Outsourcing Trends Study. Forty-three percent of the 338 advisers surveyed last May say that their firms hire external consultants, third-party providers or individual specialists for certain functions.

The top three functions that are outsourced are IT/technology, cited by 48%, followed by investment management and portfolio construction (40%), and legal and compliance (37%). Advisers say this outsourcing permits them to focus on their core business and advance the client experience up what Fidelity calls the “value stack.” This is to say advisers can spend more time helping clients define and achieve their goals, and have greater peace of mind.

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The reason advisers gave for outsourcing IT/technology was lack of internal expertise. When outsourcing this function, 69% of advisers said this was successful. As for outsourcing investment management and portfolio construction, advisers said the reason for this is to create more value for clients, and 64% said doing this was successful. Finally, the reason why advisory practices outsource legal and compliance functions was lack of internal expertise, with 74% saying doing this is effective.

Overall, 84% of advisers said outsourcing has been a positive experience. Asked why, they said this saves them time (77%), makes them more productive (66%), makes them more efficient (57%) and frees up their time to focus on deepening client relationships (53%).

The bottom line when outsourcing is undeniable, Fidelity’s study concludes. Individuals or teams that outsource have average assets under management (AUM) of $145 million, versus $110 million for those who do not. They earn an average of $365,000, compared to $335,000 for those who do not. Eighty-one percent of advisers or advisory practices that outsource have increased their client base in the past year, compared to 71% of those who do not outsource, and 95% of the former have seen their AUM rise in the past year, compared to 89% of the latter.

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