Investment Product and Service Launches

Art by Jackson Epstein

Vanguard Modifies Managed Payout Fund

Vanguard has announced forthcoming changes to its Vanguard Managed Payout Fund, including renaming it Vanguard Managed Allocation Fund, adding a new portfolio manager and eliminating monthly payouts in favor of an annual distribution.

The change to the portfolio management team is effective immediately, and the investment objective and principal investment strategy will be changed in the second quarter to reflect the cessation of monthly payments.

The fund’s structure, composition and investment adviser will not change. The fund will continue to offer a broadly diversified portfolio of equities, fixed income, commodity-linked investments and alternative investments by investing in multiple Vanguard funds through an actively managed asset allocation process. Vanguard Quantitative Equity Group (QEG), the firm’s internal active fund advisory arm, will continue to manage the fund.

“Vanguard Managed Allocation Fund provides investors with a sophisticated, actively-managed, endowment-like portfolio at a low cost,” says Matt Brancato, head of Vanguard’s Portfolio Review Department. “The fund remains an appealing option for individual investors seeking long-term capital appreciation and moderate income as a complement to their retirement strategy.”

The last scheduled monthly payout will occur in May. Going forward, investors seeking a regular stream of cash distributions can establish an automatic withdrawal plan stipulating a specified amount of their fund shares to be redeemed monthly or at a regular interval of their choosing.

Vanguard Managed Allocation Fund will continue to invest in a diversified portfolio of Vanguard funds, including but not limited to: Vanguard Total International Stock Index Fund, Vanguard Alternative Strategies Fund, Vanguard Total Bond Market II Index Fund, Vanguard Total Stock Market Index Fund, Vanguard Global Minimum Volatility Fund, Vanguard Commodity Strategy Fund, Vanguard Total International Bond Index Fund, Vanguard Ultra-Short-Term Bond Fund, Vanguard Value Index Fund, Vanguard Market Neutral Fund, and Vanguard Emerging Markets Stock Index Fund. The fund currently invests 52% of its assets in stocks, 23% in bonds and 25% in alternatives.

The fund is expected to retain an expense ratio of 0.32%, making the fund one of the lowest-cost options in the $308.6 billion U.S. World Allocation Morningstar category.

NEPC Announces Diversity Council for Institutional Investors

NEPC LLC has unveiled its Investment Diversity Advisory Council (IDAC), a program intended to convene institutional investors to discuss ways to promote diversity in their organizations and in their investment decisions.

“There’s an abundance of evidence to show that investment programs benefit from the different perspectives and ideas that come from a diverse and inclusive workforce,” says Sam Austin, partner, chair of NEPC’s Diversity and Inclusion Board, and co-chair of the firm’s Diverse Manager Committee. “At NEPC, our goal is to be a clearinghouse for information and ideas on how to improve investment outcomes for our clients and we believe diversity is an important element in improving the sustainability of those outcomes. This open forum will allow us to engage with our clients directly in conversations that help all stakeholders—including our firm—expand our definitions of diversity and continually improve the measurement benchmarks we use to track our collective progress.”

NEPC’s Diverse Manager Committee will lead the sessions and act as an educational resource for investors at various stages of incorporating diversity and inclusion into their investment plans. Outside of the IDAC, the committee’s primary purpose is to identify highly qualified diverse investment firms—those with significant ownership by women and/or underrepresented groups—that can best fulfill the unique goals, risk parameters and financial objectives of NEPC’s clients.

The first IDAC forum was held on February 5 in Tempe, Arizona, as a pilot for the broader initiative. Ten self-selected public fund clients joined NEPC facilitators for a workshop on how to best achieve short- and long-term goals for increasing diversity in boardrooms, vendor lists, workforces and investment manager selection processes. The next forum will be held at NEPC’s annual client conference on May 20 and 21 in Boston.

BondCliQ Affiliates with EDI to Issue Bond Data

BondCliQ has partnered with Exchange Data International (EDI) to distribute real-time corporate bond data.

Through this collaboration, EDI can now distribute institutional corporate bond quote (pre-trade) information and enriched transaction data (TRACE).

Chris White, chief executive officer of BondCliQ says, “There is huge demand for higher quality institutional pricing information in the U.S. corporate bond market. By coordinating directly with 35 dealers, BondCliQ has produced the first centralized data feed. The partnership with EDI makes this valuable data set more accessible to their comprehensive network of clients.”

BondCliQ’s data is appropriate for all corporate bond market participants for trading, analytics and valuations. Dealers and buy-side clients can improve their institutional trading capabilities by viewing real-time market movements, analyzing liquidity conditions and evaluating historical quote activity.  

“Fixed income markets are becoming more dependent on data to function optimally,” says Jonathan Bloch, chief executive officer of EDI. “Through our partnership with BondCliQ we will be able to cover real time and historical U.S. corporate bond markets. These data sets are either not available or accessible through more expensive offerings. EDI is happy to give our clients new corporate bond data solutions and better options.”

SMArtX Releases Unified Managed Accounts Portfolio

SMArtX Advisory Solutions (SMArtX) has launched its Total Portfolio Solutions program, a collection of pre-built unified managed accounts (UMAs) composed from a subset of the 600 investment strategies available on the SMArtX TAMP.

The program provides access to institutional caliber portfolio construction that leverages managers to deliver investment outcomes. The portfolios can be implemented intra-day and are designed for clients ranging from conservative to aggressive on the risk spectrum, with investment sizes starting at $20,000. Portfolios can be used as a complete solution or serve as a core or satellite portfolio when paired with other strategies. 

Clients can also employ SMArtX’s outsourced chief investment officer (OCIO) services to tailor the solutions to meet specific mandates. Enterprise clients can leverage the same technology to create and distribute pre-built portfolios to their financial advisers, where each set of solutions can be white-labeled and curated to simplify the investment process. 

“The Total Portfolio Solutions program brings advisers one step closer to an automated investment process, thereby freeing up resources to use on revenue producing activities,” says Evan Rapoport, CEO of SMArtX Advisory Solutions. “Enterprise clients can capitalize on an OCIO with over 20 years of institutional portfolio construction experience, making it easier to implement and manage investments at scale.” 

SMArtX features strategies from investment firms such as BlackRock, Legg Mason, State Street, Alliance Bernstein and Neuberger Berman, as well as alternative and index strategies. Furthermore, each solution can be complemented with individual equities, mutual funds, exchange-traded funds (ETFs), in-house strategies or third-party models to create a customized solution.

Transamerica Launches Stable Value Option for 403(b)s

Transamerica has announced the availability of a custom stable value separate account product developed specifically for 403(b) retirement plans. The Transamerica Capital Preservation Option is a group annuity contract issued by Transamerica Life Insurance Co.

Transamerica’s new stable value solution is said to offer transparency and flexibility regarding its crediting rate, expense ratio and underlying separate account mandate. The fee for the Transamerica Capital Preservation Option is based on an expense ratio. Crediting rates are calculated annually using a contractually specified crediting rate formula. Plans that implement this option by the end of the second quarter of 2020 are guaranteed a minimum crediting rate of 1% for the life of the contract.

“Transamerica is pleased to offer this innovative stable value solution to employers with 403(b) retirement plans for their employees,” says Blake Bostwick, chief executive officer, Workplace Solutions at Transamerica. “With the Transamerica Capital Preservation Option, plan sponsors can rely on contract features including a transparent crediting rate formula, an array of best-in-class underlying fixed-income managers and contract termination provisions that allow plan sponsors to take a market value gain over the contract balance. These are features that 403(b) retirement plan sponsors appreciate.”

The Transamerica Capital Preservation Option is available on an investment-only basis, and in all states except New York, Minnesota and California. Minimum investments start at $40 million for 403(b) retirement plans, although Transamerica may consider smaller amounts. 

Fidelity Announces Health Savings Mutual Funds

To encourage more health savings account (HSA) owners to get invested, Fidelity has launched two health savings mutual funds, the Fidelity Health Savings Fund (available both in a retail share class, FHLSX, and K share class, FHLKX) and Fidelity Health Savings Index Fund (FHSNX).

The funds are competitively priced, with annual expenses that compare with the industry average net prospectus expense ratio of 79 basis points for similar asset allocation funds, according to Morningstar. The funds are exclusively available for purchase by those with a Fidelity HSA, including individual investors, employees in workplace savings plans for which Fidelity is the recordkeeper and clients of financial intermediaries that are Fidelity Custody and Clearing clients.

“The Fidelity Health Savings Funds build on our decades of experience and expertise in asset allocation, as well as the cost efficiencies of our extraordinary scale, to offer our HSA customers innovative, low-cost investment options that simplify the complexity of investing their savings to meet uncertain future medical expenses,” says Vadim Zlotnikov, president of Global Asset Allocation at Fidelity. “Our goal with these new funds is to encourage more savers to take that next step and invest the HSA assets they intend to use for future health care expenses, and by doing so, more fully benefit from the great advantages of their accounts, which include the potential for tax-free growth.”

Both funds are co-managed by Avishek Hazrachoudhury and Geoff Stein and are available to all Fidelity HSA clients.