Products July 19, 2018

Investment Product and Service Launches

Northern Trust Creates Private Equity and Hedge Fund Service Group; Impax Introduces ESG-Focused Fund; OneAmerica to Offer Russell Investments Managed Accounts; and more.  

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ProShares has created its Online Retail exchange-traded fund (ETF), an effort to invest in larger retailers selling through online or other non-store channels, from Amazon to Alibaba.

“Retail shopping is increasingly moving away from bricks-and-mortar stores and going digital, and the companies driving sales in this rapidly growing marketplace present an opportunity for investors,” says Michael Sapir, co-founder and CEO of ProShare Advisors, LLC, the adviser to ProShares. “Rather than investing in an individual company, investors can now get exposure to Amazon, Alibaba and other global leaders in online retail with a single ticker: ONLN,” Sapir said.

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ONLN expands ProShares’ lineup of Retail Disruption ETFs, including ProShares Decline of the Retail Store (EMTY) and ProShares Long Online/Short Stores ETF (CLIX).
 

ONLN tracks the ProShares Online Retail Index, designed to measure the performance of publicly traded companies that principally sell online or through other non-store channels, such as mobile or app purchases, rather than through brick-and-mortar store locations. The index uses a modified market-capitalization weighting approach. The ProShares Online Retail Index’s constituents may include U.S. and non-U.S. companies listed on a U.S. stock exchange. Companies in the index must: be classified as an online retailer, an e-commerce retailer, or an internet or direct marketing retailer, according to standard industry classification systems; have a market capitalization of at least $500 million; and have a six-month daily average value traded of at least $1 million and meet other requirements.
 

Northern Trust Creates Private Equity and Hedge Fund Service Group

Northern Trust has launched North America Alternative Fund Services, a new group establishing private equity and hedge fund service businesses to address complex operational and strategic needs of the alternative asset management industry.

North America Alternative Fund Services provides fund administration, accounting and data solutions to hedge funds, private equity managers and managed account platforms. It offers specialized expertise in complex valuations, cash, collateral and liquidity management, as well as analytics and transparency into portfolios that increasingly combine hedge fund strategies with fund structures traditionally used by private equity firms.

The group will be led by Peter Sanchez, head of Northern Trust Hedge Fund Services since 2011. Jeff Boyd has been promoted to lead Hedge Fund Services in North America, reporting to Sanchez.

“Investment managers face new operational challenges as they move across asset classes to more complex portfolio construction approaches – incorporating private equity, real estate, infrastructure as well as hedging strategies in the search for yield,” says Pete Cherecwich, president of Corporate & Institutional Services at Northern Trust. “Under Peter’s proven leadership, our North America Alternative Fund Services group provides a sophisticated technology platform, operational expertise and service model that delivers unrivalled support to the most innovative asset managers and their clients.”

Impax Introduces ESG-Focused Fund

Impax Asset Management LLC, investment adviser to Pax World Funds, has launched Pax Global Opportunities Fund (PXGOX), sub-advised by its London affiliate, Impax Asset Management Ltd. This is the first product introduction since Pax World Management was acquired by Impax Asset Management Group plc in January.

The Pax Global Opportunities Fund seeks to deliver capital growth by investing in companies positioned to benefit from the transition to a more sustainable global economy. Impax believes that demographic change, resource scarcity, inadequate infrastructure and environmental constraints will disrupt private-sector markets profoundly in the coming years, creating opportunities for well-positioned companies and increased risk for companies unable or unwilling to adapt.

The fund aims to identify and invest in companies that possess sustainable competitive advantages and track records of consistent returns on investment. Environmental, social and governance (ESG) analysis is an integral part of Impax’s investment research and process, providing risk mitigation and important insight into the character of a company.

“We have two proprietary tools to help us identify companies well positioned to benefit from the transition to a more sustainable economy. A series of financial tests helps us find companies that we believe offer consistent, predictable returns, while the Impax Sustainability Lens provides us with unique insights into evolving trends and involves deep analysis of the risks involved in the transition to a more sustainable economy. It is a framework that facilitates the discovery of the best growth companies where the opportunities outweigh the risks,” says Kirsteen Morrison, co-portfolio manager for the Pax Global Opportunities Fund.

The investment managers intend to take a five-year view of a company’s prospects before investing, hold a concentrated portfolio of 35 to 45 companies, and run the fund with a low level of turnover. The portfolio has broad geographic and sector exposure and is overweight to mid-cap companies relative to the MSCI ACWI benchmark. In addition to the U.S. mutual fund, Impax Asset Management Ltd. has begun offering the strategy to European institutional and wholesale investors.

OneAmerica to Offer Russell Investments Managed Accounts

Global asset manager Russell Investments has reached an agreement with OneAmerica to distribute Russell Investments’ Adaptive Retirement Accounts (ARA) on behalf of defined contribution (DC) plan clients. The managed account option will be available to the OneAmerica open architecture trust business, which includes U.S. corporations, nonprofit organizations and public-sector entities. 

“This alliance with Russell Investments to bring ARA to the OneAmerica platform means a customized solution for individual retirement plan participants and more options for retirement plan sponsors,” says Terry Burns, assistant vice president of Products and Investments for OneAmerica Retirement Services. “It’s a new option to help participants optimize their pursuit of retirement income.” 

 

According to Andrew Scherer, senior director, defined contribution at Russell Investments, the tool may work for those benefiting of customized investment strategies geared towards future targeted replacement income, as ARA considers retirement accounts and assets outside of the plan sponsor’s retirement plan, along with factors catered to participants.

Each participant’s customized asset allocation is assessed quarterly and adjusted as needed based on progress toward his or her targeted retirement income goal. The ARA option is scheduled to be available in the fourth quarter 2018 to new and existing clients. 

Data & Research July 19, 2018

Millennials Reluctant to Invest in the Market

However, there are things retirement plan advisers and sponsors can do to encourage them to take on more risk.

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Millennials feel overwhelmingly confident in their own ability to use financial products—including common investment vehicles, such as stocks (66% say they’re confident) and even some more complex options, like private equity (47%), according to the Bank of the West 2018 Millennial Study.

Millennials also have age-appropriate attitudes towards asset allocation, with 66% agreeing that the more time they have until retirement, the more aggressive they can be with their investing strategy. However, they are reluctant to actually invest, saying they feel safest keeping most of their savings out of the market (66%). They are spooked by the financial crisis, with 65% saying living through that period has made them a more conservative investor. This reluctance to invest is demonstrated by their under-utilization of investing accounts that could help them build wealth and prepare for retirement: just 40% have taken advantage of common workplace retirement accounts like 401(k)s or 403(b)s; only 23% have opened an IRA or Roth IRA; 14% have a managed account; and just 12% have a brokerage account.

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“Many Millennials suffered in the wake of the financial crisis. They were the victims of poor timing—graduating into an extremely difficult job market, with many missing the past decade of the market rally and buying homes only after the housing market bounced back,” says Ryan Bailey, head of the Retail Banking Group, Bank of the West. “But Millennials have time on their side. With a long time-horizon to retirement, Millennials can afford to ride out market volatility.”

Bailey tells PLANADVISER that plan sponsors and advisers can help educate Millennials about the importance of investing in order to combat inflation, starting with:

  • Educating Millennials about why time is on their side: bring in a financial professional to demonstrate the time-value of money and how getting in the market can speed up their timeline to reaching their financial goals. Illustrate through financial models how important the early years of their career are for savers—since that cash, once invested, has the longest timeline to exponentially grow. To allay concerns, explain how portfolio diversification can help Millennial investors manage risk.
  • Bringing in a pro for onsite 1:1s: Onsite one-on-one financial consultations are a great way to encourage Millennial workers to evaluate their investing strategy. Bring in a financial professional around open enrollment season so employees can plan out retirement plan and health savings account (HSA) contributions, as well as their investment strategy.
  • Incentivizing investing: Often Millennials’ first foray into investing begins with their workplace retirement plan. Offer an employer match stretched to incentivize higher savings levels. Also think about how to beat inertia through automatic enrollment, automatic annual increases, and setting up default investment allocations.

Home ownership and debt

The study also found these equities-shy Millennials have turned to real estate as the cornerstone of their investment portfolio, with homeownership emerging as the most popular ingredient of their American Dream (56%). Following homeownership, half cited paying off debt (51%) and having the financial means to retire comfortably (49%) as the second and third most critical components.

And yet, their desire to own a home is pushing some Millennials to risk their other goals by taking on mortgages and even borrowing against their retirement savings. In fact, one in four say that they are willing to withdraw or borrow against retirement funds to finance down payments for a home.

Sixty-nine percent of Millennials in the study believe you have really only made it when you are debt-free. Many (58%) even say they pay off their credit card balances in full each month. And when it comes to paying for everyday purchases, they are a mixed bag. When paying for items in-person, they avoid credit cards and are most likely to use cash, checks, or debit cards (59%).

Yet, on some level Millennials are comfortable with leveraging themselves for certain express purposes (like homeownership—a purchase that puts most people into debt for decades). Over four in 10 Millennials don’t pay their credit card balances off in full each month. Most of this group says they feel comfortable carrying this revolving debt (59%)—particularly those who are already homeowners (66%). And when making online purchases, they’re more inclined to use credit cards or credit card rewards, such as cash back or points (52%).

“Debt doesn’t have to be a dirty word,” says Bailey. “By responsibly borrowing the amount that is just right for their individual financial situation, Millennials can fund their homeownership dreams, while freeing up capital to invest in the markets today when they still have a long time-horizon on their side.”

More about the survey results may be found here.

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