Products September 7, 2017

Investment Products and Services Launches

Goldman Sachs Launches High Yield Corporate Bond ETF; Sage Advisory Introduces Custom Laddered Strategy; and Franklin Templeton Rolls Out Active Municipal Bond ETFs.
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Goldman Sachs Launches High Yield Corporate Bond ETF

Goldman Sachs Asset Management (GSAM) has updated its Access suite of exchange-traded funds (ETFs) with the addition of the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB).

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The fund seeks to track the Citi Goldman Sachs High Yield Corporate Bond Index, which measures the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria. It uses a rules-based methodology that aims to exclude bonds with the greatest potential to default or deteriorate in price. It is priced to investors at 34 basis points and will begin trading on the NYSE Arca on September 7 with $50 million in assets.

The Index is owned and calculated by FTSE Fixed Income LLC using concepts developed with GSAM.

“High yield corporate bonds are a natural choice for investors seeking ways to generate yield in their portfolios,” says Jason Singer, portfolio manager for GHYB. “GHYB aims to address concerns surrounding high yield bonds, particularly that they can be less liquid and more prone to default, when compared to other sectors. GHYB seeks to offer a more thoughtful way to access the high yield market in a low-cost, transparent ETF wrapper.”

The GHYB will be passively managed by GSAM’s Global Fixed Income team. The fund is the second ETF in GSAM’s Access ETF line-up, following Goldman’s Access Investment Grade Corporate Bond ETF.

NEXT: Sage Advisory Introduces Custom Laddered Strategy 

Sage Advisory Introduces Custom Laddered Strategy

Sage Advisory Services, a fixed income investment management firm, has launched a new Customized Laddered Strategy (C.L.I.M.B.) designed to offer high liquidity, optimal risk/reward characteristics and favorable tax status.

Sage’s C.L.I.M.B strategy enables clients to set a maximum maturity range and realize consistent cash flows from maturity and coupon payments. In an effort to enhance return potential relative to traditional laddered strategies, Sage actively manages state, sector, and credit weightings within each maturity bucket. Additionally, Sage can provide a higher degree of liquidity to clients that encounter unexpected cash flow needs or would like to reallocate to a different asset class, the firm says.

Sage’s portfolio management team can adjust portfolio characteristics to maximize return opportunities for both institutional and retail clients, while reducing risk exposure when necessary.

C.L.I.M.B. offers an actively managed municipal ladder approach with a competitive fee structure, the ability to customize based on client’s unique investment objectives, and access to municipal bond inventory across all broker/dealers.

“Investment goals of both institutions and individuals have evolved as a result of changing market structure and regulatory oversight,” says Robert Smith, president and Chief Investment Officer at Sage. “Our goal with our new Customized Laddered Municipal Strategy was to offer a flexible investment solution that not only reflects changing investor needs, but also a simpler approach to traditional fixed income investing.” 

NEXT: Franklin Templeton Rolls Out Active Municipal Bond ETFs

Franklin Templeton Rolls Out Active Municipal Bond ETFs

Franklin Templeton Investments has added two actively managed municipal bond exchange-traded funds (ETFs) to its Franklin LibertyShares lineup: the Franklin Liberty Intermediate Municipal Opportunities ETF (FLMI) and Franklin Liberty Municipal Bond ETF (FLMB).

Both seek to provide investors with a high level of current income by investing at least 80% of their net assets in municipal securities for which interest is free from federal income taxes, including the federal alternative minimum tax. The two ETFs are generally differentiated by the dollar-weighted average portfolio maturity levels they target and the credit ratings of municipal securities they may purchase, the firm says.

The Franklin Liberty Intermediate Municipal Opportunities ETF may invest in municipal securities rated in any category including below investment grade and defaulted securities. It seeks to maintain a dollar-weighted average portfolio maturity of three to 10 years.

The Franklin Liberty Municipal Bond ETF invests only in municipal securities rated, at the time of purchase, in one of the top four ratings categories by one or more U.S. nationally recognized rating services (or comparable unrated or short-term rated securities). It seeks to maintain a dollar-weighted average portfolio maturity of five to 15 years.

“Creating a world class ETF business is our central objective, and we are delighted to unveil our new muni ETFs amid a surge in client interest in fixed income ETFs,” says Patrick O’Connor, head of global ETFs at Franklin Templeton Investments. “Leveraging Franklin Templeton’s world class municipal bond platform with more than $71 billion in assets under management, these actively managed ETFs seek to generate yield exempt from federal taxes, allowing investors to keep more of what they earn.”

The firm currently offers a suite of actively managed ETFs through the LibertyShares ETF platform, which includes two equity funds and four fixed income funds. LibertyQ, the strategic beta ETF suite, includes seven equity ETFs covering U.S., emerging markets, international and global equity strategies, as well as an income-focused global equity strategy.

Data & Research September 7, 2017

Americans Underestimate Cost of Living In Retirement

A significant number of workers underestimates what they are likely to pay for health care in retirement and many are unaware of Social Security basics, a new survey finds.
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Despite being confident about their current financial situation, a large portion of Americans significantly underestimate the projected costs of living in retirement, according to a recent survey by independent adviser Financial Engines. The study found that 58% of respondents at least 65 years of age and 76% of those between the ages of 55 and 64 believe the average married couple retiring at age 65 would need between $50,000 and $200,000 for health care. Financial Engines estimates the actual figure is $266,000.

Moreover, 64.9% of respondents to a financial literacy quiz offered by Financial Engines did not know they could defer claiming Social Security benefits until age 70, potentially earning between 6% and 8% in additional lifetime benefits under current conditions for each year they delay between ages 62 and 70.

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And even though 47.3% of respondents said they felt “somewhat or much more secure” about their finances compared to five years ago, only 8% of those people passed the financial literacy quiz. Overall, only 6% passed the quiz, which covered topics around financial decisions people are likely to make during their lifetime.

“It’s not surprising that Americans are feeling better about their financial situations given low unemployment and a record-breaking stock market,” says Andy Smith, CFP and senior vice president of financial planning at Financial Engines. “But as our quiz shows, there’s a persistent problem with financial literacy in this country. When it comes to your finances, poor decisions you make today can cost you for the rest of your life.”

Financial Engines found that people struggled most with quiz questions regarding long-term financial decisions such as paying for health care in retirement. And as the health insurance industry undergoes ongoing uncertainty, studies show many Americans fear health care costs in retirement. 

But managing health care costs is not the only long-term financial issue many people are having trouble with. The Financial Engines survey found more than half (51.4%) of people significantly underestimated how much life insurance they should have, which is recommended to be 10 times their annual income.

Several survey takers also undermined expected longevity in retirement. Plan sponsors may be able to help employees alleviate the financial downside of living longer by introducing longevity annuities to investment menus.  

Financial Engines notes, “While no one knows exactly how long they will live, many people underestimate standard assumptions for life expectancy, which can lead them to save much less than they need. Nearly three out of four people (72%) were unaware that the typical 65-year old man can expect to live about another 20 years, on average, with 61% underestimating longevity by at least five years. The Social Security Administration estimates that a man age 65 today can expect to live, on average, until the age of 84.3 years old. A typical woman age 65 today can expect to live, on average, until age 86.6.”

Smith adds, “Often, people don’t have a realistic idea of their cost of living or how expensive things will be in retirement. While each person has a unique financial situation, it’s important to remember that you are not alone. Take advantage of helpful online planning tools and if you want more personalized help, reach out to a financial professional you trust – someone who can help clarify complex issues and guide you through the financial planning process.”

For its study, Financial Engines surveyed 1,000 individuals between the ages of 18 and 65 who are employed full-time, part-time or self-employed. The survey and panel were both fielded using the Survata Publisher Network. Fielding was executed in July 2017.

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