Products December 28, 2023

Investment Product and Service Launches

KKR Income Opportunities Fund Q3 2023 investor recorded webinar now available; Victory Capital adds VictoryShares Small Cap Free Cash Flow ETF; Alpha Blue Capital Management LP enters Active ETF Space.

Reported by

KKR Income Opportunities Fund Q3 2023 Investor Call Now Available

KKR Income Opportunities Fund announced that the recording of its third quarter 2023 investor webinar is now available on the fund’s website. Tom Hobby and Richard Schoenfeld hosted the call and provided market color and portfolio updates for Q3 2023.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

Schoenfeld is a director and a senior investment professional on the KKR U.S. leveraged credit team. Hobby is a principal and member of KKR’s global client solutions group.

The KKR Income Opportunities Fund is a diversified, closed-end management investment company managed by KKR Credit Advisors LLC, an indirect subsidiary of KKR & Co. Inc. The fund’s primary investment objective is to seek a high level of current income with a secondary objective of capital appreciation.

The fund seeks to achieve its investment objective by investing primarily in first- and second-lien secured loans, unsecured loans and high-yield corporate debt instruments. It invests in a targeted portfolio of loans and fixed-income instruments from U.S. and non-U.S. issuers, implementing hedging strategies in order to achieve attractive risk-adjusted returns.

Victory Capital Adds VictoryShares Small Cap Free Cash Flow ETF to its ETF Lineup

Victory Capital Holdings, Inc.’s wholly owned investment adviser, Victory Capital Management Inc., has launched a new rules-based exchange-traded fund, VictoryShares Small Cap Free Cash Flow ETF.

The fund, with ticker SFLO, seeks to provide investment results that track the performance of the Victory U.S. Small Cap Free Cash Flow Index. It invests in profitable U.S. small-cap companies with high free cash flow yields and favorable growth prospects.

The index screens an initial universe of companies for historical and projected free cash flows. It then eliminates companies with the worst growth characteristics to seek better outcomes in a variety of market environments.

“We are excited to expand our free cash flow lineup with the introduction of SFLO,” Mannik Dhillon, president, investment franchises and solutions, Victory Capital, said in a statement. “SFLO will take the innovative methodologies employed by the VictoryShares Free Cash Flow ETF to the small cap segment. Investors will be able to capitalize on companies with attractive free cash flow yields without sacrificing growth potential in the small cap allocation of their portfolios.”

Alpha Blue Capital Management LP Enters Active ETF Space

Alpha Blue Capital Management LP has launched the Alpha Blue Capital US Small-Mid Cap Dynamic ETF. The active equity ETF is a dynamic active small-mid cap equity ETF that integrates a bottom-up security selection investment process.

Alpha Blue Capital Management LP is the ETF sponsor and sub-adviser providing fundamental research, portfolio management strategy and decision making for ABCS. ETF Architect, based in the Philadelphia area, is the adviser for the fund, ticker ABCS, on its white label ETF platform EA Series Trust.

ETF Architect is also providing quantitative consulting and monthly portfolio characteristics analysis to streamline ABCS’s active equity process and its stock selection. The strategy focuses on the less efficient, potentially higher returning, bottom 30% by market weight of the U.S. stock market.

“We believe our low cost, dynamic active small-mid cap ETF-ABCS offering with the flexibility to integrate passive index ETF investing and seeking to generate alpha, is ideal for taxable and tax-exempt individual investor accounts. Ultimately, in addition, it will be for family offices and institutional investors as AUM grows,” David Dabora, managing partner & portfolio manager for ABCS, said in a statement.

Data and Research December 27, 2023

Small-Balance Retirement Account Holders to See Significant Changes in 2024

Retirement Clearinghouse says many participants with balances of $7,000 or less will avoid leakage of savings when changing jobs.

Reported by

With the launch of the Portability Services Network and certain SECURE 2.0 Act of 2022 provisions going into place, millions of retirement savers with balances under $7,000 will see “big changes” in 2024, according to Retirement Clearinghouse, the PSN’s originator.  

The PSN announced on November 7 that its consortium went live, enabling digital automatic portability of retirement accounts from the country’s six largest recordkeepers. 

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

As of November, three of the six—Alight Solutions, Fidelity Investments and The Vanguard Group—had all completed implementation and were in the process of onboarding plan sponsors to automatically port 401(k) plan balances between member recordkeeping platforms when participants change jobs.  

The other three recordkeepers in the network—Empower, Principal Financial Group and TIAA—are slated to go live with their plan sponsors by the end of next year.  

For 2024, Retirement Clearinghouse predicts that the use of the PSN will intensify as more plan sponsors adopt the service, and as recordkeepers begin to extend it to more plan sponsors.  

Additionally, on December 29, Section 120 of SECURE 2.0, Exemption for Certain Automatic Portability Transactions, kicks in, codifying auto-portability. In support, the Department of Labor drafted its guidance and submitted it to the Office of Management and Budget for review. 

As a result, as of January 1, 2024, an employer is permitted to distribute a terminating participant’s account balance without participant consent if the balance is less than $7,000 and is immediately distributable. Also effective January 1, Section 304 of SECURE 2.0, Updating the Dollar Limit for Mandatory Distributions, increases the mandatory distribution threshold from $5,000 to $7,000. Employers are required to roll over this distribution into a default individual retirement account if the account balance is at least $1,000 and the participant has been notified and does not opt out.  

New legislation also has the opportunity to facilitate more portability and expand access to these services. For example, on December 13, a bipartisan bill was introduced in the U.S. Senate, allowing the rollover of Roth IRA savings into a Roth workplace retirement plan. If passed, the bill could further prevent retirement savings leakage by allowing a more seamless transfer of Roth savings.

RCH recently conducted an auto-portability simulation, a “discrete event simulation” that models the adoption of auto-portability within America’s defined contribution system, and found that, over the next 40 years, 342.2 million job-changing participants will be subject to mandatory distribution provisions, regardless of whether plan sponsors adopt auto-portability or not.  

But with auto-portability, RCH predicts that 175.6 million job-changing participants will consolidate, or “roll in,” appreciated retirement savings of $1.75 trillion over that 40 years, up from $155.2 billion without auto-portability. 

RCH argued that minorities will derive more benefit from auto-portability, as expanded defined contribution plan access will allow participation levels to mirror underlying population demographics. 

In the 40-year modelling period, under auto-portability 98 million minority job-changers with balances less than $7,000 will preserve an incremental $744 billion in retirement wealth, while 30 million Black Americans, a subset of the minority data, will preserve an incremental $216 billion in retirement wealth, according to RCH findings. 

«