Products July 27, 2023

Investment Product and Service Launches

Schwab Retirement partners with Newport, Conduent to expand DB, NQDC offerings; Franklin Templeton adds fixed-income ETF; PGIM launches new ETFs; and more.

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Schwab Retirement Plan Services Partners With Newport, Conduent to Expand Capabilities

Schwab Retirement Plan Services, a division of Charles Schwab Corp., announced Wednesday partnerships with retirement solution providers Newport, an Ascensus LLC company, and Conduent Inc. to expand Schwab’s nonqualified deferred compensation and defined benefit plan services.

Schwab announced that it entered the relationships to expand services in the “larger segments of the retirement plan market,” with services that will start in 2024. Schwab will remain as plan provider, with support from Conduent and Newport, and plan sponsors and participants will continue to access their DB and deferred compensation plans through Schwab’s platform. 

The expanded capabilities for NQ plans will include nonqualified plan administration; plan design, legal, tax and accounting resources; detailed plan sponsor financial reporting; direct participant payments and W-2 income statement services; and asset liability management, among other areas. 

On the DB side, the partnership will bring clients with traditional pension plans and cash balance plans services including: data analytics, compliance and reporting tools; support for data remediation and audit services; interactive calculators for participant planning; de-risking strategies, including pension risk transfer, annuity conversion and term vested lump sum payment programs; and administration for frozen DB plans. 

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Franklin Templeton Launches US Fixed-Income ETF 

Franklin Templeton today announced the expansion of its U.S. fixed-income exchange-traded-fund lineup with the launch of BrandywineGLOBAL – U.S. Fixed Income ETF on Nasdaq under the ticker USFI. 

Brandywine Global, a specialist investment manager of Franklin Templeton, offers the USFI ETF with the goal of seeking total return by investing in U.S. fixed-income securities, including debt issued or guaranteed by the U.S. government, U.S. corporate debt securities, mortgage-backed securities and asset-backed securities of U.S. issuers, as well as other fixed-income and related investments.  

“A recurring topic of conversation with clients this year has been active fixed-income ETFs,” Patrick O’Connor, global head of ETFs for Franklin Templeton, said in a statement. “We believe fixed income is an area where active management shines, and we are excited to bring Brandywine Global’s nearly 30 years of experience in the U.S. fixed-income market to this new ETF.”

USFI’s portfolio management team consists of Anujeet Sareen, Brian L. Kloss, Jack P. McIntyre and Tracy Chen.  

PGIM Brings CLO ETF to Retail Investors; Adds New Active ETF 

PGIM, the investment management arm of Prudential Financial Inc., has launched exchange-traded fund PGIM AAA CLO ETF to provide investors direct access to the $1.2 trillion collateralized loan obligation market. 

PAAA is subadvised by PGIM Fixed Income, a securitized credit and leveraged finance manager with $101 billion in securitized credit assets under management, including $55 billion in collateralized loan obligation tranches. While the ETF represents a new retail offering for the firm, PGIM Fixed Income noted that it has been managing sleeves of high-grade CLOs within investment strategies for more than 15 years, with a team of 27 investment professionals dedicated to the securitized credit space. 

“The CLO market has evolved since the Global Financial Crisis and represents an enormous, relatively untapped opportunity for retail investors,” Edwin Wilches, co-portfolio manager of the PGIM AAA CLO ETF, said in a statement. “As we remain in a period of economic uncertainty with tighter financial conditions and corporate defaults expected to increase, high-quality CLOs have the potential to insulate an investor’s portfolio while providing diversification benefits with less idiosyncratic risk and the potential for attractive risk-adjusted returns.” 

In addition to PAAA, PGIM also announced the PGIM Short Duration Multi-Sector Bond ETF, which seeks to provide total return, allocating its investments across different sectors of the fixed-income market with an average portfolio duration of three years or less. The fund closely mirrors the existing $2.9 billion PGIM Short Duration Multi-Sector Bond Fund, the firm noted. Both the mutual fund and ETF are managed by Gregory Peters, Robert Tipp and Richard Piccirillo. 

“Active ETFs are one of the fastest growing segments of the ETF market today,” Stuart Parker, president and CEO of PGIM Investments, said in a statement. “PGIM will continue to aggressively expand its suite of products to meet this client demand by either offering new ways to access the market or expanding access to our flagship strategies.”  

With the addition of these new funds, PGIM Investments now offers investors 10 actively managed ETFs across fixed income, equities and multi-asset solutions.  

Athene Adds to Fixed Indexed Annuity Lineup 

Athene USA Corp. announced three new indices in its suite of retail fixed indexed annuities that use proprietary market analysis with the goal of delivering risk-adjusted returns. 

The indices are: the S&P 500 FC Index (SPXFCDUE), from S&P Dow Jones Indices LLC and designed in collaboration with Bank of America; the AI Powered Global Opportunities Index (AIGO), sponsored by HSBC; and the UBS Innovative Balanced Index (UBSIBAL), sponsored by UBS. The annuities are issued by Athene Annuity and Life Co., a subsidiary of Athene.

“The index is the beating heart of the modern fixed indexed annuity and a strategic focus at Athene,” Mike Downing, executive vice president and chief operating officer, Athene USA, said in a statement.  

Athene noted that the indices are focused on: 

  • The S&P 500 FC Index aims to control intraday realized volatility and adapt faster to changing market conditions than an index using traditional end-of-day volatility targeting; 
  • The AI Powered Global Opportunities Index adds to rules-based strategies using IBM Watson and other technologies to learn and evolve over time from the growing amount of data being generated each day; and  
  • The UBS Innovative Balanced Index leverages unique signals that aim to provide an early read into the U.S. macro environment and inform an all-weather tactical allocation to equities, commodities and bonds.  
Data and Research July 26, 2023

Workplace Savers Feel ‘Off Track’ to Retire, Seek Sources of Guaranteed Income

Increased market volatility, high inflation, fears of a recession and a lack of retirement income were cited as contributing factors to savers’ low retirement confidence in a new BlackRock study. 

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Retirement confidence has been on a steady decline since 2021, as only 56% of workplace savers this year said they feel “on track” with their savings to retire with the lifestyle they want, compared to 63% in 2022 and 68% in 2021, according to a new BlackRock study. 

The lack of confidence has not translated to a decrease in savings rates, which held steady year-over-year in BlackRock’s study. But participants did express that having guaranteed retirement income would quell some of their fears about inflation and market volatility eroding their savings, even as plan sponsors remain reluctant to provide retirement income options, according to the researchers 

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“Retirement income is the No. 1 topic our clients are talking to us about,” Anne Ackerley, head of BlackRock’s retirement business, said via email. “It’s interesting to see that plan sponsors are realizing that these plans have been effective for savings prior to retirement, but not necessarily for optimized spending in retirement.” 

Across generations, workplace savers cited four key concerns they believe are eating away at their retirement confidence: increased market volatility, high levels of inflation, recessionary fears and lack of retirement income. 

Approximately 50% more workplace savers said that hardships related to high inflation and volatility have set them back with saving for retirement compared to last year, and 29% of workplace savers plan to retire later due to these economic conditions. 

BlackRock’s 2023 “Read on Retirement” survey provides insight from 465 plan sponsors, all of which have at least $300 million in assets, as well as 1,339 workplace savers, 1,319 independent savers and 304 retirees. All respondents were interviewed using an online survey, which was in the field from March 21 to May 24. 

Plan sponsors share the same fears as their participants, as only 46% said they are “highly confident” in the ability of their participants to stay on track during a period of market volatility. These plan sponsors also recognize the importance of their job, as 98% said they feel responsible to help participants generate and manage their income in retirement, according to the report. 

Regarding investing, 71% of Generation Z workplace savers are not confident in managing investments in their plan themselves, the survey found. The survey also found that 60% of the same cohort could harm the performance of their own investments, as they would consider selling during a market downturn.  

Demand for Guaranteed Income 

A guaranteed stream of income in retirement is something most employees are seeking, according to the study: BlackRock found that 89% of savers said having guaranteed income would positively impact their current well-being. In addition, 71% said they would save more if their plan offered them a guaranteed retirement income solution.

Savers also expressed interest in more diversified investment portfolios. About 98% of respondents said they like the idea of a “well-diversified fund where you can opt in to have a portion automatically converted to guaranteed income as you near retirement.”

Despite this demand for guaranteed income solutions beyond what Social Security can offer, employers remain reluctant to offer in-plan annuities and other guaranteed solutions. Some industry experts say this is because retirement plan committees are held back from making a selection by fear of missing out on better offerings and are concerned the plan will be stuck with the selection.  

One concerning finding is that only 37% of plan sponsors said they feel “extremely confident” that their plan enables participants to know how much of their balance can be spent each year in retirement.  

When BlackRock asked this question in 2020, 61% were confident they were helping their participants understand how much they would be able to save in retirement, according to Ackerley. 

“The drop to 37% this year, we believe, indicates that plan sponsors understand that their participants need better tools to help them understand how much they can spend in retirement due to increased volatility and longer average lifespans,” Ackerley said in an emailed statement.  

Ackerley encourages plan sponsors to consider both increased education and tools, as well as investment solutions, as part of a holistic approach to retirement income. 

Lack of Investment Knowledge 

Other factors possibly contributing to participants’ low retirement confidence are a lack of familiarity with certain investment strategies and not consulting with a financial adviser: Even though nearly 80% of workplace savers said they would be interested in investing in an actively managed fund, a potential way to limit downside risk, 41% said they are not familiar with active investing strategies.  

“In our view, the plan sponsor and financial advisers both have an opportunity to work together to help meet savers where they are in their retirement journey,” Ackerley said. “The data shows that many workplace savers see their employer as the source of trusted information on how to navigate their plan: Over [75%] of workplace savers say it would be helpful if their plan provided specific education around the investments available.” 

Due to last year’s volatile market performance, many plan sponsors now believe active strategies can be a “ballast against market shocks,” as they are designed to outperform the market and build resilience into portfolios, according to the survey. It appears there is an opportunity for plan sponsors to educate participants on active management and consider adding these funds to their investment lineup.  

On a positive note, 30% of savers who said they feel on track for retirement cited having access to an adviser as a reason why. Financial uncertainty is driving savers toward trusted sources to help manage their retirement investments, and BlackRock reported that, this year, 21% more savers stated a preference for have a professional manage their investments—as opposed to doing it themselves—than in 2022.  

As a whole, the majority of respondents said it would be helpful for their employer to automatically re-allocate their investments to something more appropriate for their age. Many savers opt for target-date funds in their plan because of the convenient access to professional management, according to BlackRock.  

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