Products April 4, 2019

Investment Product and Service Launches

WisdomTree Restructures European and Japan Equity Funds; SSGA Launches Sector Rotation SPDR ETFs; Vanguard Files SEC Registration for Commodity Strategy Fund; and more.

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Art by Jackson Epstein
Art by Jackson Epstein

Art by Jackson Epstein

WisdomTree Restructures European and Japan Equity Funds

WisdomTree, an exchange-traded fund (ETF) and exchange-traded product (ETP) sponsor and asset manager, has implemented changes for the WisdomTree Dynamic Currency Hedged Europe Equity Fund (DDEZ) and the WisdomTree Dynamic Currency Hedged Japan Equity Fund (DDJP).

As of April 2, both funds will transition to transparent, models-based actively managed multifactor strategies. The funds’ expense ratios remain unchanged.

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According to WisdomTree, the WisdomTree Europe Multifactor Fund (EUMF), formerly the WisdomTree Dynamic Currency Hedged Europe Equity Fund (DDEZ), is a transparent, actively managed strategy, and invests in European equity securities that exhibit potential for returns based on proprietary measures of factors such as value, quality, momentum and correlation.

The WisdomTree Japan Multifactor Fund (JAMF) seeks to achieve income and capital appreciation through a transparent, actively managed strategy, and invests in Japanese equity securities exhibiting potential for returns based on proprietary measures of factors such as value, quality, momentum and correlation. 

“WisdomTree’s Modern Alpha approach to multifactor investing is designed to provide higher alpha potential with lower volatility and all the benefits of the ETF structure,” says Jeremy Schwartz, WisdomTree EVP and global head of research. “We continue to see value in this approach and are excited to expand our offerings with the restructuring of EUMF and JAMF.”

SSGA Builds Launches Sector Rotation SPDR ETFs

State Street Global Advisors (SSGA) launched two actively-managed, sector rotation SPDR exchange-traded funds (ETFs) with tactical allocation strategies. The SPDR SSGA US Sector Rotation ETF (XLSR) and SPDR SSGA Fixed Income Sector Rotation ETF (FISR) are managed by the firm’s Investment Solutions Group (ISG).

“These two new active ETFs highlight three key qualities of State Street Global Advisors – the power of ISG’s sophisticated tactical asset allocation, the world’s largest and most liquid suite of equity sector ETFs, and our experience in managing over $400 billion in fixed income assets,” says Noel Archard, global head of SPDR Product at State Street Global Advisors. “In bringing these attributes to a wider audience through our SPDR ETF family, we are providing clients with alpha-seeking solutions to enhance core portfolios.”

The SPDR SSGA US Sector Rotation ETF seeks to provide capital appreciation by overweighting or underweighting S&P 500 Sector ETFs based on ISG’s sector return forecasts and research, which includes a proprietary, quantitative sector selection model. ISG uses the model results and applies qualitative judgment to construct a portfolio of sector ETFs that seeks to maximize returns while meeting risk targets.

The SPDR SSGA Fixed Income Sector Rotation ETF seeks to provide total return by allocating yield-generating ETFs across the fixed income spectrum. FISR uses a tactical investment strategy based on ISG’s Fixed Income Sector Rotation Model, followed by fundamental review by the portfolio management team. The model provides views on the direction of rates and spreads across the maturity and credit quality spectrums.

Vanguard Files SEC Registration for Commodity Strategy Fund

Vanguard has filed a preliminary registration statement with the Securities and Exchange Commission (SEC) for the Vanguard Commodity Strategy Fund. The actively-managed fund, expected to launch in June , is said to offer investors added portfolio diversification, along with a potential hedge against inflation risk by investing primarily in commodities and treasury inflation protected securities (TIPS), according to Vanguard.

“The Commodity Strategy Fund will be a low-cost, broad-based option for advisers and institutional investors seeking additional diversification and inflation protection for a well-balanced portfolio,” says Matt Brancato, head of Vanguard’s Portfolio Review Department. “We believe the commodity exposure can serve as an effective inflation hedge and also provide value in mitigating stock and bond risks.” 

Vanguard’s new fund will offer Admiral Shares at a $50,000 investment minimum, with an estimated expense ratio of 0.20%.

The fund is seeking to outperform the Bloomberg Commodity Total Return Index by investing in commodity-linked derivative investments, such as commodity futures and swaps, collateralized by a mix of Treasury bills (T-bills) and short-term TIPS.

PineBridge Launches Fund Targeted to Domestic Equity Market in China  

PineBridge Investments, (PineBridge) has launched the PineBridge China A-Shares Quantitative Fund. The fund seeks to give global investors access to the domestic equity market in China through a quantitatively managed, active equity strategy that invests in equity and equity-related securities connected to the economic development of China. 

The fund is managed by PineBridge Investments Asia Ltd., with investment advice from Huatai-PineBridge Fund Management Co., an onshore Shanghai-based joint venture between PineBridge and Huatai Securities established in 2004.

“International index inclusion and continued economic liberalization in China are expected to drive substantial flows and increasing allocations towards China A-shares. The large and liquid domestic A-shares market aims to offer attractive, long-term return opportunities from China’s growth and innovation, and finding the most attractive stocks in this dynamic market requires an established local presence,” says Anik Sen, global head of Equities, PineBridge Investments. “The onshore universe presents extraordinary alpha opportunities and we are thrilled to bring investors the combination of PineBridge’s strength in Asia and Huatai-PineBridge’s investment expertise in Mainland China.”

The fund’s reference index, the MSCI China A International Total Return Net Index, reflects the set of China A-shares for the international investor taking into consideration the progressive A-share inclusion and foreign ownership limits.

“The further weight increase of A-shares in the MSCI indices is a significant milestone for the opening of China’s capital market,” says Jack Lin, managing director and APAC head of Client Coverage at MSCI, “We are pleased that PineBridge has chosen MSCI China A International Total Return Index as the reference benchmark for its new fund.”

The PineBridge China A-Shares Quantitative Fund is domiciled in Ireland and registered for sale across Europe.

Benefits April 4, 2019

Health Benefit Employee Cost-Sharing Can Bring Unexpected Consequences

An analysis from Gallagher identifies ways “best-in-class” employers are controlling health care costs.

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Employers cited the high costs of medical services, prescription drugs and specialty drugs as their top three health care cost-management challenges, according to Gallagher’s latest Best-in-Class Benchmarking Analysis.

Organizations that scored among the upper 25% in controlling health care costs offer a competitive benchmark for employers interested in taking a more proactive and structured approach, according to William F. Ziebell, president, Gallagher Employee Benefits Consulting and Brokerage.

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Best-in-class employers excel by focusing on helping employees get the right care at the right place, time and price. To better understand how they do this, Gallagher measured three-year trends for health premium increases and decreases, as well as the priority placed on managing health benefit costs and the perceived success of the underlying strategy.

The analysis found best-in-class employers tend to shift fewer health care costs to employees through premiums, deductibles and copays. Instead, they’re making coverage more affordable to increase the likelihood that employees will seek the care they need and follow treatment plans.

“While there are a variety of valuable tactics employers have at their disposal to contain health care spend, some can have unexpected consequences and may actually weaken an employer’s ability to manage important health outcomes, like physical and emotional wellbeing. An example is an employee who responds to cost shifting by avoiding the expense of medical care. At worst, the employee could end up in the hospital for an untreated condition. And at best, the employee may have escaped that outcome or the employer would have paid less for the hospital stay—if the plan incentivized regular care,” says a human capital insights report based on the benchmarking analysis.

The best-in-class employers are more likely to offer only one or two medical plans. Gallagher says narrowing the health plan platform concentrates buying power to rein in employer expenses, and consolidates efforts to communicate and measure employee wellbeing for clearer results.

“Data helps take the fear out of making big benefit decisions. Understandably, employers often shy away from choices that disrupt employee expectations and cause pushback, but that reluctance hinders innovative thinking. Data analysis can model the impact of possible benefit designs and pave the way for changes that have lasting value,” the insights report says.

The report goes on to explain that benefit trends sometimes entice employers to jump on board without using data analysis to guide their decisions. Disease management programs that focus on high-cost conditions like asthma provide an example. Targeted data analytics help employers sift through their cost drivers to understand not only the condition’s prevalence, but also whether costs are high enough to warrant a more robust disease management program.

The benchmarking analysis also found that for a better perspective on how to actively manage and lower overall spending on drugs, without directly affecting employees, best-in-class employers are more inclined to carve out pharmacy benefits from the health plan. The analysis shows 14% of employers are doing this now, but that is projected to increase to 25% in two years.

More insights from Gallagher’s analysis can be downloaded from here.

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