Products January 24, 2019

Investment Product and Service Launches

Securian Asset Management introduces name changes to mutual funds; First Trust adds fixed-income ETF; and Citi creates bond funding environmental and climate finance. 

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Art by Jackson Epstein
Art by Jackson Epstein

Art by Jackson Epstein

Securian Asset Management Introduces Name Changes to Mutual Funds

Securian Asset Management has changed the name of three of its mutual funds.

The Advantus Strategic Dividend Income Fund is now the Securian AM Real Asset Income Fund. Additionally, the two Advantus Managed Volatility Funds are now the Securian AM Dynamic Managed Volatility Fund and the Securian AM Managed Volatility Equity Fund.

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The fund name changes follow the May 2018 rebranding of Advantus Capital Management to Securian Asset Management.

 “These investment products are designed to offer adaptability as market conditions change, achieving flexibility through varying equity allocations,” says Craig Stapleton, CFA, FRM, a senior vice president with Securian Asset Management and its head of ALM and quantitative strategies. “These strategies seek to reduce equity exposure when markets are more unstable, and increase exposure when market volatility is low.”

First Trust Adds Fixed-Income Mutual ETF

First Trust Advisors L.P. has launched a new actively managed exchange-traded fund (ETF), the First Trust Long Duration Opportunities ETF.

The fund seeks to generate current income with a focus on preservation of capital by investing at least 80% of its net assets (including investment borrowings) in investment grade fixed-income securities that are issued or guaranteed by the U.S. government. 

With heightened interest rate and equity market volatility, the portfolio managers believe mortgage-backed securities (MBS) are an important piece of a diversified portfolio due to their low correlation to other core asset classes and positive credit quality trends. The portfolio is managed using a combination of top-down macro-economic views coupled with bottom-up security selection.

The fund is managed by First Trust Advisors L.P., with day-to-day management decisions made by the First Trust Securitized Products Group portfolio managers. When selecting the portfolio for the fund, the portfolio management team focuses on the global economy, macro trends in the fixed income market as well as ongoing valuations and trends of core MBS sectors.

The portfolio managers believe thorough and continuous monitoring of overall housing market fundamentals, quantitative portfolio modeling, and the ability to rebalance the portfolio to stay within the fund’s duration target of eight or more years, is critical to achieving higher risk-adjusted returns.

Citi Creates Bond Funding Environmental and Climate Finance  

Citi has issued its firm’s first green bond, further committed to environmental and climate finance. The bond will fund renewable energy, sustainable transportation, water quality and conservation, energy efficiency and green building projects financed as part of Citi’s $100 billion Environmental Finance Goal.

In the deal, which priced on January 22, Citi issued one billion euros, three-year fixed rate notes. The transaction marked the first green bond offering from Citigroup Inc.

“We are proud to start the year with the launch of our inaugural green bond,” says Jamie Forese, president of Citigroup and head of the Institutional Clients Group. “This transaction represents an important next step in expanding Citi’s commitment to sustainable growth. This bond also further enhances our green bond expertise, strengthens our partnerships with clients around the world and responds to increasing investor interest in sustainable finance.”

In 2015, Citi announced a $100 Billion Environmental Finance Goal to finance and facilitate $100 billion within 10 years to support environmental solutions and accelerate the global transition to a low-carbon economy. Citi also recently announced that it will source renewable power for 100% of its global energy needs by 2020. Both initiatives are part of Citi’s contribution to advancing the United Nations Sustainable Development Goals (SDGs), as well as goals of Citi’s Sustainable Progress Strategy, which sets out Citi’s guiding principles, priorities and ambitions in environmental finance, environmental and social risk management, and the firm’s own operations and supply chain.

Under Citi’s Green Bond Framework environmentally eligible criteria have been defined as renewable energy, energy efficiency, sustainable transportation, water quality and conservation, and green buildings.

Compliance January 24, 2019

Churches Seek Clarification for Which Entities Can Adopt Pre-Approved Plans

An informal position taken by the IRS is indicated by it excluding mention of non-qualified church-controlled organizations (non-QCCOs) from the ability to rely on pre-approved plans.

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In December 2018, chief executive officers of Church Alliance member organizations submitted letters to key Congressional leaders urging resolution of an important policy issue facing members’ retirement programs.

According to the Church Alliance, the issue relates to the recent position taken by the Treasury Department and IRS, under which certain church-affiliated organizations are barred from sponsoring church retirement income account plans offered under section 403(b)(9) of the Internal Revenue Code. PLANSPONSOR has learned that the “position” the letter refers to was an informal position by the IRS, as they told entities that had submitted 403(b)(9) volume submitter plans for an opinion letter that they would not allow for inclusion of non-qualified church-controlled organizations (non-QCCOs).

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The informal position is indicated by the IRS excluding mention of non-QCCOs from the ability to rely on pre-approved plans. On its website, the IRS says churches and qualified church-controlled organizations (QCCOs) may rely on a 403(b) prototype plan’s opinion letter regardless of whether the plan is a standardized or nonstandardized plan conditioned on the adopting employer’s accurate representations that it is a church or qualified church-controlled organization.

PLANSPONSOR also learned that after legislation was introduced addressing clarification of retirement income account rules relating to church-controlled organizations, the IRS said they would no longer say it was not permissible for inclusion of non-QCCOs in pre-approved plans, but under their discretion in what they allow for pre-approved plans, they would still not issue a letter if the plan allowed it. 

“The recent Treasury Department and IRS position disregards more than 30 years of practice, precedent, and clear statutory language. As a result, employees of church-related nursing homes, daycare centers, summer camps, preschools, colleges, universities, hospitals, and other social service organizations stand to lose access to the unique plan features they have come to depend upon in these church plans,” one letter says. The letters encourage lawmakers to pass the clarifying legislation.

This issue for 403(b) plans is similar to the issue brought by lawsuits against mostly health care organizations challenging the church plan status of their defined benefit (DB) plans.

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