Products February 25, 2021

Investment Product and Service Launches

MSCI to launch investment solutions with Microsoft, and Xtrackers by DWS launches ESG ETFs.

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Art by Jackson Epstein

MSCI to Launch Investment Solutions with Microsoft

MSCI Inc. has announced the development of Investment Solutions as a Service for the global investment industry in collaboration with Microsoft Corp. The new service will allow institutional investors to use next generation technologies, advanced analytics and big data to help anticipate and address key strategic and investment challenges.

The service will combine Microsoft’s Cloud and artificial intelligence (AI) technologies with MSCI’s extensive data sets, analytical models and deep expertise of the global investment industry to power next-generation investment decisionmaking.

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Services to be launched in 2021 include environmental, social and governance (ESG), index, data management and investment analytics solutions. The solutions are a part of the strategic alliance created between MSCI and Microsoft last year to accelerate innovation in the global investment industry.

The ESG service will provide insights on companies’ adaptive capacity to climate change, carbon footprint measurements, and exposure to physical risk, including climate-related events such as hurricanes and flooding.

The index solution gives investors the opportunity to create and customize indexes. Clients can create, back test and analyze customized indexes; compare those indexes against established benchmarks; and refine their creations through an iterative process and order them from MSCI.

MSCI will be releasing a new developer portal offering application programming interfaces (APIs) that integrate with clients’ existing ecosystems. Through the developer portal, developers and researchers can find, select and analyze historical markets data on a range of asset classes and develop their own investment solutions that meet their specific risk and portfolio construction needs.

“From responding to the historic and unrivaled challenge of climate change, to harnessing the power of big data and innovative analytics, Investment Solutions as a Service is a milestone in powering the next generation of investment decisionmaking,” says Henry Fernandez, chairman and CEO, MSCI.

“MSCI’s investment solutions, combined with the data and analytics capabilities of Microsoft Azure, will enable investment managers to harness intelligent insights needed to confidently navigate today’s global markets,” says Scott Guthrie, executive vice president, Cloud + AI, Microsoft.

Xtrackers by DWS launches ESG ETFs

Xtrackers exchange-traded funds (ETFs) by DWS has launched the first ETFs providing exposure to environmental, social and governance (ESG) versions of the S&P MidCap 400 and S&P SmallCap 600 indexes.

Xtrackers S&P MidCap 400 ESG ETF (NYSE Arca: MIDE) and Xtrackers S&P SmallCap 600 ESG ETF (NYSE Arca: SMLE) are now listed.

“At DWS, we have made ESG-centric investing integral to our value proposition for our clients, and the launch of MIDE and SMLE is a logical follow-on. We seek to provide investors with transparency on relevant ESG-metrics of a potential investment. Investors can, for example, easily view the reduction in carbon footprint of the underlying companies, compared to a non-ESG benchmark. This level of transparency is important for investors and intermediaries seeking credible ESG alternatives to mainstream equity indices,” says Arne Noack, DWS’s head of systematic investment solutions, Americas.

The ESG methodology underpinning the funds starts by taking the established S&P mid- and small-cap indexes then applying exclusions and rankings filters to produce the ESG indexes the ETFs track. Both the Xtrackers S&P MidCap 400 ESG ETF and Xtrackers S&P SmallCap 600 ESG ETFs have net expense ratios of 0.15%.

Compliance February 25, 2021

BBVA Compass Bancshares Loses Second Attempt to Get ERISA Suit Dismissed

Since there were no clear administrative remedies for fiduciary breaches spelled out in plan documents, a federal judge rejected the firm’s claim that the plaintiffs failed to exhaust them.

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A federal judge has denied BBVA Compass Bancshares’ motion to dismiss an Employee Retirement Income Security Act (ERISA) lawsuit accusing it of failing to monitor investments and remove imprudent ones in its 401(k) plan. This is the second time the court has rejected the firm’s motion to dismiss.

The original complaint accuses BBVA of mismanaging a $100 million money market fund “that was the investment equivalent of stuffing cash into a mattress” and failing to properly monitor investments and remove imprudent ones, “including high-cost mutual funds whose performance did not justify their increased costs.”

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BBVA argues that the court must dismiss the plaintiffs’ claims for failure to exhaust administrative remedies. However, Judge Madeline Hughes Haikala of the U.S. District Court for the Northern District of Alabama, found that the plaintiffs were never given clear instructions for how to exhaust their administrative remedies.

Looking at the plan’s summary plan description (SPD) and the plan document, Haikala found that neither contains an express provision concerning administrative procedures for claims for breach of fiduciary duty. “Because the SPD makes the language regarding ‘General Claim Procedure’ in the ‘Applying for Benefits’ section subordinate to an initial request for payment of benefits, a reasonable plan participant would not understand from the SPD that the claim procedure applies to a claim for breach of fiduciary duty in which no payment is sought,” she wrote in her opinion.

Haikala noted that the “Plan Administration” section of the SPD does not mention an administrative process for claims for breach of fiduciary duty. However, it does state that employees with questions should address them in writing to the plan administrator, and, as Haikala pointed out, that is what at least one plaintiff did.

Through her attorney, the plaintiff asked the plan administrator to tell her plainly what administrative procedure was available to her to pursue her concerns about the management of the plan and plan investments. She also asked for “all documents related to the administrative process.”

According to the court opinion, the plan administrator replied that her request for information was “unclear” and “overly broad” and did not appear to be within the scope of the information to which she was statutorily entitled. Haikala pointed out that the “ERISA Rights” section of the SPD states: “If a claim for benefits is denied or ignored, in whole or in part, suit may be filed in a state or federal court.”

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