Products June 24, 2021

Investment Product and Service Launches

Nationwide partners with AB to offer in-plan income guarantees; Voya’s new stable value solution offers manager diversity; Bloomberg and MSCI launch emerging markets ESG index suite; and more.

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Art by Jackson Epstein

Nationwide Partners With AB to Offer In-Plan Income Guarantees

Nationwide and global investment and research firm AllianceBernstein L.P. (AB) have announced that they have expanded their partnership to offer AB’s Lifetime Income Strategy (LIS) to Nationwide’s large retirement plan clients.

LIS combines AB’s research in glide path design with a flexible guaranteed income option to offer plan participants control of their accounts, full access to their money and income certainty in retirement. This solution is customizable for retirement plans in the mega plan market and is the latest offering in Nationwide’s suite of in-plan guarantees that meet a range of plan sponsor and participant needs.

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LIS includes an optional income feature that will systematically transition a participant’s retirement savings to a guaranteed lifetime income program starting at age 50. This allows the participant to build up a lifetime income benefit that is protected, even in down markets.

“The expansion of Lifetime Income Strategy is an extension of an already highly successful relationship Nationwide has with AB and will serve as an important addition to our suite of in-plan guarantees designed to address America’s growing retirement income needs across all plan types and sizes,” says Eric Stevenson, president of Nationwide Retirement Solutions. “This solution will be a strong fit for those types of plans that are looking to provide in-plan income options to their participants.” 

Stevenson adds that the passing of the Setting Every Community up for Retirement Enhancement Act (SECURE) Act in 2019 created opportunities to provide more flexibility and access to lifetime income options within defined contribution (DC) retirement plans. “In addition to the legislative change, research shows consumers’ need for lifetime income is stronger than ever,” he says.

Voya’s New Stable Value Solution Offers Manager Diversity

Voya Financial Inc. has announced the launch of a new stable value solution that provides differentiated sector allocations and manager diversity.

The new fund—the Voya/RAM Focus Stable Value Fund—will be managed by Voya Investment Management (Voya IM) and Ramirez Asset Management (RAM), an affiliate of Samuel A. Ramirez & Co. Inc., which is one of the oldest and largest Hispanic-owned investment firms in the U.S. The Voya/RAM Focus Stable Value Fund is available to any workplace retirement savings plan currently eligible to use stable value as an investment option.

“As a core investment vehicle, stable value funds are a popular option offered in 401(k), 401(a) and 457 plans. We’re thrilled to offer a new and unique solution through the Voya/RAM Focus Stable Value Fund, which provides a specific focus on retirement security,” says Heather Lavallee, CEO of wealth solutions at Voya Financial. “Having a low-risk investment option can help individuals navigate market stress during uncertain times, which is an important consideration given what many experienced this past year amid the pandemic.”

The Voya/RAM Focus Stable Value Fund strategy seeks to deliver a high-quality, diversified fixed-income portfolio designed to optimize the objective of delivering top-tier, risk-adjusted returns. It is managed with a defined set of investment guidelines by Voya IM and sub-adviser RAM. Key fund features include:

  • A dynamic sector allocation process whereby Voya IM and RAM regularly evaluate macroeconomic and thematic insights that drive a risk profile based on their views of the best relative symmetry between risk and return in the market;
  • Voya IM’s rigorous security selection process that performs in-depth security-level analysis with a focus on fundamentals, technical analysis and valuations across bond market sectors, leveraging quantitative toolsets and incorporating broader macro insights into security-level analysis; and
  • A strategic allocation to the taxable municipal bond asset class. RAM uses its sector expertise and a proprietary credit evaluation model to offer access to essential infrastructure with attractive yields and higher credit quality.

“At Voya, we believe providing investment solutions that support individuals when it comes to retirement security is fundamental to helping Americans achieve their retirement savings goals,” says Christine Hurtsellers, CEO of Voya Investment Management. “The Voya/RAM Focus Stable Value Fund strives to support this goal.”

Bloomberg and MSCI Launch Emerging Markets ESG Index Suite

Bloomberg and MSCI Inc. have launched the Bloomberg Barclays MSCI Emerging Markets ESG Index Suite, which includes 10 environmental, social and governance (ESG) indexes.

These benchmarks incorporate ESG and socially responsible investing (SRI) considerations in underlying hard and local currency emerging market (EM) fixed-income indexes. The index family includes the following versions across global, pan-Euro and the U.S. dollar:

  • Bloomberg Barclays MSCI EM ESG Weighted Indices: uses MSCI ESG Ratings to tilt issuer market weights;
  • Bloomberg Barclays MSCI EM SRI Indices: designed to screen out issuers with substantial revenue derived from sources such as adult entertainment, alcohol, gambling, tobacco, controversial military weapons, civilian firearms, nuclear power and genetically modified organisms (GMOs); and
  • Bloomberg Barclays MSCI EM Sustainability Indices: uses an emerging markets debt benchmark that includes fixed- and floating-rate U.S. dollar, euro and/or British pound-denominated debt issued from sovereign, quasi-sovereign and corporate EM issuers. The index includes issuers with BB and above ESG ratings.

“Investor demand for ESG considerations continues to grow, and we are consistently working to expand Bloomberg’s offerings to meet these requirements as ESG factors are increasingly incorporated into investors’ workflows,” says Chris Hackel, index product manager at Bloomberg.

“We have seen accelerating demand from investors to expand ESG indexes and data solutions across asset classes and markets. This newly launched emerging markets fixed-income index family extends the breadth of coverage of ESG fixed-income indexes and provides institutional investors with additional options for indexed funds and for benchmarking performance,” says Eric Moen, head of ESG product at MSCI. 

For more information, visit Bloomberg Indices.

Janus Henderson Adds U.S. Real Estate ETF to Offerings

Janus Henderson Group plc has expanded its active exchange-traded fund (ETF) offering with the Janus Henderson U.S. Real Estate ETF (JRE).

Managed by Portfolio Managers Greg Kuhl and Danny Greenberger, the fund seeks to provide access to real estate securities driving the future of the sector, which may include cell towers, data centers, gaming real estate investment trusts (REITs), cold storage and more, without bias toward style, property type or market cap.

“Offering attractive valuations, structural and secular growth tailwinds, and an opportunity to provide investors with protection from inflation, real estate is an asset class with the potential to create significant shareholder value and compelling returns in the coming years,” says Kuhl. 

The JRE exchange-traded fund (ETF) is a natural product extension based on the expertise of the firm’s Global Real Estate Equities team and existing U.S. real estate equities strategy, the firm says.

“Supply and demand dynamics within the real estate market are continuously evolving, making it an asset class where active management can add meaningful value to investors,” says Nick Cherney, head of exchange-traded products at Janus Henderson. “With many investors under-allocated to real estate, JRE brings Janus Henderson’s expertise in the asset class to ETF investors seeking to access its diversification, income, inflation-protection and risk-adjusted return potential.”

For more information on the Janus Henderson U.S Real Estate ETF visit https://www.janushenderson.com/en/row/documents/.
Investing June 24, 2021

PSNC 2021: In-Plan Guaranteed Income: Will the SECURE Act spark a transformation of the 401(k) industry?

A PSNC session explored participant demand for retirement income, the types of guaranteed solutions available and a process for evaluation and implementation. 

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During day three of the 2021 virtual PLANSPONSOR National Conference (PSNC) a panel of speakers debated whether in-plan guaranteed income provisions in the Setting Up Every Community for Retirement Enhancement (SECURE) Act could alter the retirement industry’s long-held stigma toward annuities.

Matthew Wolniewicz, president at Income America, began the discussion by underscoring the investment risks plan participants assume themselves, especially during times of market volatility. These periods—the most recent being the market instability as the coronavirus pandemic hit the U.S. in March 2020—can cause investors to make impulsive and damaging decisions that affect their portfolio’s longevity, Wolniewicz said. “We all know that investors do wrong things at the wrong time, and especially during periods of market volatility,” he noted.

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This is even more true for retirees or employees who are heading into their retirement years, many of whom are anxious not just about the market’s volatility, but how their longevity will play out in the next 20 to 30 years.

“People are faced with uncertainty not only in how the markets will perform, but in how long they will live,” Wolniewicz said. As they age, many people fear any financial decision could upturn their investment options, such as pulling their money out during a period of market instability or keeping their money in.

These participants say having a guarantee of income throughout retirement would put them at ease and would make them more likely to avoid taking out their 401(k) funds during volatility, Wolniewicz said. “Eighty percent of participants said they would leave their money in the plan if they knew they would get some help during retirement,” he noted, citing a 2019 Willis Towers Watson study.

As more participants show an interest in guaranteed income, plan sponsors are taking notice. A BlackRock survey cited during the panel recently found that 96% of plan sponsors feel a newfound sense of responsibility in offering annuity products, with 82% saying they are likely to add an annuity solution in the next 12 months. As sponsors realize the impact their plans have on a participant’s retirement, more are implementing features that supplement income, the panelists noted.

“Sponsors today are concerned about doing the right thing for their end-employees,” Wolniewicz said. “The two ways that any participant will have retirement income will be through Social Security and plan savings, so sponsors are looking for solutions that will provide income.”

Yet, as much as there is interest in annuity features, there is confusion about the solutions as well. Employers that were concerned about annuity products said the features were too administratively complex (75%), had high fees (61%), were too complex or unproven (60%) or they were worried that participants may face portability restrictions (58%).

“The pain points are longevity risk and sequence of return risk in retirement,” added Brian Seelinger, a senior portfolio manager with Northwest Bank. “People don’t know these phrases in retirement, but they know the inherent risk and fear.

“The primary barrier to implementing some type of income has been the complexity and the fees, but also the potential risk that a poor selection would expose the sponsor to liability,” he continued.

Seelinger explained that a large reason plan sponsors are often uncertain about annuities is the fees. Insurance, separate accounts and riders are included in the overall fee costs, which can be difficult to calculate or track.

While the SECURE Act has eliminated a major hurdle for plan sponsors, employers are also still puzzled about where they can begin researching their options, Seelinger said. “It’s so complex with so many moving parts, that it really is something that requires special knowledge,” he said.

Vidya Rajappa, vice president, portfolio manager and head of portfolio management multi asset strategies at American Century Investments, explained optional annuity riders to plan sponsors during the panel, including a guaranteed minimum withdrawal benefit (GMWB). Adding a GMWB guarantees a steady stream of retirement income by allowing participants to withdraw a percentage of funds each year, regardless of market conditions, Rajappa said.

Aside from access to account assets, a GWMB can capture market upsides while avoiding any impact from down markets. Additionally, any assets remaining upon death are transferred to beneficiaries, income is paid from assets until they are depleted and income will continue even after assets are depleted, Rajappa said.

The panel also suggested soluble steps for employers wanting to implement annuity products. First, define plan goals and vote to add an in-plan guarantee product to the plan. Second, update any documents, including adding an in-plan guarantee option to the plan’s investment policy statement (IPS). Third, research options and compare them to determine what would be a good fit with participant preferences. From there, plan sponsors can make their decision and proceed with the implementation process.

The panelists emphasized that plan sponsors should provide consistent documentation and communication to participants throughout the process, and especially once a decision is made.

Seelinger said he expects more plan sponsors to partner with financial advisers in the future, as more employers look to add annuity features. As a result, more advisers will expand their expertise, he noted.

“We think there’s going to be a flight to more educated advisers who may not just have a Chartered Financial Analyst [CFA] designation, but are also able to break down risk parameters,” he said. “It’s going to be a situation where someone who goes through these steps will really have to rely on independent third-party experts.”

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