Products February 18, 2021

Investment Product and Service Launches

Vanguard releases international bond index fund; Putnam Investments will launch active ETF strategies; and Alger expands CIT offerings.

Reported by
Art by Jackson Epstein

Vanguard Releases International Bond Index Fund

Vanguard has introduced a broad market international bond index fund, Vanguard Total International Bond II Index Fund. The fund will provide international fixed income exposure for Vanguard Target Retirement Funds, Vanguard Target Retirement Trusts and Vanguard LifeStrategy Funds, which will be the only investors in the new fund.  

As previously announced, the investment strategy of the new fund mirrors that of the Vanguard Total International Bond Index Fund and will seek to track the same benchmark. Effective immediately, Total International Bond II Index Fund will receive new cash flows from the Target Retirement series and LifeStrategy series. The fund of funds’ existing Total International Bond Index Fund holdings will be transitioned to the new fund in a prudent and tax-sensitive manner over time. 

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

“This will enable Vanguard to segregate transaction costs produced by the fund of funds from those generated by other investors in Total International Bond Index Fund, which we believe to be in the best interest of investors,” says Kaitlyn Caughlin, head of Vanguard’s portfolio review department. 

Given the significant market volatility experienced last year, and in an effort to protect investors’ interests, Vanguard said it delayed the launch until market conditions improved. The investment strategies, asset allocations, glide path and expense ratios for Vanguard Target Retirement series and LifeStrategy series remain the same.

Putnam Investments Will Launch Active ETF Strategies

Putnam Investments will bring four of its key U.S. equity strategies to market this year in the form of semi-transparent active exchange-traded funds (ETFs), with the first of the products expected to be available in the spring, upon completion of the registration process.

These offerings will represent the first ETF products provided by the company, which currently makes available an array of retail mutual funds, separately managed accounts, collective investment trusts (CITs), private funds and non-U.S. funds.

The investment strategies for the four initial ETF products will be similar to existing mutual funds with well-established track records, both in the environmental, social and government (ESG) and large-cap equity areas, and will include: Putnam Sustainable Leaders ETF, Putnam Sustainable Future ETF, Putnam Focused Large Cap Growth ETF and Putnam Focused Large Cap Value ETF. 

“In an effort to provide our clients with greater optionality in accessing the firm’s deep, expansive capabilities, Putnam will be combining its fundamentally driven investment approach with the benefits offered by an ETF structure,” explains Putnam Chief Operating Officer (COO) Aaron Cooper. “Our goal is to deliver strong, risk-adjusted investment performance through an array of products, including traditional mutual funds, separately managed accounts, and, soon, active ETFs.”   

All four Putnam ETFs will use the Fidelity tracking basket methodology for active equity ETFs.

Alger Expands CIT Offerings

Fred Alger Management LLC (Alger) has expanded its collective investment trust (CIT) offerings with Alger Focus Equity CIT, a focused portfolio of approximately 50 high-conviction, large capitalization stocks.

The Alger Focus Equity strategy, started by Alger in 2013, has more than $3.2 billion in assets under management (AUM). Currently, the strategy is offered in several vehicles, including a mutual fund (the Morningstar 5-star rated Alger Focus Equity Fund), separate accounts, retail separately managed accounts (SMAs) and an offshore vehicle. The Alger Focus Equity CIT joins a strong lineup of CITs, including the Alger Capital Appreciation Series CIT, which was launched in 2014. 

“We believe it’s important to offer retirement plan clients a choice when it comes to investments in their plans. With the launch of the Alger Focus Equity CIT, we’re able to package a high-conviction strategy into a vehicle with an attractive pricing structure for a retirement plan,” says Jim Tambone, executive vice president and chief distribution officer at Alger.

  In addition to the launch of the new CIT, Alger and SEI Trust Co. have registered these CITs with Nasdaq Fund Network (NFN). Plan sponsors and advisers will now be able to access daily net asset value and performance information. The three CITs on NFN include: Alger Capital Appreciation Series CIT (R1): AGCASX; Alger Capital Appreciation Series CIT (R5): SEIAAX; and Alger Focus Equity Series CIT (R1): SEIACX.

Benefits February 18, 2021

Why Retirement and Emergency Savings Need to Go Hand in Hand

Nearly 30% of workers have no emergency savings fund, leading many to raid their retirement accounts.

Reported by

Plan sponsors need to make sure workers keep both retirement savings and emergency savings as top-of-mind goals in order to prevent those without emergency savings from withdrawing money from their retirement accounts, experts say.

The importance of having emergency savings has been underscored since the outbreak of the COVID-19 pandemic, which caused many American workers to be laid off or have their pay reduced through scaled-back hours. In addition, LIMRA’s Secure Retirement Institute (SRI) found in a survey conducted last July that 29% of workers lacked an emergency savings fund, and even among those who had one, 59% said they would exhaust their savings before six months had passed.

Get more!  Sign up for PLANSPONSOR newsletters.

Pete Welsh, head of retirement services for Millennium Trust, notes that before individuals can address their long-term financial goals, they need to address their short-term financial goals, including emergency savings, which is why emergency and retirement savings need to go hand in hand.

Yanela Frias, president of Prudential Retirement, says a survey her company conducted prior to the COVID-19 outbreak found that 63% of Americans did not have even $500 stored away for an emergency. As a result, Frias says, “Many have taken loans, hardship withdrawals or COVID-19-related distributions from their retirement plans, compounding the degradation of their retirement savings and causing many employers to worry if their workers will be able to retire on time. COVID-19 has highlighted the shortcomings of the current approach, whereby employers do not address emergency savings. During the first three quarters of this year, 10% of plan participants took a loan, hardship withdrawal or COVID-19-related loan from their retirement account. We know that emergency savings is a very important concept because, often, the retirement plan is the only source of savings Americans have. When they withdraw money from their retirement account, it directly impacts their ability to retire, and the money may never be replaced. An in-plan emergency savings account can be a source of liquidity when an individual faces a crisis, preventing them from taking money out of their retirement account.”

After the pandemic erupted, Prudential Retirement surveyed plan sponsors about emergency savings accounts and found that 23% of those that don’t already offer one intend to include automatic emergency savings as one of their benefits, Frias says.

Alison Salka, senior vice president and head of research at LIMRA, says a survey her organization conducted among plan sponsors showed that 70% are concerned how COVID-19 has weakened the retirement readiness of their workers.

“Consumers need to be able to deal with short-term, unexpected emergencies as well as long-term goals, most notably, retirement,” she says. “A good savings mindset prioritizes the creation of a safety net of funds and then a series of other goals that lead to long-term financial security. Payroll deduction is a great and easy way to help people save. Emergency savings accounts at the workplace are particularly important, given the economic fallout from the pandemic. Since the pandemic began, 14% of consumers we surveyed lost their job. In addition, 32% earned less income due to decreased hours or reduced pay. Forty-five percent of workers indicate the pandemic’s economic downturn has negatively affected their retirement. If employees have emergency savings in place, then they can avoid raiding their retirement accounts.”

«