Products March 18, 2021

Investment Product and Service Launches

Hartford Funds launches new ETF and T. Rowe Price creates Impact Equity Fund.

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Art by Jackson Epstein

Hartford Funds launches new ETF

Hartford Funds has launched a new exchange-traded fund (ETF), the Hartford Longevity Economy ETF (NYSE Arca: HLGE).

The fund seeks to provide investment results that, before fees and expenses, correspond to the total return performance of the Hartford Longevity Economy Index (LHLGEX).

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LHLGEX is designed to generate attractive risk-adjusted returns by investing in companies that comprise industries that reflect certain themes that are expected to benefit from the growth of the aging population and the substantial buying power it represents. 

HLGE is designed to invest in companies included within industries that provide goods and services that reflect longevity economy themes, including aging in place and home modification, working longer, performance health and comfort, maintaining social connections, financial freedom, staying mobile, human enhancement and leisure, and entertainment. 

HLGE is designed to address risks and opportunities within the U.S. longevity economy universe by selecting equity securities of companies exhibiting a favorable combination of priority multifactor characteristics, including valuation, momentum, and quality. LHLGEX seeks to outperform a capitalization-weighted universe of U.S. capitalization equity securities over a complete market cycle.

“Education about the importance of longevity planning has long been a hallmark of the insight Hartford Funds shares with financial professionals, and this product is an extension of that strategy,” says Vernon Meyer, chief investment officer (CIO) at Hartford Funds. “By leveraging our world-class multifactor indexing approach and risk management, the Hartford Longevity Economy ETF seeks to deliver a unique and diversifying shareholder experience by tapping into the underappreciated and persistent value of evolving consumer patterns among the widening senior demographic.

HLGE is listed on the New York Stock Exchange Arca Inc. and its estimated current expense ratio is 0.44%

T. Rowe Price Creates Impact Equity Fund

T. Rowe Price has launched its first product giving investors the opportunity to simultaneously pursue their financial goals and to have a positive impact on the global environment and social equity issues. 

The T. Rowe Price Global Impact Equity Fund will employ an active management approach to seek companies that the company says are on the right side of these changes. It will initially be offered to U.S. investors, but the firm intends eventually to introduce the strategy to clients around the world.

The fund will seek out companies that can potentially provide excess returns over its benchmark, the MSCI All-Country World index. It will focus on three pillars: climate and resource impact, social equity and quality of life, and sustainable innovation and productivity. It will exclude certain industries and companies that the manager believes do not conform to the fund’s impact mandate, such as fossil fuels, tobacco, gaming and for-profit prison companies.

The fund will be aligned with the United Nations Sustainable Development Goals (UNSDGs), a globally recognized framework designed to end poverty, ensure prosperity and protect the planet.

The fund will be managed by Hari Balkrishna. Balkrishna has 15 years of investment industry experience, including spending the past decade at T. Rowe Price. From 2015 until the end of last year, he was associate portfolio manager of the firm’s global growth equity strategy. Having lived and worked on five continents, Balkrishna has a keen understanding of the many different social systems around the world and he is personally passionate about addressing climate change.

The fund will employ an all-capitalization, high-conviction approach, typically owning between 55 and 85 securities, focused on those that Balkrishna believes will create positive environmental and social impact, along with attractive returns, over a long-term time horizon.

As with other T. Rowe Price strategies, the fund will draw upon the firm’s global equity research platform, comprising 203 equity research analysts, 10 sector portfolio managers and 73 regional and diversified portfolio managers. In addition, the fund will tap the expertise of the firm’s environmental, social and governance (ESG) experts and responsible investing research analysts, as well as its proprietary Responsible Investing Indicator Model (RIIM), a database detailing how more than 15,000 securities measure up against established environmental and social parameters.

The net expense ratio for the Investor Class shares (Ticker: TGPEX) is 0.94% and the minimum initial investment is $2,500. The net expense ratio for the I Class shares (Ticker: TGBLX) is 0.79% and the minimum initial investment is $1 million.

Data and Research March 18, 2021

Retirement Accounts Post Record During a Pandemic and Recession

Employer-sponsored retirement plans and individual accounts hold some $35 trillion in total assets at a time when the broader economy—and many of its most vulnerable constituents—continues to struggle.

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New data published by the Investment Company Institute (ICI) shows total U.S. retirement assets grew to $34.9 trillion as of December 31, which is up 7.5% from the end of the third quarter of the year and up 9.3% overall for last year.

With such strong growth for the year, the ICI reports, retirement assets accounted for a third of all household financial assets in the United States at the end of December. The ICI update shows that assets in individual retirement accounts (IRAs) totaled $12.2 trillion at the end of the fourth quarter of 2020, while defined contribution (DC) plan assets were $9.6 trillion, up 6.8% from September 30.

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According to the ICI, government defined benefit (DB) plans—including federal, state and local government plans—held $7.1 trillion in assets as of the end of December, marking a 7.6% increase from the end of September. Private-sector DB plans held $3.4 trillion in assets at the end of the fourth quarter of 2020, while annuity reserves outside of retirement accounts accounted for another
$2.5 trillion.

Such growth figures would have been impressive in a “normal” year for the markets and the U.S. and global economies. But in the context of the ongoing coronavirus pandemic, which has killed well in excess of 500,000 Americans and caused historic surges in unemployment, the figures are even more notable. As various sources have discussed with PLANSPONSOR, the past year has made doubly clear the fact that the markets and the economy are not one and the same thing.

Furthermore, the past year has also clearly demonstrated just how severe income and overall wealth inequality are in the United States. To be sure, since the global financial crisis of 2007 and 2008, U.S. households in the aggregate have come a long way in strengthening their balance sheets. Yet the distribution of wealth is highly unequal—about as unequal as it has ever been—and research shows not everyone is able to participate in the growth of retirement plan assets.

According to data published by PGIM Fixed Income, each household in the top 1% of the wealth distribution has, on average, $25 million in assets, including nearly $10 million of equities. The next 9% of the distribution holds an average of $3.5 million each, supported by more than $1 million of pension entitlements, including DC and DB plans. In marked contrast, the bottom half of households has only $20,000 of net worth, on average, less than 0.1% of the assets of a household at the top.

For the workplace retirement planning audience, sources say it remains important to highlight the coverage gap that continues to leave many Americans out of the DC and DB plan system. A white paper published last year by Human Interest, a firm providing automated 401(k) plans tailored for small businesses, suggests that just 12% of employers with fewer than 100 employees offer a 401(k) plan to their employees, while only 36% of employers with between 100 and 499 employees do. On the other side of the spectrum, 92% of employers with more than 500 workers provide retirement savings opportunities to their employees.

The paper highlights how, heading into the coronavirus pandemic, some 30.7 million small and midsized businesses in this country employed a collective 60 million people, or roughly half the U.S. workforce. While signs of recovery are emerging alongside the nation’s vaccination effort, the paper says the subsequent economic turmoil caused by the pandemic has had a disproportionately large effect on these workers, millions of whom remain furloughed or laid off.

The pandemic has also had a disproportionate impact on women and people of color, as demonstrated by the latest “Retirement Risk Readiness Study” from Allianz Life Insurance Co. Fewer than half of the respondents to the survey who identify as people of color (48%) say they participate in a workplace retirement plan, while 33% have life insurance, 21% have an IRA and 5% own a variable annuity.

According to the Human Interest paper, the 60 million workers in the small-business sector were already at an inherent disadvantage when it comes to saving and investing for the future, and it shows in such statistics as their average net worth.

“The primary cause of this retirement savings gap is a lack of access to financial tools that help people save, especially through work,” says Jeff Schneble, CEO of Human Interest. “People save using a workplace retirement plan, or not at all. Too many employees don’t have access to a retirement savings plan at work.”

The Human Interest analysis says it is a common misconception that people have to earn high salaries before they’re able to take advantage of tax-qualified retirement plans. In fact, when given access to a 401(k) plan, Human Interest finds, people across all salaries are saving for retirement. The firm’s data shows people earning between $30,000 and $40,000 are saving 6.1% of their salary, whereas workers earning between $200,000 and $209,999 are saving 7.7%.

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