Products September 12, 2019

Investment Product and Service Launches

Wilmington Trust and Federated offer CITs to DC clients, and Cohen & Steers closes real estate fund share classes.

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Art by Jackson Epstein
Art by Jackson Epstein

Art by Jackson Epstein

Wilmington Trust and Federated Offer CITs to DC Clients

Wilmington Trust and Federated Investors, Inc. have collaborated to provide collective investment trusts (CIT) for defined contribution (DC) plan clients.

The collaboration allows Wilmington Trust to broaden its product spectrum by offering the Federated High Yield Bond Collective Investment Fund and the Federated Prime Cash Collective Investment Fund, which will be the first prime cash vehicle from Wilmington Trust.  

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CITs are pooled investment vehicles maintained by a bank or trust company exclusively for qualified retirement plans. They offer benefits similar to mutual funds, but at generally lower costs, making them an attractive option for plan sponsors to consider in carrying out their fiduciary responsibilities. CITs can also be tailored to fit unique investment goals and risk appetite, offering more innovative investment opportunities and customized options than before.

“Our collaboration with Federated marks another milestone for the CIT industry, and for our efforts as fiduciary trustee to deliver solutions that help clients meet their long-term goals,” says Rob Barnett, group vice president and head of Retirement Distribution at Wilmington Trust. “The modern-day CIT is not your grandfather’s investment fund and today offers scalability, flexibility, customizable options and transparency that empowers advisers, plan sponsors and participants to make fully informed decisions. We are on a mission to increase education among advisers and investors about the benefits of CITs and to advance the widespread adoption of CITs across the industry.”

Cohen & Steers Closes Real Estate Fund Share Classes

Cohen & Steers is closing its share classes of the Cohen & Steers Real Estate Securities Fund (Class A: CSEIX; Class C: CSCIX; Class I: CSDIX; Class R: CIRRX; Class Z: CSZIX; Class F: CREFX) to new investors, effective at the close of business on November 8. The fund will remain open to its current shareholders, participants in qualifying retirement plans, and existing intermediary-sponsored discretionary models.

As of August 31, the fund had assets under management of $6.0 billion and carried a five-star Morningstar rating. It ranked in the top decile of Morningstar’s U.S. Real Estate fund category for the five- and 10-year periods, and in the top quartile for the one- and three-year periods.

“Striving to deliver consistent outperformance is central to our competitive advantage and reputation,” says Joseph Harvey, Cohen & Steers president and chief investment officer. “The fund invests across the REIT market-capitalization spectrum and opportunistically invests in international real estate securities, real estate fixed income securities and options. Closing the fund to new investors should allow us to maintain an asset level that will preserve our ability to meet the fund’s investment objectives.”

Benefits September 12, 2019

Employer Health Benefit Costs to Rise 6.5% in 2020

A focus on managing chronic conditions, and education to improve health care utilization can help employers manage cost increases.

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U.S. employer-provided medical benefit costs are forecasted to rise 6.5% in 2020, outpacing general inflation by 3.8%, according to the 2020 Global Medical Trend Rates Report released by Aon plc.

The increase for U.S. employer-sponsored medical plans expected next year is due to a combination of higher costs for specialty drugs, moderate price increases for care and flat or decreasing health utilization.

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Aon’s report confirms the increasing impact of non-communicable diseases on health care costs globally. In the U.S., musculoskeletal, cancer, cardiovascular, diabetes and high blood pressure were the most prevalent health conditions driving health care claims. Aon’s report also confirms the growing prevalence of risks from unhealthy personal habits in the U.S., such as physical inactivity, obesity, bad nutrition, aging and excessive alcohol and substance abuse.

“Many of the risk factors lead to chronic conditions with long-term medical costs that make them difficult to treat and result in long-term medical cost increases,” says Tim Nimmer, Aon’s global chief actuary for health solutions. “As a large portion of our waking hours are spent on the job, the workplace is a logical place to create a healthier culture and change behaviors. Our goal is to guide employers as they become more critical in helping individuals and their families to take a more active role in managing their health, including participating in health and well-being activities and better managing chronic conditions.”

Of the health care initiatives large employers participating in the National Business Group on Health’s (NBGH) latest Health Care Strategy and Plan Design Survey cited, implementing virtual solutions (51%) and developing a more focused strategy to address high-cost claims (39%) were at the top of the list.

Increasingly, employers are working with partners to develop innovative solutions and address emerging challenges. Another reason for increased reliance on partners for 2020 is necessity, especially in the area of high-cost specialty therapies. Some therapies already on the market are in excess of $1 million per patient, and it is likely that new drug therapies will cost even more. As a growing number of high-price drugs from the pipeline are approved, the need to work closely with partners on how to finance and manage these therapies will only increase, the NBGH survey report says.

As for decreasing health care utilization, Lively found many employees don’t understand health benefits—including that most insurance covers preventive care. Better education can lead employees to use benefits correctly and become healthier, it says.

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