Investment Products and Services Launches

Franklin Templeton expands ETF lineup with three additional funds; ABG and Russell partner on managed account program; and more.

Franklin Templeton Investments has introduced three new exchange-traded funds (ETFs)—Franklin Liberty Senior Loan ETF (FLBL), Franklin Liberty High Yield Corporate ETF (FLHY) and Franklin International Aggregate Bond ETF (FLIA)—expanding its line-up of fixed income active ETFs managed by Franklin Templeton Fixed Income Group. The three ETFs are listed on the Cboe BZX exchange.

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“In a persistently low-yield environment like the one we’ve been in, the need for income has intensified while advisers and clients are challenged in finding it,” says Patrick O’Connor, head of global ETFs. “As investors look to get more income out of their fixed income allocation, these new ETFs enable them to access additional fixed income sectors globally in a targeted way, as they define what they need and how they want to achieve it.”

The three new ETFs are managed by Franklin Templeton Fixed Income Group team members who specialize in the asset classes.

Franklin Liberty Senior Loan ETF (FLBL) seeks to provide a high level of current income with a secondary goal of preservation of capital. The fund invests at least 80% of its net assets in senior loans and investments that provide exposure to senior loans. The fund invests predominantly in income-producing senior floating interest rate corporate loans made to or issued by U.S. companies, non-U.S. entities and U.S. subsidiaries of non-U.S. entities. FLBL is managed by Mark Boyadjian, SVP, director of Floating Rate Debt and portfolio manager, Madeline Lam, VP and portfolio manager, and Justin Ma, VP and portfolio manager.

Franklin Liberty High Yield Corporate ETF (FLHY) seeks to provide a high level of current income with a secondary goal of capital appreciation. The fund invests at least 80% of its net assets in high yield corporate debt securities and investments that provide exposure to high yield corporate debt securities. The fund may enter into certain derivative transactions, principally currency and cross currency forwards and swap agreements, including interest rate and credit default swaps (including credit default index swaps). FLHY is managed by Glenn Voyles, SVP, director of Portfolio Management, Corporate Bonds, and Patricia O’Connor, VP and portfolio manager.

Franklin International Aggregate Bond ETF (FLIA) seeks to maximize total investment return, consistent with prudent investing, consisting of a combination of interest income and capital appreciation. The fund invests at least 80% of its net assets in bonds and investments that provide exposure to bonds. Bonds include debt obligations of any maturity, such as bonds, notes, bills and debentures. The fund invests predominantly in fixed-and floating-rate bonds issued by governments, government agencies and governmental-related or corporate issuers located outside the U.S. The fund may enter into various currency-related transactions involving derivative instruments, principally currency and cross currency forwards, but it may also use currency futures contracts. FLIA is managed by John Beck, SVP, director of Fixed Income-London and portfolio manager.

Hartford Funds Launches Short-Duration ETF

 

Hartford Funds has launched the Hartford Short Duration exchange-traded fund (ETF) (HSRT), which seeks to provide current income and long-term total return by investing in fixed-income securities. HSRT, along with another recently launched fixed income ETF in April 2018, the Hartford Schroders Tax-Aware Bond ETF (HTAB), adds to Hartford Funds’ ETF suite of six fixed income and seven multifactor ETFs.

“Lower duration and more frequent reinvestment are strong tools to help address rising rates within a fixed income allocation, and our actively-managed Short Duration ETF is designed to deliver both,” says Vernon Meyer, chief investment officer of Hartford Funds. “We see fixed income ETFs as being well-positioned for the current market, with the goals of providing income and stability to help round out a portfolio.”

Sub-advised by Wellington Management Company LLP, HSRT will typically invest in investment grade securities, but can also invest in bank loans and non-investment grade fixed income securities. The fund will use derivatives—such as Treasury futures and interest rate swaps—to manage its interest rate risk and duration, maintaining a dollar-weighted average duration of less than three years. HSRT’s expense ratio is 0.29%.

First Trust Launches Actively Managed ETF

First Trust Advisors L.P. (First Trust) has created a new actively managed exchange-traded fund (ETF), the First Trust TCW Unconstrained Plus Bond ETF (UCON). The portfolio is sub-advised and managed by TCW Investment Management Company LLC (TCW). The fund’s managers look for value across a range of global fixed income market segments seeking to maximize long-term total return.

The fund is managed in an ‘unconstrained’ manner, meaning that its investment universe is not limited to the securities of any particular index and TCW may invest in fixed income securities of any type or credit quality. Unlike index-based strategies, unconstrained strategies provide a flexible, adaptable, go anywhere approach, the company says. TCW’s fixed-income management philosophy applies a long-term value discipline emphasizing fundamental bottom-up research, which seeks to identify securities that are undervalued and offer a superior risk/return profile.

“This actively-managed ETF provides another tool for investment advisers to build portfolios for their clients, leveraging the best thinking of the world-class team at TCW. As interest rate volatility has returned this year, we believe professional management for fixed income assets is more important than ever,” says Ryan Issakainen, CFA, senior vice president, ETF strategist at First Trust. 

ABG and Russell Partner on Managed Account Program

Alliance Benefit Group, LLC (ABG) announced an alliance between ABG and Russell Investments’ Adaptive Retirement Accounts (ARA) program. As part of the alliance, ABG plans to offer the managed accounts program to its clients as well as partner with Russell Investments’ defined contribution (DC) and intermediary sales teams to jointly promote the ARA program to the financial adviser community.

“ABG is thrilled to offer Russell Investments’ ARA program. We strongly believe managed accounts will be a competitive differentiator for many years because they can provide better participant outcomes than target-date funds (TDFs),” says Don Mackanos, president of Alliance Benefit Group LLC. “This program is well positioned from a pricing and feature standpoint, and is fully integrated with industry leading recordkeeping software vendors such as the Relius platform. The ARA program, coupled with Russell Investments’ distribution through financial advisers, supported by ABG member firms for their administration and recordkeeping services, makes this a home run in the market.”

 

“We have longstanding relationships with many of the ABG member firms and look forward to partnering with them to capitalize on the benefits of our ARA program,” says Andrew Scherer, senior director of defined contribution for Russell Investments. “A lot of time and effort went into building this program, and we look forward to a very successful rollout.”

Scherer added that ARA’s benefits include a customized asset allocation designed to increase the likelihood of participants achieving an appropriate level of retirement income based on their needs. In addition, ARA delivers its asset allocation by leveraging the plan’s core menu, a process that accentuates a financial adviser’s value in selecting and monitoring a plan’s investments.

The program is expected to launch this summer.

Americans Place Returns Above Values for Investments

While many prioritize social investments and community welfare when choosing investments, most opt for performance first and a profitable company whose values they disagree with vs. a struggling company whose values they like, Merrill Edge found.

While 34% of Americans describe the stock market as “volatile,” that concern doesn’t deter most from investing, according to the latest Merrill Edge Report, a survey of more than 1,000 mass affluent Americans.

 

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Most Americans (57%) say they made money in the stock market in the past year. Seniors (68%) and Generation Xers (67%) cite the most financial gains, with Generation Z (ages 18 through 22) at 54%.

 

Investors are prioritizing social investments and community welfare when choosing where to put their money. Americans say they are more likely to invest in companies that:

  • Pay women and men equally (87%);
  • Promote diverse senior leadership (85%);
  • Demonstrate a commitment to environmental sustainability (82%);
  • Provide three or more months of family leave (78%);
  • Support the LGBTQ community (61%); and
  • Share their religious beliefs (62%).

 

However, the survey found Americans still value financial gains over social values, as they are most apt to invest in stock based on market performance (88%), closely followed by the stock’s ability to pay dividends (85%). In addition, 60% of respondents say they would be more likely to invest in a profitable company whose values they disagree with than a struggling company whose values they agree with (40%), as well as the most profitable company regardless of its sector (57%) over a company with a focus on environmental assets (43%).

 

Looking to others for financial advice

 

One in three Americans say their financial stability is dependent on receiving an inheritance. This is true for 20% of Baby Boomers, 36% of Gen Xers, 32% of Millennials, and 63% of Gen Z. In addition, respondents are becoming more likely to rely on input from others than their own instincts when making major life decisions, such as investing money (36%) and retiring (22%).

 

One in five respondents are more apt to rely on digital than in-person advice, and 69% of Americans believe all financial decisions will be made with the help of technology in their lifetime. Forty percent of respondents are already comfortable consulting artificial intelligence (AI) for financial guidance; many would trust AI to provide spending and saving guidance (45%) and make investments (32%).

 

However, survey results show in-person advice is still king. When it comes to making financial decisions, 81% of Americans are most likely to turn to a financial adviser over their closest confidants, including wealthiest friends (70%), older generations (69%) and even finance apps (50%).

 

“While we’re seeing rapid adoption of emerging technologies, investors truly want the best of both worlds—digital and physical—when it comes to decisionmaking, not one or the other,” says Aron Levine, head of Merrill Edge.

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