Products May 18, 2017

Investment Products and Services Launches

Wisdom Tree unveils fixed income strategy; Fidelity launches ESG Index Funds; and Envestnet offering 3(38) investment service to TIAA clients.
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Wisdom Tree Unveils Fixed Income Strategy

WisdomTree has released its Barclays Yield Enhanced U.S. Short-Term Aggregate Bond Fund (SHAG). The fund seeks to enhance yield by sourcing and reweighting subcomponents within the short end of the U.S. Aggregate fixed income universe, while maintaining similar risk characteristics. It has a net expense ratio of 0.12%. The firm notes that SHAG over-weights credit securities and under-weights treasuries.

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“In a market environment where every basis point counts, over-weighting treasuries might not be your first stop on the road to income,” says Kevin Flanagan, senior fixed income strategist at WisdomTree. “SHAG may serve as a powerful tool for investors seeking to navigate a potential rising rate environment.”

In a statement, Wisdom Tree noted: “With another potential rate hike a few weeks away, SHAG offers a solution for investors who wish to shorten the duration of their fixed income portfolio—particularly if they are concerned about rising rates—while still focusing on income.”  

NEXT: Fidelity Launches ESG Index Funds

Fidelity Launches ESG Index Funds
 
Fidelity Investments has launched two new index funds focused on sustainable companies. The Fidelity U.S. Sustainability Index Fund and Fidelity International Sustainability Index Fund will allow investors to contribute to companies with a positive impact on environmental, social and governance (ESG) ideals.
 
The funds offer multiple share classes and are available directly to individual investors as well as through third-party financial advisers and workplace retirement plans. These products extend Fidelity’s ESG offerings, which currently include an actively managed mutual fund—Fidelity Select Environment & Alternative Energy Portfolio—and Fidelity’s FundsNetwork program, which provides investors access to more than 100 ESG funds.

“Launching the ESG funds reaffirms Fidelity’s commitment to providing our 26 million customers access to a diverse set of investment vehicles to meet their distinct financial goals,” says Colby Penzone, senior vice president for Fidelity’s Investment Product Group. “We understand that some investors may choose to advance specific causes, based upon their own principles. As a result, we expect the ESG factors used in the new funds to help many investors better align their personal principles with their investment objectives.”

Each fund will attempt to replicate the performance of its respective index, before expenses, by normally investing at least 80% of its assets in securities included in the index, the firm says. The Fidelity U.S. Sustainability Index Fund will seek to provide investment results that correspond to the total return of the MSCI USA ESG Index, a capitalization-weighted index that provides exposure to companies with high ESG performance relative to their sector peers, as rated by MSCI ESG Research. MSCI USA ESG consists of large- and mid-cap companies in the U.S. market.

The Fidelity International Sustainability Index Fund will seek to provide investment results that correspond to the total return of the MSCI All Country World Index (ACWI) ex USA ESG Index, a capitalization-weighted index that provides exposure to companies with high ESG performance relative to their sector peers, as rated by MSCI ESG research. MSCI ACWI ex USA ESG consists of large- and mid-cap companies across 22 developed markets and 23 emerging markets.

The funds will be available in three distinct share classes: Investor Class, Premium Class and Institutional Class.

NEXT: Envestnet Offering 3(38) Investment Service to TIAA Clients

Envestnet Offering 3(38) Investment Service to TIAA Clients

Envestnet Retirement Solutions (ERS) announced its customized 3(38) investment management service platform, Envestnet Fiduciary Advantage, will be available to plan sponsors and advisers whose retirement plans include TIAA's Custom Portfolios Model Service. The same 3(38) investment management services will be made available to plan sponsors, or their advisers, that wish to incorporate TIAA's Target Income Models, which apply Liability Driven Investing (LDI) principles.

"Our arrangement with TIAA will offer fiduciary support for the broader swath of advisers that wish their plan sponsor clients to take advantage of TIAA's Target Income Models, but may choose not to take on the fiduciary responsibility for managing the portfolios themselves," says Robert Bernstein, co-founder and senior managing director of Envestnet Retirement Solutions. "We are pleased to provide fiduciary support to plan sponsors using TIAA's innovative model service given TIAA's long-held respect by industry insiders and the educators whose retirement plans it serves. We are also proud to help TIAA enable an even broader community of plan participants across the country to potentially save more for retirement using its Custom Portfolios Model Service and Target Income Models."

The Envestnet Fiduciary Advantagepowered by ERS's institutional-caliber research enables plan sponsors and their advisers to ensure they are selecting, managing, and reporting plan investments in accordance with their fiduciary duty, the firm notes. It allows plan sponsors and advisers to utilize the proprietary, systematic ERS SCORE Methodology to select plan investments that are in the best interests of participants.

"Plan sponsors and advisers are interested in simple yet sophisticated default solutions, like our Target Income Models, that focus on creating retirement income for plan participants," says Dan O'Toole, senior managing director and head of Institutional Investment Solutions and Research at TIAA. "By offering 3(38) services that provide plans using our custom solutions with fiduciary support, more institutions and participants will have access to lifetime income solutions in their retirement plans."

Administration May 18, 2017

Some Participants Unaware They Are Retirement Ready

Plan sponsors can help participants make sure they have a plan in place to retire on time, and also to help them visualize what that life may look like.

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More Americans are working past the traditional retirement age of 65 than they have since the turn of the century, according to a recent study by the Pew Research Center. The survey found 18.8% of Americans at least 65-years-old reported being employed part-time or full-time in May 2016. That translates to 9 million people laboring through their golden years. It also marks a steady increase in the amount of people employed at this age and older, which Pew has tracked since 2000 when the rate stood at 12.8%.

This phenomenon could put employers at a major disadvantage as they struggle to endure rising benefits costs and a younger workforce with less room for advancement.

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And while many Americans are working past retirement age because they want to, several are doing so because they’re unaware they are financially secure enough to retire. Tim Walsh, senior managing director, TIAA, says this is something his firm has been working to counter in the non-profit sector.

“Plan sponsors can follow some steps to help clear a batter path for those reluctant retirees,” says Walsh.

He notes that path begins with effective communication and providing participants with the tools and resources they need to determine whether they will be ready to retire on time, or need to take further action to prepare. An important aspect of that strategy could be lifetime-income projections based on factors such as account balances, savings rates, investments and capital market assumptions. In fact, Congress is currently looking at the Lifetime Income Disclosure Act, which would require employers to take similar steps.

Walsh says even monthly-income projections on participant statements can be enough to trigger participants to start thinking about how they are going to spend their retirement years and what they need to save for.

“What we’ve heard from participants is that they tend to think in buckets,” Walsh explains. “They want to make sure they have a bucket of dollars to pay for all core expenses whether it’s food, shelter, or clothing. The second bucket is the ‘fun bucket.’ They want to be able to fund vacations and spend money on grandkids. A third is for potential emergency needs and health care expenses. If there is anything left over, legacy is important for a lot of participants.”

NEXT: Dealing with emotions

To that extent, Walsh says it is also important for plan sponsors to address participant needs beyond the financial realm and into the emotional one. He says his firm has had success with tools designed to help employees visualize what retirement could look like and how they could spend it based on their savings habits.  

Part of this effort is led through TIAA’s “Preparing for Retirement” website geared at employees within five years of retirement. Through educational materials and a questionnaire, the site aims to help participants visualize their retirement lifestyle and come up with a personalized plan to achieve it. It also offers a “qualitative information on the role various income strategies like social security and lifetime income from annuities can play in retirement.” So far, TIAA is reporting an 86% completion rate with the process.  

Walsh adds, “Plan sponsors need to design a retirement plan to make sure participants will be able to fund these buckets. That’s where having an investment menu that provides for guaranteed income in retirement such as a fixed annuity, but also growth options like mutual funds, can help.”

Furthermore, offering participants access to personal financial and retirement-planning advice can be crucial.  

“Participants age 55, and even younger than that, want to be able to sit across the table from an adviser and make sure they have a plan in place,” says Walsh. He adds these scenarios could be excellent opportunities for participants nearing retirement age to make necessary changes in order to achieve their retirement goals, whether it be aiming for a different income-replacement ratio or seeking guaranteed income outside of Social Security benefits.

Walsh says these tools can motivate employees to start saving around what they actually want to do in retirement such as pursuing a hobby, doing volunteer work, or anything else. “It really helps them see a day in the life,” he explains.

The Pew Research Center’s survey was based on employment data from the Bureau of Labor Statistics and more information can be found at PewResearch.org.

“Income Insights: Mental Accounting in Retirement” can be found at TIAA.org.

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