Products July 24, 2014

Natixis Launches Global Tactical Allocation Fund

July 24, 2014 (PLANSPONSOR.com) – The Seeyond Multi-Asset Allocation Fund from Natixis Global Asset Management (NGAM) invests in stocks, bonds and volatility as an asset class.
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The global tactical asset-allocation fund strives to offer greater diversification by integrating equity volatility as an asset class while investing in global stocks and bonds. Equity volatility can be used to manage risk or to seek returns in different types of environments (see “Investors Want Smarter Volatility Management”). This ability can be especially valuable to investors during market downturns, Natixis says.

David Giunta, president and CEO of Natixis, says the multi-asset-allocation fund can be used as a stand-alone core allocation capable of outperforming a benchmark of global equities and bonds, and can provide additional diversification in volatile markets.

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The fund’s management team has an established reputation in dynamic asset allocation, Giunta adds. The fund is based on a strategy that seeks to generate value through asset allocation, rather than individual security selection. As a result, the management team invests in volatility as an asset class, including volatility index futures, and equity index options and futures.

“We do not simply use volatility defensively,” explains Frédéric Babu, senior portfolio manager for Natixis. “One common misperception of volatility is often akin to an insurance premium that can come at a high cost over the long term. Instead, the fund also uses volatility actively to extract value from volatility through the full cycle.”

Sam Richmond-Brown, head of client portfolio management at Natixis, believes the fund will be popular among retirement plan participants. “We believe that the Seeyond fund is well suited to appeal to a broad investor base, including retirement plan participants who are in search of long-term growth of capital from investments in a range of securities and asset classes across global markets,” he tells PLANSPONSOR.

Richmond-Brown adds that, while the expense of active asset-allocation planning can be a detriment to an investor’s long-term return, the opportunity to receive long-term capital appreciation through passive funds also presents its challenges.

“Our strong belief is that to overcome the challenges associated with short term bouts of uncertainty, we must first ensure that capital can be allocated dynamically over time based on a broad multi-asset investment universe that includes stocks and bonds,” he says.

— Matthew Miselis

Compliance July 24, 2014

Senate Committee Advances ERISA Amendments Impacting PBGC

July 24, 2014 (PLANSPONSOR.com) – The Senate’s Health, Education, Labor and Pensions (HELP) Committee advanced a bill seeking to better define rules for protecting pension assets when companies downsize or close.
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Congress may be deadlocked on any number of issues, but the HELP Committee was able to reach strong bipartisan consensus on seven bills in recent weeks—sending the would-be laws to Senate leadership for potential deliberation before by the full upper house. One of the pieces of legislation, known as S. 2511, would amend the Employee Retirement Income Security Act (ERISA)—specifically the sections pertaining to “pension downsizing liability rules.”

The goal of S. 2511, according to Senator Tom Harkin, D-Iowa, chairman of the HELP Committee, is to “ensure that there is a workable mechanism to protect pension benefits when employers show symptoms of financial distress.” The text of the bill is quite short by the way of employment and benefits law, stretching only onto three pages.  

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In short, the bill would make technical amendments to Subsection (e) of Section 4062 of ERISA by inserting language to further define what constitutes a “substantial cessation of operations.” The bill would also clarify when the relevant regulatory bodies, namely the Pension Benefit Guaranty Corp. (PBGC), should step in to assist stressed pension funds. Committee members say the steps are necessary to prevent unnecessary intervention by the PBGC while also ensuring protections for participants will be available when truly needed.

Should the amendments be approved by Congress, an employer shall not be treated as having a cessation as described in Section 4062 unless “(A)(i) all operations at a facility in a location are ceased, and such cessation is reasonably expected to be permanent; (ii) no portion of such operations is moved to another facility at a different location; (iii) no portion of such operations is assumed by or otherwise transferred to another employer; and (iv) no other operations are reasonably expected to be maintained at such facility; and (B) as a result of the cessation … more than 20 percent of the employees of the employer have a termination of employment that is reasonably expected to be permanent.”

The bill also includes direction that the PBGC “shall not take any enforcement, administrative, or other action pursuant to Section 4062(e) of the Employee Retirement Income Security Act of 1974 that is inconsistent with Subparagraph (A) of Section 4062(e)(2) of such act, as added by Subsection (a), without regard to whether the action relates to a cessation or other event that occurs before or after the date of enactment of this act, unless such action is in connection with a settlement agreement in place before June 1, 2014.”

While the language itself does not necessarily sound like a big win for pension plan participants, committee members say further defining what a cessation is, and when the PBGC should step in, will bring more certainty and efficiency to the difficult process of managing pension funds at closing and struggling employers. Further, committee members say the PBGC has on occasion been forced to take action related to pension funds at employers that met the technical definition of cessation without actually being in a position of hardship.

In a statement issued shortly after S.2511’s approval by the HELP Committee, the American Benefits Council (ABC) applauded the move. James Klein, ABC president, said the bill includes a number of “common-sense measures to clarify the language of the longstanding statutory provisions.”

“This measure returns enforcement of the law to its original purpose,” he said. “In recent years, the PBGC’s enforcement policy has given rise to significant compliance challenges and large unexpected liabilities for many companies that have engaged in normal business transactions, such as the sale of a very small business unit or the consolidation of small operations at different facilities, where there is no actual cessation of operation. … We look forward to working with lawmakers who support retirement security as this measure is considered by the full Senate and, hopefully, its ultimate enactment.”

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