To
help investors balance the need for generating income today, while also aiming
to drive portfolio growth to generate sustainable future income, global asset
manager Russell Investments has launched the Russell Multi-Strategy Income
Fund.
The
new fund, available via financial professionals, invests across a set of asset
classes with both income and growth potential using a team of specialist money
managers and strategies. Additionally, recognizing that market opportunities
will likely change over the course of an investor’s time horizon, the fund has
built-in flexibility to seek to adapt to risk and opportunities using dynamic
portfolio management. Russell
says the new fund is available for defined contribution (DC) retirement plans.
“The
demand for income solutions is as great as it has ever been, so this is driving
many investors to prioritize short-term income over long-term growth by
‘reaching for yield.’ In this pursuit they are potentially jeopardizing their
future income needs,” says Phill Rogerson, managing director, consulting and
product, for Russell Investments’ U.S. adviser-sold business.
The
fund invests in a broad range of globally diversified income-producing equity,
real assets and fixed-income securities. A team of specialist third-party
managers has been assembled based on their specific expertise in
income-producing investments, such as listed infrastructure, real estate investment trusts (REITs), global
equity, emerging market debt and global credit. Russell Investments also
directly manages a portion of the fund’s assets.
Brian Meath, senior
portfolio manager, and Rob Balkema, portfolio manager, have primary
responsibility for the management of the fund. “We are looking beyond bonds and
borders to deliver a truly global, multi-asset, income-oriented fund,” says
Meath.
A new report from Northern Trust finds many plan sponsors have reservations about taking a more active role in encouraging
specific levels of saving and providing projections of retirement income for participants.
Jim Danaher, managing director of defined contribution solutions at Northern Trust, warns employers that inadequate retirement savings among the employee population is a critical issue, in part because an older workforce can bring higher benefits costs and prevent new talent from joining up. Fully 60% of participants surveyed think they are behind schedule on savings, North Trust notes.
“Plan sponsors generally agree it’s important to encourage
saving for retirement,” Danaher says. “They have real concerns, however,
about providing participants with targeted recommendations—by salary level or
age—about how much they should be saving. The differing survey responses
suggest employer behavior needs to change as employees look for plan sponsors
to take a more active role in their retirement plans.”
At the same time, the study shows that policy issues, such
as management’s role as a fiduciary, must be clarified before senior leaders
will be comfortable providing the level of guidance sought by plan participants. According to the report, employees favor companies playing
an active role in their retirement plans—leading to better talent retention
among employers actively managing and improving their retirement benefits.
The findings come despite industry chatter that retirement
benefits are becoming a necessity during the hiring process, rather
than a perk or differentiator, Danaher tells PLANSPONSOR. Employees still highly value their retirement benefits, he says, and they want to work for employers that can help them achieve a successful retirement.
He points to survey results showing 88% of employees “strongly
favor” or “somewhat favor” employers that provide tools to help employees determine
if they are saving the correct amount for a financially secure retirement. Not
surprisingly, employees who say they favor their employers are generally
likelier to stay in their current job or company. In addition, more than four in
five employees surveyed said they would consider taking their employer’s advice
when determining their contribution to a 401(k) plan, demonstrating plan
participants continue to have a strong level of trust in their employers’
retirement benefit offerings (see “Employees
Value Financial Education from Employers”).
Improving DC Plans
Based on the employee survey results, Northern Trust
identified key themes to guide employers as they consider evolving their DC
plans to help employees achieve financial security in retirement. The following
plan principals were also associated with more positive employee perceptions of
their employers:
Get specific – Making specific salary deferral recommendations for age or salary
levels encourages participation in retirement planning, Northern Trust says,
and it shows employers care about employee outcomes.
Provide projections – Employees are
interested in receiving projections of gross retirement savings and of monthly/yearly
retirement income expectations, in addition to their current account balance.
Plan sponsors generally favor this idea, Northern Trust says, although some
expressed concern about the accuracy of projections.
Offer investments specifically for retirees
– Northern Trust suggests sponsors should add investment options specifically
designed to provide a stream of predictable income for retirees. Participants
said they would find such options attractive and plan sponsors conceptually
like the idea of investment options that could reduce rollovers from
company-sponsored plans to individual retirement accounts (IRAs), which may
have higher fees and less fiduciary oversight.
Northern Trust says interviews with senior executives at
large plan sponsors revealed that fiduciary concerns about making prescriptive
recommendations are a primary roadblock to more proactive management of DC
plans. But plan sponsors’ views were also influenced by factors unique to their
retirement plans, including the age or financial sophistication of their
workforce and whether their company still offers a traditional defined benefit
pension plan.
“The concept of employers taking a more active role in the
retirement plans of their employees has yet to catch on throughout the broader
marketplace,” adds Susan Czochara, senior product manager for defined contribution
solutions at Northern Trust. “However, simply providing participants with a DC
plan and retirement planning tools are not sufficient to ensure they will
adequately plan and save for retirement. Our survey indicates that employees
would welcome, rather than resent, a stronger guiding hand from their
employers. Based on these results and other trends in the marketplace, we view
proactive plan sponsors as becoming the new norm.”
The study represents the fifth installment in Northern
Trust’s “The Path Forward” research
series, exploring the future of defined contribution plans. In addition
to the online survey of 1,007 participants, the study is based on 43 in-depth
interviews with plan sponsors, whose plans have assets totaling more than $352
billion, and 10 plan consultants. Research firm Greenwald & Associates
conducted the survey and interviews.