Compliance May 23, 2019

Senate and House Staff Already Discussing SECURE Act

Word on the Hill is that the Senate may decide to take up the House version of the SECURE Act as-is—and sooner rather than later.

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Melissa Kahn, managing director of retirement policy for the defined contribution team at State Street Global Advisors (SSGA), took time out of a busy schedule on Thursday to offer her expectations for what comes next following the House’s passage of the SECURE Act.

“Like many other industry stakeholders, we are thrilled with the step taken by the House today,” Kahn said. “This will hopefully prove to be a major step toward ensuring that workers can achieve a secure retirement. The SECURE Act covers so many different areas across retirement plan access and coverage, savings efficiency, lifetime income and more. It really is a great package in total.”

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Kahn said she and colleagues we’re happy to see the “huge bipartisan vote” cast in favor of the SECURE Act.

“Democrats and Republicans were able to come together and that is a great sign for American workers,” Kahn said. “Where it goes from here is the crucial next question.”

According to Kahn, there are already ongoing discussions taking place between House and Senate staffers about what will be the best way to move forward between the SECURE Act and the popular retirement-focused legislation known as RESA. Other sources suggested the Senate leadership has already filed to consider the SECURE Act under a unanimous consent agreement. This would mean that the Senate could quickly pass the bill, if no Senator objects.

“We have heard rumors that the Senate could move on the SECURE Act very quickly,” Kahn said. “I would not be surprised if we see Senate action very, very soon, in fact. Based on what we are hearing, it may be that the Senate decides they are just going to take up the House version of the SECURE Act as-is, or they may decide to enter a reconciliation process. But either way, I think this is going to happen, and I think it’s going to happen quickly.”

Stepping back, Kahn noted that she has been in the retirement business for some time now, and from her perspective, it is refreshing to be reminded that one is working in an area where there can be such strong bipartisan agreement.

“People in both political parties recognize that this is a pressing need for all of America,” Kahn said. “This is the biggest step forward for our industry since the Pension Protection Act. We are just about to publish our own analysis on social media and on our public policy page which argues that RESA and SECURE Act are the most significant and necessary retirement changes since the Pension Protection Act. And it’s about time for reform, because things have changed so much in our workforce and economy since PPA.”

Kahn’s optimistic perspective about the prospect for Senate action was echoed in the large number of written statements submitted to PLANSPONSOR in response to the SECURE Act’s easy House passage. In his statement, Financial Services Institute (FSI) President and CEO Dale Brown urged the Senate “to take up this critical legislation and pass it as soon as possible.”

Empower President and CEO Edmund F. Murphy III said Congress “has done a great service to American retirement savers by voting for the Setting Every Community Up for Retirement Enhancement Act of 2019.”

“The next stop is the Senate, where we hope these reforms move quickly,” Murphy said. “The Senate’s similar legislation, the Retirement Enhancement Savings Act, also is riding a bipartisan wave of support and swift action on these proposals lays the foundation for Congress to begin working on the next round of pension reform.”

Phil Waldeck, president of Prudential Retirement, also commended the House for its vote.

“The bipartisan SECURE Act is the most significant legislation aimed at bolstering America’s retirement system in more than a decade, and it provides for much needed access to workplace retirement plans, improved retirement savings, and guaranteed retirement income that cannot be outlived,” Waldeck said. “To keep this momentum going, we strongly urge the Senate to move swiftly on retirement security and pass this important legislation.”

Products May 23, 2019

Investment Product and Service Launches

American Century to offer ETFs with ActiveShares methodology, and Morningstar reveals global suite of bond indexes.

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Art by Jackson Epstein
Art by Jackson Epstein

Art by Jackson Epstein

American Century to Offer ETFs With ActiveShares Methodology

American Century Investments has announced it has filed for exemptive relief for actively managed, semi-transparent exchange-traded funds (ETFs) that will utilize Precidian Investments’ ActiveShares methodology. The structure will allow American Century to deliver investment strategies in these ETF vehicles without the daily holdings disclosure requirement of fully transparent ETFs.

“We’re pleased that we’ll be able to offer our clients another way to access our time-tested investment expertise with the tax advantages inherent in ETFs,” says Edward Rosenberg, senior vice president and head of ETFs for American Century.

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American Century joined JP Morgan Asset Management, BlackRock, Capital Research, Legg Mason, ClearBridge, Royce and Nationwide in licensing Precidian’s intellectual property. Precidian’s ActiveShares structure seeks to combine aspects of the traditional mutual fund with the efficiencies and flexibilities of an ETF, says American Century. Precidian’s ETF structure seeks to provide asset managers with the ability to generate excess return without daily disclosure of their proprietary strategies, while simultaneously creating significant improvements in tax efficiency, manager flexibility and lower operating costs.

The funds will be incorporated into American Century’s suite of ETFs. Other offerings include American Century Diversified Corporate Bond ETF (KORP), American Century Quality Diversified International ETF (QINT), American Century STOXX U.S. Quality Growth ETF (QGRO), American Century STOXX U.S. Quality Value ETF (VALQ) and American Century Diversified Municipal Bond ETF (TAXF). STOXX is a registered trademark of STOXX Ltd.

Morningstar Reveals Global Suite of Bond Indexes

Morningstar, Inc. has introduced a global suite of bond indexes that represent all major fixed-income markets and asset classes. These indexes are designed to serve as portfolio benchmarks and building blocks for portfolio construction. 

The Morningstar bond indexes define the opportunity set for fixed-income investors in a portfolio-friendly structure by striking a balance between breadth of market coverage and investability, with an emphasis on liquid, tradable securities.

“Fixed income plays an essential role in helping investors achieve their financial goals,” says Sanjay Arya, head of Indexes at Morningstar. “Understanding the underlying market is key to improving investment outcomes, and it is our belief that the democratization of information levels the playing field for everyone across the investment ecosystem. We have constructed a comprehensive global family of bond indexes that represent discrete asset class exposures, without any gaps or overlap.”

“Bond indexing is challenging; yet indexes are more important than ever—as tools for portfolio construction and as bases for investment products,” says Dan Lefkovitz, strategist for Morningstar Indexes. “We want to better reflect the investable market while also offering transparency into critical exposures, such as interest-rate sensitivity, credit quality, and sector allocation.” 

The launch of a new index suite is part of Morningstar’s broader investment in the fixed-income space. The company recently updated its fixed-income categories, forming intermediate core bond and intermediate core-plus bond categories. To enable more accurate, consistent and comparable analysis, Morningstar is transitioning from manager-reported to calculated fixed-income data, effective July 31, for portfolios dated as of June 30. Select countries that offer calculated data today, such as Canada, will be transitioned to the global methodology in the near future.

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