Products December 21, 2017

Investment Products and Services Launches

BNY Mellon releases fund focused on income generation, and AI Insight announces new liquid alternative research.

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BNY Mellon Investment Management has announced the recent launch of Dreyfus Global Multi-Asset Income Fund, which began offering its shares on November 30, 2017. The fund uses an actively managed global multi-asset strategy that focuses on income generation.

BNY Mellon’s Dreyfus Corporation serves as the investment adviser of the fund, and Newton Investment Management (North America) Limited serves as the fund’s sub-investment adviser. Paul Flood and Bhavin Shah are the fund’s primary portfolio managers. Flood, the fund’s lead portfolio manager, is the lead manager of Newton’s global multi-asset income and multi-asset diversified return strategies. He joined Newton in 2006. Shah is an investment manager on the multi-asset team at Newton, and joined in June 2011.

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“With the launch of Dreyfus Global Multi-Asset Income Fund, we see the potential for U.S. investors to capture attractive income streams globally, while diversifying risk through Newton’s multi-asset, active approach,” says Joe Moran, head of distribution, The Dreyfus Corporation, A BNY Mellon company. “Across the investment landscape we are seeing a shift away from one asset class products focused on a single region in favor of products that invest across the full spectrum of asset classes, and we are responding to that demand with what we believe are our ‘best-in-breed’ boutique offerings.”

Newton allocates the fund’s investments across asset classes seeking to construct a diversified portfolio focused on income generation, while maintaining the potential for long-term capital appreciation and managing the risk profile of the fund’s portfolio of investments. Newton allocates the fund’s investments among equity and equity-related securities, debt and debt-related securities, and, generally to a lesser extent, real estate, commodities and infrastructure in developed and emerging markets. The fund seeks to gain exposure to various asset classes principally through direct investments in securities, but the fund also may use derivative instruments and investments in other investment companies, including exchange-traded funds, and real estate investment trusts for such exposure.

“Investors need investment options that can deliver not only a current income stream, but that take a long-term approach to capital appreciation. We see Dreyfus Global Multi-Asset Income Fund, which aims to provide current income while maintaining the potential for long-term capital appreciation, as an opportunity that can provide for both needs,” says Flood. “The Fund draws upon Newton’s strong heritage of managing multi-asset portfolios, deep experience across global markets and rigorous fundamental analysis to unearth our highest-conviction ideas for investors.”

The fund offers Class A (DRAAX), Class C (DRACX), and Class I (DRAIX) shares with a minimum initial investment of $1,000. The fund also offers Class Y (DRAYX) shares generally with a minimum initial investment of $1,000,000.  Additional information regarding the fund can be found on Dreyfus’ website at www.dreyfus.com.

AI Insight Announces New Liquid Alternative Research

AI Insight Inc. will begin offering liquid alternative research reports in 2018, enabling advisers to compare the details and financial performance of alternative investment mutual funds.

Given the growing popularity of liquid alternatives and need for research around this asset class, the reports are designed to provide financial professionals with the information they need to understand the complexities of these investments, while making it easy for them to document for regulatory compliance.

AI Insight also announced the release of a whitepaper, Understanding the Complexities of Liquid Alternatives, which provides information around liquid alternatives, including regulators’ guidance and definition of liquid alternatives; different types of funds; supervision; and training and documentation recommendations.  

AI Insight wrote the whitepaper in response to regulators’ increased focus on liquid alternatives, including the release of a Financial Industry Regulatory Authority (FINRA) e-learning course, Understanding Alternative Mutual Funds in August 2017 and a recently reissued Investor Alert by FINRA and the Securities and Exchange Commission (SEC), Alternative Funds Are Not Your Typical Mutual Funds.

In addition to making the Understanding Alternative Mutual Funds FINRA e-learning course available on its platform, AI Insight currently offers over 80 CE courses eligible for .5 to 2 credits toward the CFP and other designations, as well as prospectus- and PPM-based research and training.

To support its liquid alternative research capabilities, AI Insight has hired Lucas Johnson, CFA, to help lead the initiative. Johnson was formerly a due diligence analyst with National Planning Holdings, Inc., where he specialized in due diligence reviews of liquid alternatives and other alternative investments.   

“We are excited to welcome Lucas to the team to help expand our liquid alternative research capabilities,” says Sherri Cooke, president and chief executive officer of AI Insight. “AI Insight is dedicated to providing advisers with the tools and resources they need to understand the risks, rewards and investment strategies of complex products.”  

More information on AI Insight’s e-learning catalog can be found here.
Compliance December 21, 2017

Tax Bill Affects IRA Conversions, Loans, 529s, NQDC Plans

The bill does not impact tax breaks for retirement savings, either by lowering the amount people can contribute or requiring some or all of the money to be invested as a Roth 401(k).

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The tax bill currently awaiting President Trump’s signature does not fundamentally change the tax breaks retirement plan participants receive, according to a law alert that The Wagner Law Group issued.

However, the Tax Cuts and Jobs Act does make some changes to Employee Retirement Income Security Act (ERISA) plans, including 529 college savings plans, and nonqualified deferred compensation (NQDC) plans. The tax bill will continue to allow taxpayers to recharacterize contributions made to a Roth individual retirement account (IRA) as contributions to a traditional IRA, as long as it is done before the due date of the taxpayer’s income tax return, including any extension. Importantly, this will not apply to the reverse situation, where an investor would take traditional IRA contributions and then recharacterize them as Roth.

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Currently, if an employee has taken out a loan from their retirement plan and has an outstanding balance when leaving the company, they have up to 60 days to roll over the outstanding loan balance to an IRA to avoid having the loans treated as taxable distributions. The tax bill extends this rollover period to the due date for filing their tax returns.

College savings plans are now amended to permit 529 account owners to take a $10,000 distribution each year and apply it not just to college expenses but also to public, private or religious elementary or secondary schools. The tax bill also permits rollovers from a 529 plan to an ABLE program, which is a tax-favored savings program for disabled individuals, as long as that program is owned by the designated beneficiary or a member of his or her family.

With respect to nonqualified deferred compensation (NQDC) plans, the bill modifies the definition of a “covered employee” at a publicly traded company, for whom an annual deduction up to $1 million applies. A covered employee includes the principal executive officer and principal financial officer, as well as the next three highly compensated employees, during the tax year. Furthermore, if an individual was a covered employee at a company in a taxable year after December 31, 2016, they will be considered to be a covered employee for all future years.

The bill also extends the application of this NDQC feature to include all foreign companies publicly traded through American depository receipts (ADRs) as well as certain types of large organizations that are not publicly traded, such as large private C or S companies. The bill eliminates commission and performance-based exclusions.

A tax-exempt organization will be subject to a 21% excise tax on any payment in excess of $1 million paid to its highest paid employees, and any excess parachute payment. An excess parachute payment is redefined as one exceeding three times the average annualized compensation for the five years preceding separation of service. With regard to transfer of employer stock to an employee in connection with their performance, the employee can defer,  for income tax purposes, the income attributable to the stock, but this must be done no later than 30 days after the stock is vested or becomes transferable, whichever comes first.

Offering additional commentary, the tax and accounting division of Thomson Reuters notes that the legislation allows 401(k) plans and other eligible retirement plans to help victims of federally declared major disasters occurring in 2016 by allowing “qualified 2016 disaster distributions” of up to $100,000 per individual prior to January 1, 2018. Such distributions are not subject to the 10% additional tax on early withdrawals.

Professor Jamie Hopkins, co-director of the retirement income program at the American College of Financial Services in Bryn Mawr, Pennsylvania, notes that while the 401(k) savings cap and Rothification of accounts did not end up in the final bill, neither did any additional measures to help Americans to save more for retirement. She says the removal of recharacterication of IRAs to Roth IRAs will discourage people from investing in Roth IRAs, since recharacterizations allowed them to undo conversions.

However, Tim Slavin, senior vice president at Broadridge, sees a number of positives for retirement plan participants. Most notably, he says, lowering the tax brackets for middle- and lower-income Americans could go a long way to motivate people who are not currently contributing to their 401(k) plan to sign up, or for those who are already in the plan, to increase their contributions. He also likes the flexibility being added to 529 plans. He thinks the new provisions will increase ownership and assets in 529 plans.

And the extension of time people are being given to repay outstanding loans without having the distribution being treated as taxable income is another improvement Slavin applauds. As he notes, “There are a lot of loans out there.”

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