Products November 1, 2018

Investment Product and Service Launches

SSGA Creates Fixed Income Data and Investment Publication, and Northern Trust Selects Diversity-Focused Firms to Offer Investment Insight.

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State Street Global Advisors (SSGA) has launched the SPDR Bond Compass, a quarterly publication intended to provide investment professionals with data and investment outlooks, which they can use to engage their clients on fixed income investment strategies.

The Bond Compass uses proprietary research from State Street Global Markets, the research and trading division of State Street, and provides insight into how investors are positioning their portfolios.

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“The overall sense from our metrics is that, despite recent volatility, investors remain cautiously optimistic about growth in the medium term,” says Michael Metcalfe, global head of macro strategy for State Street Global Markets. “Bond flows are indicating that investors view inflation as broadly benign and are not currently troubled by the inflationary outlook, a trend confirmed by our online metrics through early October.  What we are seeing is a re-assessment of risk and a review of holdings across the curve, but not wholesale protection purchasing.  If you add to that some modest buying of credit, the flows seem to indicate that long term investors are not panicking just yet.” 

The analysis shows current indicators of investor holdings in a variety of fixed income instruments and overlays buying and selling behaviors from the past quarter. These data points provide insight into investor sentiment and allow observers the opportunity to cut through the noise of the market to see the reality of the investor positions beneath.  The contrast between existing holdings and recent buying trends enables additional insight into investor outlook for exposure in the future. 

“Clients’ use of fixed income ETFs [exchange-traded funds] continues to expand and investors are increasingly looking for valued-added insights to tailor bond portfolios for the current market,” says Matt Bartolini, head of SPDR Americas Research at State Street Global Advisors. “Throughout the year we have seen investors de-risk credit portfolios, moving from fixed-rate high-yield ETFs to loans, while also shortening duration and adding some principal preservation. As a result, short-term government bond ETFs have seen a 59% increase in assets. The Bond Compass provides data driven insights our clients need, along with our timely investment outlook and the necessary tools for action.”

Northern Trust Selects Diversity-Focused Firms to Offer Investment Insight

Northern Trust Asset Management has selected five firms owned by people of color, women, veterans or people with disabilities to provide equity research helping inform the firm’s investment decisions.

The selected firms—Academy Securities, Inc.; CL King & Associates; Drexel Hamilton, LLC; Loop Capital Markets; and Telsey Advisory Group—offer specialized and differentiated perspectives that the firm says will provide insights as part of its equity research process. The effort stems from Northern Trust Asset Management’s 11-year-old “minority-owned brokerage program,” which this year set a target to execute 10% of all equity security trading commissions in common and collective funds with “minority brokers.”

“Investing has have evolved over the years, and diversity of thought in our research is a critical component to achieving the investment outcomes we seek,” says Chief Investment Officer Bob Browne, CFA. “We believe diversity drives innovative ideas, creative insights and expertise—and we’re pleased to welcome these five firms to our platform.”

Data & Research November 1, 2018

Many Retirees Fail to Consider Effect of Taxes

As a result, they may have lost the opportunity to save six years’ worth of income in retirement, according to a Nationwide Retirement Institute survey.

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Thirty-seven percent of retirees admit they did not consider how taxes would impact their retirement income, a Nationwide Retirement Institute survey found. As a result, the institute says, they may have lost the opportunity to save six years’ worth of income in retirement.

Sixty percent of pre-retirees, 70% of recent retirees, and 75% of those who have been retired for more than 10 years say they are only somewhat knowledgeable or not at all knowledgeable about tax planning.  Fifty-two percent of pre-retirees and 47% of recent retirees wish they better understood how their income in retirement will be taxed.

Fifty-one percent of future retirees say they are only somewhat or not at all knowledgeable about how tax brackets work, and 40% of future retirees did not know that someone in a high tax bracket might pay two to three times more in taxes than someone in a lower tax bracket.

Forty-six percent of recent retirees wish they had better prepared for paying taxes in retirement, and 24% said they have paid several thousands of dollars more in taxes than they had expected.

Eighty-two percent of those nearing retirement, 64% of those recently retired, and 62% of those retired for more than 10 years want to learn about taxes. Among those who work with an adviser, 85% of those nearing retirement, 82% of those recently retired and 68% of those retired over 10 years expect their adviser to help them plan for taxes in retirement. Thirty-eight percent of future retirees said they would switch advisers for someone who could help them plan for taxes in retirement.

“Building tax flexibility into a retirement income plan is crucial,” says Eric Henderson, president of Nationwide’s life insurance business. “Doing so allows you to use different types of investments and retirement accounts to potentially avoid higher tax brackets. Financial advisers can provide a fact-based estimate of taxes in retirement and a unique plan to address those costs.”

Among those retired more than 10 years, Social Security is their primary source of income for 49%. Among recent retirees, this is true for 43%. Twenty-five percent of those approaching retirement say that their 401(k) will be their primary source of income, followed by their pension (22%) and Social Security (20%).

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