Investment Product and Service Launches

WisdomTree Restructures European and Japan Equity Funds; SSGA Launches Sector Rotation SPDR ETFs; Vanguard Files SEC Registration for Commodity Strategy Fund; and more.

Art by Jackson Epstein

Art by Jackson Epstein

WisdomTree Restructures European and Japan Equity Funds

WisdomTree, an exchange-traded fund (ETF) and exchange-traded product (ETP) sponsor and asset manager, has implemented changes for the WisdomTree Dynamic Currency Hedged Europe Equity Fund (DDEZ) and the WisdomTree Dynamic Currency Hedged Japan Equity Fund (DDJP).

As of April 2, both funds will transition to transparent, models-based actively managed multifactor strategies. The funds’ expense ratios remain unchanged.

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According to WisdomTree, the WisdomTree Europe Multifactor Fund (EUMF), formerly the WisdomTree Dynamic Currency Hedged Europe Equity Fund (DDEZ), is a transparent, actively managed strategy, and invests in European equity securities that exhibit potential for returns based on proprietary measures of factors such as value, quality, momentum and correlation.

The WisdomTree Japan Multifactor Fund (JAMF) seeks to achieve income and capital appreciation through a transparent, actively managed strategy, and invests in Japanese equity securities exhibiting potential for returns based on proprietary measures of factors such as value, quality, momentum and correlation. 

“WisdomTree’s Modern Alpha approach to multifactor investing is designed to provide higher alpha potential with lower volatility and all the benefits of the ETF structure,” says Jeremy Schwartz, WisdomTree EVP and global head of research. “We continue to see value in this approach and are excited to expand our offerings with the restructuring of EUMF and JAMF.”

SSGA Builds Launches Sector Rotation SPDR ETFs

State Street Global Advisors (SSGA) launched two actively-managed, sector rotation SPDR exchange-traded funds (ETFs) with tactical allocation strategies. The SPDR SSGA US Sector Rotation ETF (XLSR) and SPDR SSGA Fixed Income Sector Rotation ETF (FISR) are managed by the firm’s Investment Solutions Group (ISG).

“These two new active ETFs highlight three key qualities of State Street Global Advisors – the power of ISG’s sophisticated tactical asset allocation, the world’s largest and most liquid suite of equity sector ETFs, and our experience in managing over $400 billion in fixed income assets,” says Noel Archard, global head of SPDR Product at State Street Global Advisors. “In bringing these attributes to a wider audience through our SPDR ETF family, we are providing clients with alpha-seeking solutions to enhance core portfolios.”

The SPDR SSGA US Sector Rotation ETF seeks to provide capital appreciation by overweighting or underweighting S&P 500 Sector ETFs based on ISG’s sector return forecasts and research, which includes a proprietary, quantitative sector selection model. ISG uses the model results and applies qualitative judgment to construct a portfolio of sector ETFs that seeks to maximize returns while meeting risk targets.

The SPDR SSGA Fixed Income Sector Rotation ETF seeks to provide total return by allocating yield-generating ETFs across the fixed income spectrum. FISR uses a tactical investment strategy based on ISG’s Fixed Income Sector Rotation Model, followed by fundamental review by the portfolio management team. The model provides views on the direction of rates and spreads across the maturity and credit quality spectrums.

Vanguard Files SEC Registration for Commodity Strategy Fund

Vanguard has filed a preliminary registration statement with the Securities and Exchange Commission (SEC) for the Vanguard Commodity Strategy Fund. The actively-managed fund, expected to launch in June , is said to offer investors added portfolio diversification, along with a potential hedge against inflation risk by investing primarily in commodities and treasury inflation protected securities (TIPS), according to Vanguard.

“The Commodity Strategy Fund will be a low-cost, broad-based option for advisers and institutional investors seeking additional diversification and inflation protection for a well-balanced portfolio,” says Matt Brancato, head of Vanguard’s Portfolio Review Department. “We believe the commodity exposure can serve as an effective inflation hedge and also provide value in mitigating stock and bond risks.” 

Vanguard’s new fund will offer Admiral Shares at a $50,000 investment minimum, with an estimated expense ratio of 0.20%.

The fund is seeking to outperform the Bloomberg Commodity Total Return Index by investing in commodity-linked derivative investments, such as commodity futures and swaps, collateralized by a mix of Treasury bills (T-bills) and short-term TIPS.

PineBridge Launches Fund Targeted to Domestic Equity Market in China  

PineBridge Investments, (PineBridge) has launched the PineBridge China A-Shares Quantitative Fund. The fund seeks to give global investors access to the domestic equity market in China through a quantitatively managed, active equity strategy that invests in equity and equity-related securities connected to the economic development of China. 

The fund is managed by PineBridge Investments Asia Ltd., with investment advice from Huatai-PineBridge Fund Management Co., an onshore Shanghai-based joint venture between PineBridge and Huatai Securities established in 2004.

“International index inclusion and continued economic liberalization in China are expected to drive substantial flows and increasing allocations towards China A-shares. The large and liquid domestic A-shares market aims to offer attractive, long-term return opportunities from China’s growth and innovation, and finding the most attractive stocks in this dynamic market requires an established local presence,” says Anik Sen, global head of Equities, PineBridge Investments. “The onshore universe presents extraordinary alpha opportunities and we are thrilled to bring investors the combination of PineBridge’s strength in Asia and Huatai-PineBridge’s investment expertise in Mainland China.”

The fund’s reference index, the MSCI China A International Total Return Net Index, reflects the set of China A-shares for the international investor taking into consideration the progressive A-share inclusion and foreign ownership limits.

“The further weight increase of A-shares in the MSCI indices is a significant milestone for the opening of China’s capital market,” says Jack Lin, managing director and APAC head of Client Coverage at MSCI, “We are pleased that PineBridge has chosen MSCI China A International Total Return Index as the reference benchmark for its new fund.”

The PineBridge China A-Shares Quantitative Fund is domiciled in Ireland and registered for sale across Europe.

Plan Design, Education and Advice Can Improve Participant Retirement Savings

Defined contribution plan participants and non-participants surveyed by Natixis shared incentives that would encourage them to save or save more for retirement.

When asked for their outlook on their financial security in retirement, 44% of American workers who participate in a company-sponsored retirement plan believe they will be comfortable in retirement as long as they are careful with their spending, according to a Natixis survey of 1,000 American workers who are eligible to participate in a company-sponsored defined contribution (DC) plan—700 of whom participate and 300 who do not.

By generation, 43% of Millennials say they will be comfortable in retirement as long as they are careful with their spending, 37% of Generation X say the same, as do 48% of Baby Boomers. However, information gathered from the survey about savings indicates these employees may be unrealistically optimistic.

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The savings picture

Surveyed Millennials started saving for retirement at age 25, on average, and say they’ll need $822,789 to retire. With an average of $79,764 saved, they’ve reached nearly 10% of their goal. They expect to retire at age 61 and currently are 30 years old, on average. To reach their goal, they will need to save $23,969 annually.

Surveyed members of Generation X started saving for retirement at age 29, on average, and say they’ll need $980,466 to retire. With an average of $166,328 saved, they’ve reached 17% of their goal. They expect to retire at age 64 and currently are 45 years old, on average. To reach their goal, they will need to contribute as much as $42,849 annually.

Surveyed Baby Boomers started saving for retirement at age 32, on average, and say they’ll need to generate $1,018,488 to fund their retirement. With an average of $306,703 saved to date, they’ve reached 30% of their goal. They expect to retire at age 69 and currently are 64 years old on average. To reach their goal, they will need to save roughly $142,357 per year.

Barriers to saving and habits that hurt long-term savings

American workers who participate in a company-sponsored DC plan say daily living expenses (65%) are the biggest obstacle to saving more for retirement, followed by general debt (43%), housing costs (43%) and health care costs (32%). One-quarter say they’d rather spend money to enjoy life now.

For Millennial DC plan participants, daily expenses (61%), general debt (47%), housing costs (40%), education costs and student loans (28%) and health care costs (24%) are cited as obstacles to saving for retirement.

Among those who do not participate in their employer-sponsored DC plan, 34% say it is because their employer does not offer a match or the match isn’t big enough, and 32% report they have too much debt. Fifteen percent cite a need to pay off their student loans, and 13% say retirement is too far away to be a priority now. Fifteen percent say plan fees are too high, 14% report not enough flexibility and choice in investments, and 13% say plan participation is too complicated.

The survey found 27% of DC plan participants have taken a withdrawal from their plan, and when they’ve changed jobs, 22% have taken a lump-sum distribution without saving into another plan.

Match is an incentive to participate

Seventy-nine percent of DC plan participants say their employer offers a matching contribution. Across all generations, the top reason given for participating in their DC plan is the company match, which was cited by 56% of respondents overall (Millennials-56%, Generation X-56%, Baby Boomers-53%).

A bigger company match from their employer would incentivize the majority of Millennials (60%) and Generation X (65%) to save more into their company-sponsored defined contribution plan. Baby Boomers cite bigger tax incentives (59%) as the best way to get them to save more into their defined contribution plan.

However, if the match in their plan were decreased, the majority (74%) of participants say they would continue to save at the same rate, including 73% of Millennials, 75% of Generation X and 76% of Baby Boomers.

DC plan participants also cited the following as incentives to save more:

  • Bigger tax incentives (43%);
  • A higher contribution limit (24%);
  • Having a way to automatically increase their contribution level each year (21%);
  • Simplified rules and choices within the plan (18%);
  • A student loan repayment program offered through their employer (17%); and
  • Getting access to professional investment advice in their plan (15%).

Seventy-six percent of respondents say they would be more inclined to save if they could invest in a company-sponsored defined contribution plan on day one of employment, including 76% of Millennials.

According to the survey, doing some social good within their DC plans would incent more employees to save or save more. Among both DC plan participants and non-participants, 75% indicated they would like their investments to reflect their personal values. Sixty-one percent of respondents say they would be more likely to contribute/increase their contributions if they knew their investments were doing social good, including 66% of Millennials.

Three-fourths of survey respondents believe it is important to make the world a better place while growing their personal assets, and 62% are concerned about the environmental, social and ethical records of the companies in which they invest.

Just 13% of DC plan participants say their retirement plan offers environmental, social and governance (ESG) options, and 60% would like to see more in their plan offering, including 64% of Millennials.

Helping employees improve savings

Sixty-eight percent of employees surveyed believe employers should be required to provide matching contributions in their plans, and 54% believe individual contributions toward retirement savings should be made mandatory.

More than half (53%) say it is the government’s responsibility to provide universal access to a retirement savings plan.

Employers can help employees improve retirement savings by providing more education, as 64% of DC plan participants say they need more education from their employer about their workplace retirement savings plan. For example, less than one in five (14%) workers know the exact amount of the employee 401(k) contribution limit for 2019. In addition, nearly two-thirds (64%) of employees age 50 and older who are eligible to make catch-up contributions are not doing so.

When asked how they felt about market volatility, 41% of DC plan participants say they wish they better understood how volatility affects their investments.

The survey also found professional financial advice helps. Employees with financial advisers contribute a higher percentage of their salary to a company-sponsored defined contribution plan: 7.2% for advised versus 6.5% for non-advised participants. Less than half (48%) of DC plan participants rely on professional financial advice about saving and investing for retirement. Of those who don’t have access to professional financial advice through their company retirement plan, 24% say they wish they did.

The survey included 503 Millennials (23 to 38 years old), 249 Gen X (39 to 54 years old) and 248 Baby Boomers (55 to 73 years old.) Data was gathered in January and February 2019 by the research firm CoreData.

A white paper about the survey results may be found at www.im.natixis.com/us/research/defined-contribution-plan-participant-survey-2019.

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