Products November 21, 2019

Investment Product and Service Launches

Broadridge Financial acquires portfolio management solutions provider; Putnam offers new SMAs and model portfolios; Pacific Global adds ETFs to complement flagship fund; and more.

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Art by Jackson Epstein

Art by Jackson Epstein

Broadridge Financial Acquires Portfolio Management Solutions Provider

Broadridge Financial Solutions, Inc. has acquired ClearStructure Financial Technology, a global provider of portfolio management solutions for the private debt markets.

“ClearStructure’s component services enhance our existing multi-asset class, front-to-back office solution, providing our clients with a unique capability to access the public and private markets,” says Eric Bernstein, Broadridge’s head of asset management solutions. “This acquisition aligns to Broadridge’s strategy of providing a true cross-asset platform to enable asset management clients to have a single view into their entire book of business.”

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“We’re delighted to join Broadridge and to offer expanded portfolio management technology to create optimum investment workflow efficiency for portfolio managers, investment analysts, risk professionals, and operations teams,” says ClearStructure CEO Scott Turley.  

Putnam Offers New SMAs and Model Portfolios

Putnam Investments has begun offering seven equity model-based separately managed accounts (SMAs) and is expected to have six multi-asset model portfolios available to the marketplace by year-end.

“The demand for strategies in the model delivery structure is rapidly increasing as advisers seek products that are fee-efficient and tailored to meet their clients’ individual preferences,” says Robert L. Reynolds, president and CEO, Putnam Investments. “We think it is important to offer our investment strategies through a host of different investment vehicles to allow maximum flexibility for advisers as they develop individualized portfolio solutions that help generate their clients’ desired investment results.”  

The recently launched model SMAs developed by Putnam include U.S. Large Cap Value Equity; U.S. Large Cap Growth Equity; U.S. Multi-Cap Core Equity; Sustainable Leaders Fund; Sustainable Fund; and International Durable Equity.  

In addition to offering SMAs, Putnam will also enter the multi-asset model portfolio space later this year with six offerings. The model portfolios will use a systematic investing approach and be composed of Putnam’s active mutual funds and third-party exchange-traded funds (ETFs). The portfolios largely will be benchmarked to custom multi-asset portfolio benchmarks.

Each model portfolio will have a different risk profile as a result of the split between equities and fixed income, with increasing levels of equities in increments of 20%. Active investments will represent approximately half of each portfolio. 

Putnam’s Multi-Asset Model Portfolio lineup will include Income (targeted 0% equity); Balanced Income: (targeted 20% equity); Conservative Growth: (targeted 40% equity); Balanced Growth: (targeted 60% equity); Growth (targeted 80% equity); Aggressive Growth (targeted 100% equity).

The portfolios will be managed by Putnam’s Global Asset Allocation team.

Pacific Global Adds ETFs to Complement Flagship Fund

Pacific Global ETFs has added two income-focused exchange-traded funds (ETFs) to its suite of actively managed, income-focused investment strategies.

The new funds, Pacific Global International Equity Income ETF (NYSE Arca: IDY) and Pacific Global Focused High Yield ETF (NYSE Arca: FJNK), are designed to complement Pacific Global ETFs’ flagship fund, Pacific Global US Equity Income ETF (NYSE: USDY).

“We’re excited about the launch of our income-focused ETFs that build on the more than 150-year legacy of Pacific Life,” says Anthony J. Dufault, managing director of Pacific Global ETFs. “We constructed our ETFs with a focus on addressing investors’ needs for income-producing strategies, which is especially important with today’s low interest rates.”

Federated Investors Reorganizes Investments of PNC Capital Advisors

Federated Investors, Inc. has acquired certain components of the PNC Capital Advisors LLC (PCA) investment management business. The transaction involved the reorganization of 18 PNC equity, fixed-income and liquidity mutual funds into 16 corresponding Federated mutual funds and the transition of a five-person Cleveland-based international equity portfolio management team from PCA to Federated. The acquisition also included a portion of PCA’s separate account and separately managed account businesses. 

The reorganization of $14.0 billion in assets comprised approximately $11.3 billion in liquidity assets, $2.3 billion in equity assets and $450 million in fixed-income assets. Each mutual fund reorganization was approved by PNC fund shareholders.

“This transaction builds upon Federated’s long-term relationship with PNC and provides the shareholders of the funds and other PNC customers access to Federated’s diverse range of investment strategies, proven performance and extensive customer service capabilities. Federated continues to seek alliance and acquisition opportunities in the U.S. and throughout the world,” says J. Christopher Donahue, president and chief executive officer of Federated Investors. “We also are pleased to offer the strong historical performance of the international funds to our customers as complements to our existing range of international equity options.”

The three fundamentally driven international equity funds that are now part of the Federated complex inherit the performance established by the Cleveland-based investment management team. Polaris Capital Management had served as sub-adviser to the value component of the PNC International Equity Fund and has been retained as sub-adviser for the Federated International Equity Fund.

More information on fund name changes can be found here.

Compliance November 21, 2019

What Plan Sponsor Clients Should Consider Before Joining an Open MEP

Providers of open MEPs are likely to create many different versions, and it has yet to be determined how much fiduciary responsibility plan sponsors will shoulder, MassMutual says

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While many proponents of the Setting Every Community Up for Retirement Enhancement (SECURE) Act are calling open multiple employer plans (MEPs) a game changer for the retirement plan industry, MassMutual has just issued a white paper detailing what employers might want to consider before joining an open MEP.

Certainly, the legislation would help the nearly 40 million Americans employed by companies with fewer than 100 employees that do not offer a retirement plan, MassMutual says in its report, “Open Multiple Employer Plans: What Open MEPs May Mean for Your Business.” Fifty-three percent of businesses with fewer than 50 employees do not offer a retirement plan.

A recent Nationwide survey of business owners with 500 or fewer employees found that 59% think the SECURE Act would have a positive impact on their ability to offer a 401(k) plan. Eighty-four percent think it would make it easier for them to offer a 401(k) plan.

Eighty-eight percent think offering a 401(k) plan provides both their businesses and their employees tax advantages, and 88% think it helps them recruit top talent. Just slightly less, 86%, think it helps with employee retention.

“Open MEPs would streamline plan administration and fiduciary oversight for sponsors,” Caroline Boyd, head of strategy for MassMutual’s Workplace Solutions, tells PLANADVISER. “One of the biggest benefits of open MEPs for an employer is that they can reduce their liability depending on which model they choose—3(38) or 3(21) fiduciary oversight and/or 3(16) plan administration.”

Boyd reminds sponsors that open MEPs do not absolve them completely of fiduciary responsibilities. “One of the myths about open MEPs is that you can shift all of your fiduciary liability to the plan provider,” Boyd says. “But it’s really a shared fiduciary liability. Employers are still going to be responsible for getting the right payroll information to the sponsor and for handling distributions, loans and hardship withdrawals.”

This is why MassMutual recommends sponsors entering an open MEP hire an experienced third-party administrator to handle 3(16) responsibilities, Boyd says.

In addition, MassMutual says in its white paper, “Open MEPs are likely to come in many ‘models,’ as plan providers create their own version of a multiple employer plan. Pricing will depend on the size of the plan, its design and the level of services provided.”

Further, since open MEPs will join together dozens of businesses from disparate industries, they could end up being complicated to manage and instead of lowering plan administration costs, they could increase them, Boyd says. One estimate says they will increase costs by four basis points, she notes.

MassMutual warns that the details of how open MEPs will work has yet to be determined: “Proponents sometimes describe Open MEPs as an easy-to-use, low-cost, turnkey solution for smaller employers who have been traditionally underserved by the retirement plan market. In our view, it is too soon to gauge how well open MEPs will deliver on all aspects of this promise.

“For starters, until the SECURE Act is signed into law, the DOL [Department of Labor] issues regulations and guidance, and retirement plan providers begin creating their own open MEP models, there is no way to know the specifics of how open MEPs will operate, the degree to which they will actually offer fiduciary and administrative relief, and whether they will provide the cost savings that some are suggesting they will,” MassMutual continues.

Indeed, Tom Reese, an investment adviser with Conrad Siegel, says the SECURE Act does not make it clear as to how much fiduciary responsibility will shift to a third party.

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