Products July 29, 2021

Investment Product and Service Launches

Vanguard to launch two active funds, reopen Wellington fund; As You Sow issues corporate 401(k) sustainability scorecard; MIM broadens investor access to public fixed income strategies; and more.

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Art by Jackson Epstein

Art by Jackson Epstein

Vanguard to Launch Two Active Funds, Reopen Wellington Fund

Vanguard has filed initial registration statements with the U.S. Securities and Exchange Commission (SEC) to introduce two new active fixed income funds: Vanguard Core-Plus Bond Fund and Vanguard Multi-Sector Income Bond Fund. The funds are designed to meet the needs of clients seeking actively managed “core” and “satellite” bond portfolios and will augment the lineup of higher-alpha, diversified fixed income strategies managed by Vanguard Fixed Income Group.

“Vanguard has invested heavily in active management talent and capabilities for decades, resulting in a lineup of active bond funds that leverage proven portfolio manager expertise and help clients achieve investment success,” says Kaitlyn Caughlin, head of Vanguard Portfolio Review Department. “Vanguard’s client-centric approach to product development has produced a carefully curated line-up that drives long-term value and meets evolving investor needs.”

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The fund may invest beyond the U.S. investment-grade bond market in areas such as high-yield corporate securities and emerging markets debt of all credit quality ratings. Core-Plus Bond will be differentiated from Vanguard Core Bond Fund in its incremental flexibility across higher-alpha potential sectors, particularly in its greater exposure to high-yield and emerging markets. The fund will have an estimated expense ratio of 0.30% for Investor Shares and 0.20% for Admiral Shares, compared with an average expense ratio of 0.48% for industry peers.

Multi-Sector Income Bond will offer exposure primarily to U.S. investment-grade securities, U.S. high-yield corporate securities, and emerging markets debt of all credit quality ratings. Multi-Sector Income Bond will have an estimated expense ratio of 0.40% for Investor Shares and 0.30% for Admiral Shares, compared with an average expense ratio of 0.98% for industry peers.

Vanguard expects to make Core-Plus Bond available to investors in the fourth quarter of 2021 and Multi-Sector Income Bond available for public investment later.

Vanguard also announced it will reopen Vanguard Wellington Fund to all investors immediately, due to improved fund liquidity and capacity. The fund is managed by Wellington Management Company LLP and has been closed to new financial advisory, institutional, and intermediary investors since 2013.

As You Sow Issues Corporate 401(k) Sustainability Scorecard

As You Sow released a new corporate 401(k) sustainability scorecard that grades companies on their retirement plan investments.

“No one knows what investments they own or understands that we are profiting from our own destruction and adding risk to our portfolios. Once people know what they own they will demand change. Our new scorecard shines a bright light on this,” says Andrew Behar, CEO of As You Sow.

More than 100 million people are invested in retirement plans in the U.S. with assets exceeding $10 trillion, with much of it in funds managed by major asset managers like Vanguard, BlackRock, Fidelity, and TIAA. As You Sow has built a suite of Invest Your Values tools that show every investor precisely what they own; some funds support justice and sustainability, others are invested in extraction and risk.

“Our hope is that the company will listen to their employees when they are demanding retirement plan options that avoid the financial and ecosystem risks of rainforest destruction and climate change,” says Behar.

Amazon.com and Comcast are the first companies analyzed in the new 401(k) scorecard. 

These first two scorecards will be followed by additional companies from the S&P 500. Previous research has found that few retirement plans offer sustainable investment options that avoid risk sectors like big oil, coal-fired utilities, weapons of mass destruction, cluster munitions, prisons, and companies that score poorly on gender equality.

Most employees across the nation are unaware their retirement plan investments are profiting from environmentally and socially risky companies, says As You Sow in a press release. The financial risks include stranded assets, reputational risk, and other negative impacts of unsustainable business practices that can destroy shareholder value.

The Corporate 401(k) Sustainability Scorecard grades retirement plans on seven environmental and social issues, including a breakdown of how each investment option is rated.

Two solutions are offered to address the risk of unsustainable investments—first, companies should work towards making the default investment option a sustainable fund, and second, companies should make sure sustainable investment options are at least offered in the retirement plan.

MIM Broadens Investor Access to Public Fixed Income Strategies

MetLife Investment Management (MIM) announced it has completed the first phase of a collective investment trust (CIT) offering with SEI Trust Company (STC) as the CIT trustee. MIM’s suite of CITs will expand investor access to its public fixed income strategies and capabilities, particularly for the defined contribution (DC) market.

Jude Driscoll, head of public fixed income for MetLife Investment Management, says, “This CIT platform is a natural extension of MIM’s existing capabilities. For more than 20 years we have built a successful business managing pension and other institutional client assets, and as the defined benefit and defined contribution markets evolve, we recognize the need for a holistic defined contribution platform that encompasses a range of strategies.”

The full MetLife Investment Management family of CITs include the MetLife Short Duration 1-3 Year Collective Trust; MetLife Short Duration 1-5 Year Collective Trust; MetLife Intermediate Credit Collective Trust; MetLife Credit Collective Trust; MetLife Core Fixed Income Collective Trust; MetLife Core Plus Collective Trust; MetLife Long Credit Collective Trust; MetLife Long Government/Credit Collective Trust; MetLife High Yield Collective Trust; MetLife High Yield Mid-Grade Collective Trust; MetLife Emerging Market Debt Collective Trust; and MetLife Multi-Sector Opportunistic Collective Trust.

“Plan sponsors and their consultants are keenly aware that plan participants are looking for growth opportunities and yield before and after retirement. We believe that our platform, which includes strategies across the yield curve and asset classes, offers retirement plans a range of options to help attain their goals,” adds Driscoll.

Enfusion Creates Customized Trading Workflow for GSAM

Goldman Sachs Asset Management (GSAM)’s Alternative Investments & Manager Selection (AIMS) co-investment business has selected Enfusion to provide investment management technology solutions and middle- and back-office managed services.

Enfusion created a custom unified solution via application programming interface (API) so that AIMS can import data across instruments into the Enfusion platform from its proprietary execution management system (EMS) in real-time, providing a holistic view of a fund for portfolio managers and the risk team. Enfusion’s front to back-office platform and APIs allow the fund’s portfolio managers to manage orders across all asset classes.

In addition to creating a centralized repository of trade data and activity, the cloud-based solution will track portfolio positions to ensure transparency across the fund and facilitate profit and loss (P&L) and risk monitoring and reporting at the fund and holding levels.

To complement the integration of these solutions, Enfusion’s managed services team will manage reconciliation and trade capture, as well as investigate breaks and make necessary adjustments. Outsourcing these efforts will allow the AIMS team to focus more on core trading activity, streamlining the investment process.

Thomas Kim, CEO of Enfusion, says, “Increasingly, our clients are looking for new ways to scale and reconcile between systems. Our primary focus has and will always be to solve these complex industry challenges, leveraging the solid foundation we’ve built, while also working with partners like Goldman Sachs Asset Management to customize a solution set that meets their needs in any given scenario.”

T. Rowe Price Adds Retirement Blend Funds to Target Date Lineup

T. Rowe Price Group, Inc. has launched its Retirement Blend Fund series, a mix of active and passive investment strategies.

“We understand everyone’s path to retirement is different and are pleased to deliver greater choice to the target-date marketplace through the new Retirement Blend Funds,” says Wyatt Lee, portfolio manager and head of target date strategies, multi-asset. 

The Retirement Blend strategy has been in place at T. Rowe Price since 2018 but it was previously available only in the collective investment trust (CIT) format. This mutual fund series extends the firm’s Retirement Blend approach to a wider range of investors for whom a mutual fund is the preferred or most appropriate vehicle.

The Retirement Blend Funds use the enhanced glide path and the same diversification and tactical asset allocation as T. Rowe Price’s existing retirement series of target-date portfolios.

All of T. Rowe Price’s target-date portfolios, including the new Retirement Blend Funds, are managed by the same portfolio management team: Lee and portfolio managers Kimberly DeDominicis and Andrew Jacobs van Merlen.

Like T. Rowe Price’s other target-date funds, the Retirement Blend Funds use a unitary fee structure, where an all-inclusive management fee rate is set at the top level. Depending on the target date, or vintage, the range of net expense ratios for the Retirement Blend Funds is 0.34% to 0.44% for the Investor Class shares and 0.19% to 0.26% for the I Class shares. Fund vintages are available in five-year increments from 2005 to 2065.

The Retirement Blend Funds’ minimum initial investment is $2,500 for the Investor Class shares and $1,000,000 for the I Class shares.

Products July 28, 2021

A $500 Step Towards Financial Wellness

The nonprofit financial wellness provider SaverLife has teamed up with the KFC Foundation to meet the straightforward but ambitious goal of ensuring KFC workers can amass $500 in emergency savings.

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This week, the KFC Foundation, an independent 501(c)(3) non-profit organization primarily funded by KFC franchisees, launched an innovative emergency savings program for KFC employees; in its goals and approach, the program reflects some of the broader financial wellness trends that are reshaping the employee benefits landscape.

The savings program was created in partnership with SaverLife, a national non-profit fintech company that helps working families pursue prosperity through modest-but-regular savings. Formally, the program is known as MyChange with SaverLife. It was piloted with some KFC employees last year, according to the firm, and it is now being rolled out nationally.

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Though there are other objectives, MyChange is primarily designed to help KFC team members build at least $500 in short-term savings while instilling lasting positive savings behaviors.

“To be able to offer these types of resources means a lot,” says Justin Stewart, a KFC franchisee and the board chair of the KFC Foundation. “Programs like MyChange with SaverLife help us develop the financial acumen of our team members, setting them up for success in their future, while also strengthening our organization from the ground up.”

The program is relatively straightforward in its approach, relying on scalable technology and gamification to encourage participation. Eligible employees of KFC corporately-owned and franchisee-owned restaurants who sign up and enter the Savings Match Challenge will get a $20 sign-up bonus, and by saving at least $10 a month, they will receive a $1-for-$1 match of up to $40 per month over a six-month period. The goal is to get workers to create a $500 short-term emergency savings fund—or boost their current savings by $500.

In an email to PLANADVISER, Emma Horn, managing director of the KFC Foundation, said it was not hard to build consensus on the KFC Foundation’s board about the importance of this program.

“The heart of what the KFC Foundation does is take care of KFC restaurant employees across the U.S.,” Horn wrote. “Having an emergency fund has always been important and valuable. The uncertainty that came with the pandemic emphasized the need to create a program like MyChange with Saverlife to help equip KFC restaurant employees with resources that would help them grow their financial knowledge, build a habit of saving money, and create a short-term emergency savings fund.”

As Horn explained, the program is viewed as a complement to other existing programs.

“The KFC Foundation offers charitable assistance programs for eligible KFC restaurant employees to help them earn their GED, go to college, make it through a hardship or crisis and build their financial knowledge,” she said. “We created this program to equip KFC restaurant employees with valuable financial skills to create lasting savings behaviors. The programs we offer KFC restaurant employees, made possible by the support of our franchisees, show them that we care and that we’re invested in their personal development and wellness, which leads to having a stronger organization.”

Asked if she expects many of KFC’s peers in the restaurant industry to move in a similar direction, Horn is hesitant to make any specific predictions. However, she noted that the program has already sparked a strong positive response from KFC’s workers.

“While we can’t speak to what our peers may do, the KFC Foundation’s charitable assistance programs are great resources for eligible KFC restaurant employees and help KFC franchisees attract and retain top talent in their restaurants,” Horn said. “We hear time and again how grateful and proud KFC restaurant employees are to work somewhere that these types of opportunities are available.”

Reflecting on the progress her nonprofit organization has made since its founding 20 year ago, Neha Gupta, vice president of marketing for SaverLife, tells PLANADVISER that early on, the organization provided in-person, one-on-one financial coaching to people in need. Staring six years ago, SaverLife embraced a technology-focused approach designed to deliver financial wellness coaching and simple, gamified savings tools at significant scale.

“We try to anchor people around the $500 emergency savings figure because that is about the cost of a single unexpected financial challenge—a tire change or a new appliance,” Gupta says. “Of course, getting people to $1000 or even higher is going to be better, but for lower-income and minimum wage workers, we have to be realistic. Many of the people we work with are starting out from a place of living paycheck to paycheck.”

Gupta says she has high hopes for the partnership with the KFC Foundation, citing success seen in working with the national clothing retailer Levi via its Red Tab Foundation.

“These corporate-linked nonprofit foundations can support people in a way that the internal human resources departments cannot,” she explains. “Formerly, these types of foundations would focus on giving cash grants or emergency loans. Increasingly, alongside the broader shift in focus towards promoting financial wellness, these organizations are promoting self-help, and they are doing so by making matching savings contributions, for example. We know from the 401(k) world the importance of matching and messaging.”

Gupta says one lesson her organization has learned since taking its approach digital is the importance of promoting engagement—and not just upon the launch of a new savings program.

“To this end, we have really worked hard on improving the gamification aspect, setting up store versus store participation competitions, for example,” she says. “One very interesting thing we’ve realized is the power of offering even simple prizes or incentives. You can inspire people to enroll and save more merely by raffling off a few nice pairs of socks. In fact, for whatever reason, that’s a very popular strategy right now—giving away a nice pair of branded socks to those who enroll.”  

Gupta agrees that entities like SaverLife and the KFC Foundation, working in concert, can have a direct positive impact on peoples’ financial lives. However, she warns, the lack of broad-based financial wellness in the U.S. is a systemic and pernicious problem that is going to require a society-wide approach to redress.

“A huge part of what we are thinking about right now is how we can have a positive impact at the systemic level,” Gupta says. “We are seeking ways to work with policymakers and communities to get the necessary financial support to millions of people. We are very excited about the new child tax credit, for example, and we are big advocates of such policies. We are trying to make sure our members are aware of this new credit and the steps they have to take to get the credit.”  

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