Products June 9, 2022

Investment Product and Service Launches

Nationwide adds two new death benefit features; Putnam Investments to launch five new investment strategies; and Broadridge launches multi-account collective investment trust fund.

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Art by Jackson Epstein

Art by Jackson Epstein





Nationwide Adds Two New Death Benefit Features

Nationwide has announced the launch of enhanced legacy features to the Nationwide defined protection annuity, a registered index-linked annuity.

The two new death benefit features, which are available at no extra cost, are designed to fit the emerging needs of financial professionals and their clients in today’s challenging economic environment.

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The return of the premium death benefit feature guarantees beneficiaries will receive no less than the original premium invested in the annuity. It is automatically added if the annuitant and co-annuitant are both 75 years old or younger on the application sign date.

The spousal protection feature protects both spouses and provides a death benefit on both of their lives, even on qualified contracts.

Nationwide DPA, which was created with product development partner Annexus, also provides three defined protection levels which limit negative performance. This allows clients to select how much of their investment—90%, 95% or 100%—will be protected from market losses and helps determine their performance opportunities. DPA also features a variety of index strategies that can offer upside potential and be tailored to fit a broad range of investment objectives.

Putnam Investments to Launch Five New Investment Strategies

Putnam Investments has announced that the firm will bring three active fixed-income and two active quantitative equity exchange-traded funds to the market, all with an environmental, social and governance focus, following completion of the regulatory process.

The two quantitative equity ESG strategies will be sub-advised by Putnam affiliate PanAgora Asset Management, Inc. Putnam will be the sponsor/investment adviser on all five transparent ETFs.

Additionally, the new fixed-income and quantitative equity ESG ETFs, along with the existing Putnam Sustainable Leaders ETF and Putnam Sustainable Future ETF, will serve as underlying investment components within the firm’s ESG-focused target-date series, the Putnam Sustainable Retirement Funds. This new suite will be implemented in the coming months through a repositioning of the existing Putnam RetirementReady Funds target-date series.

The Putnam ESG Core Bond ETF will seek high current income consistent with what Putnam believes is prudent risk by investing mainly in a diversified portfolio of investment-grade fixed-income securities, with a focus on companies or issuers that Putnam believes meet relevant ESG criteria. The fund will invest mainly in investment-grade bonds of governments and private companies with intermediate- to long-term maturities (three years or longer). The portfolio managers are Michael Salm, Andrew Benson and Sri Mahanti.

The Putnam ESG High Yield ETF will seek high current income, with capital growth as a secondary goal when consistent with achieving high current income. The fund will invest mainly in bonds that are below investment grade that are obligations of U.S. companies or issuers and/or have intermediate- to long-term maturities (three years or longer). The fund will focus on companies or issuers that Putnam believes meet relevant ESG criteria. The portfolio managers are Rob Salvin and Norm Boucher.

The Putnam ESG Ultra Short ETF will seek as high a rate of current income that Putnam believes is consistent with preservation of capital and maintenance of liquidity. The fund will invest in a diversified portfolio of fixed-income securities composed of short-duration, investment-grade money market and other fixed income securities, with a focus on companies or issuers that Putnam believes meet relevant ESG criteria. The portfolio managers are Joanne Driscoll, Andrew Benson and Michael Lima.

The Putnam PanAgora ESG International Equity ETF will seek long-term capital appreciation by investing mainly in common stocks of companies of any size outside the United States, with a focus on securities that PanAgora believes offer attractive benchmark-relative returns and exhibit positive ESG metrics. The portfolio managers are George Mussalli and Richard Tan.

The Putnam PanAgora ESG Emerging Markets Equity ETF will seek long-term capital appreciation by investing mainly in common stocks of emerging markets companies of any size, with a focus on securities that PanAgora believes offer attractive benchmark-relative returns and exhibit positive ESG metrics. The portfolio managers are George Mussalli and Richard Tan.

Broadridge Launches Multi-Account Collective Investment Trust Fund

Matrix Trust Company, a subsidiary of Broadridge Financial Solutions, Inc., has announced the launch of a new collective investment trust, the Matrix Trust Multi-Manager Stable Value Fund, in conjunction with Mesirow Financial as sub-adviser. Retirement plan advisers will now have access to the multi-account fund, which provides diversification in stable value with no minimum investment.

The fund builds upon Matrix’s existing CIT platform, providing Matrix custody clients and consultants as well as plan sponsors and recordkeepers access to the fund. Matrix Trust is the trustee of the fund and is assisted by Mesirow Financial as sub-adviser on the allocation to and performance monitoring of underlying stable value investments. The fund will initially invest in equal weights with four stable value products offered by Lincoln Financial Group, Great West Life and Annuity, New York Life and Transamerica for the stable value strategy.

As a newly created pooled fund investment option, the fund has no history or performance record. It is a CIT available as an investment option to certain tax-qualified, employer-sponsored retirement plans and is not available to the general public. Investments in the fund are not registered with the Securities and Exchange Commission, are not bank deposits insured by the Federal Deposit Insurance Corporation nor any other agency of the U.S. government, are not guaranteed by Matrix Trust Company and are subject to investment risks, including loss of principal.

The Markets June 9, 2022

In Many Ways, ESG Is Nothing New

While often spoken about as a new or emerging phenomenon, the practice of building portfolios that address environmental, social and governance concerns goes back to the late 19th century.

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During the 2022 PLANSPONSONR ESG Essentials Seminar, held live in Orlando ahead of the 2022 PLANSPONSOR National Conference, Bonnie Saynay, the managing director of ISS ESG, provided a detailed history of the use of environmental, social and governance factors by institutional investors and their fund managers.

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Saynay started by acknowledging that ESG is currently enjoying a moment in the institutional investor spotlight. Regulators in Washington, D.C., and in states across the union, are taking a close look at the development and distribution of ESG-focused investment products and services. Meanwhile, a significant portion of the U.S. investor population, across institutional and retail markets, say they want access to ESG-focused investment products and services.

However, the truth is that ESG investing, as a general matter, has roots going back more than a century. Saynay noted that, in 1898, the Friends Fiduciary Corporation launched a socially responsible investing fund that sought to meet the needs of Quaker investors concerned about firearms and alcohol. Later, in 1920, the Methodist Church in the United Kingdom started a program to help its members avoid certain types of “sinful” investments, and some 50 years later, the Pax World Fund was established with the goal of opposing militarism. When one looks back, Saynay said, the history is rich.

“So, suffice to say, the ESG issue has been evolving for a long time,” Saynay said. “One thing that is new, at least here in the United States, is the growing conviction that ESG investing is, in a sense, simply good investing. ESG investing is not about taking a values-based position. It is, in reality, the effort to take a full view of externalities and risks and how important factors could impact your returns.”

Of course, some ESG strategies involve negative screening that simply rejects certain stocks or entire sectors, potentially denting performance potential, but that’s not what ESG is all about in 2022, Saynay said. Instead, modern ESG investing is about leveraging the vast, rapidly growing pool of data and insights that pertain to factors directly impacting the performance of investment portfolios. Saynay listed off factors such as a company’s carbon footprint; its ability to manage waste; its impact on air quality and biodiversity; its water use; its impact on land degradation; its ability to attract and retain diverse talent; its ability to ensure good governance; its cybersecurity capabilities; and its transparency in corporate executive pay.

“As a point of reference, some 90% of S&P 500 companies are already disclosing ESG information in their recurring statements, and ESG issues are now a constant topic in earnings calls,” Saynay said.

When it comes to the retirement plan fiduciary’s perspective, Saynay said, some degree of caution when utilizing ESG is warranted, because the regulatory picture is complex and there are strict requirements for fiduciaries under the Employee Retirement Income Security Act. However, it is simply no longer the case that ESG is a fringe issue. Simply put, ESG factors are currently material to the performance of investment portfolios, and in that sense, plan fiduciaries may in fact have a duty to weigh the possibility of securing better performance by leveraging ESG considerations.

“Research also shows that about three-quarters of retirement plan participants surveyed say they would increase contributions if they could access ESG within their workplace savings plan,” Saynay said. “In addition, there is strong evidence that suggests retirement plan participants also have a greater, stronger connection with their workplace when the companies they work for speak about ESG issues and offer the opportunity to invest accordingly.”

Saynay said the ESG market of today is rapidly evolving, and there is particularly strong interest in the idea of “ESG integration.” As Saynay explained it, this approach sees asset managers utilize ESG data and frameworks to improve portfolio outcomes—rather than to achieve a particular social and environmental impact. Many asset managers are thus already directly coding ESG-focused information into the valuation models they utilize.

Speaking to the challenges associated with ESG implementation, Saynay pointed principally to the fluid and fast-expanding availability of potentially useful and economically material data.

“The opportunity set to use this data continues to grow at a rapid clip,” she explained. “One challenge stemming from this fact is that there is not any single governing body to help investors understand the information they are receiving or to help securities issuers know how they should be structuring and distributing such data.”

Saynay named as another challenge the difficulty of understanding how to work with third parties, such as assurance providers, which offer professional advice to companies on how to publicly disclose data and how to live up to the ESG promises they may have made to their clients.  

“From the asset manager perspective, if your trading system is supposed to be flagging something and it does not actually flag that development, that’s a problem,” Saynay said. “When it comes to ESG investing, due diligence and monitoring is so critical. You can’t just rely on fund names or representations without actually looking under the hood.”

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