Products September 10, 2020

Investment Product and Service Launches

MATC releases portfolio gallery with global asset managers; Ascensus adds advice and managed accounts services; New York Life partners with Visual Capitalist on data visualization platform; and more.

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Art by Jackson Epstein

Art by Jackson Epstein

MATC Releases Portfolio Gallery With Global Asset Managers

The Mid Atlantic Trust Co. (MATC) will launch the ModelxChange Gallery to provide access to portfolio construction and management expertise from global asset managers, with BlackRock, Franklin Templeton, Federated Hermes and Janus Henderson as part of the initial release. 

Franklin Templeton has released a suite of a dozen outcome model portfolios that provide targeted diversification among asset classes, regions and sectors, and that use a wide range of active, passive and smart beta investments. “Outcome model portfolios can help simplify allocation decisions and provide a solution that is more personalized than a target-date fund [TDF] in a retirement plan,” says Yaqub Ahmed, head of Franklin Templeton’s Investment-Only Division, U.S. Retirement and Insurance/Subadvisory. 

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BlackRock has made its LifePath target-date and risk allocation exchange-traded fund (ETF) models available to those advisers with plans and assets custodied at MATC. As the first TDF, LifePath has seen investors through more market ups and downs than any other TDF, BlackRock says. With the launch of LifePath target-date models on the ModelxChange Gallery, BlackRock is helping to provide more investors with low-cost, professionally managed portfolios of diversified investments that adjust over time. For plan sponsors and advisers, BlackRock is bringing a time-tested default investment alternative to the model marketplace. 

Janus Henderson and Federated Hermes will also be launching models using the ModelxChange Gallery. Janus Henderson will be launching six asset allocation models, including three ETF-based models as part of its Global Adaptive Capital strategy. The other three models from Janus Henderson, part of its Global Allocation strategy, are mutual fund models. 

Federated Hermes plans to offer 11 multi-manager target-date portfolios on the ModelxChange Gallery platform beginning on October 1. Designed specifically for defined contribution (DC) plans, Federated Hermes’ glide path models will take an open-architecture approach to investment selection that mixes active and passive mutual funds and ETFs. 

For retirement plan advisers and recordkeepers, ModelxChange supports ETFs, with a single, end-of-day execution price. Simultaneously, advisers managing those retirement plans can also incorporate those same models into the high-net-worth accounts with assets in custody with MATC. 

Ascensus Adds Advice and Managed Accounts Services

Ascensus is expanding the managed account services available to its institutional partners and clients. The firm now offers four personalized advice and managed account services, with plans to add more options in the future.

“The retirement industry is seeing a trend toward saver personalization, and we believe that managed account solutions are an important piece of that puzzle,” says Dan Basile, Ascensus’ head of product. “By investing in the technology to support choice in advice services, we’re better positioned to offer our partners the ability to implement their own fiduciary solutions moving forward. And, by expanding the managed account services Ascensus offers, we can give financial advisers the freedom to choose the option best suited to their clients’ goals.”

Ascensus now offers managed account services from Morningstar Investment Management, NextCapital, Russell Investments and Stadion. Institutional partners and financial advisers may choose to make one or several of these services available to clients during the plan proposal process.

“We will continue to leverage our purpose-built technology to offer our institutional partners expanded choice and enable them to deliver personalized account management services to their clients and savers,” says David Musto, Ascensus’ president and CEO.

New York Life Partners With Visual Capitalist on Data Visualization Platform

New York Life Investments, in partnership with Visual Capitalist, has announced the launch of Advisor Channel, a data visualization platform offering financial advisers easily accessible and digestible educational material on critical capital markets and investment trends. 

“Financial advisers are facing a rapidly evolving landscape with ever-changing client dynamics and expectations, shifting investment behaviors and pronounced market volatility—making it more crucial than ever that they have access to tools and platforms that sort signal from noise and distill valuable market insights into easy-to-access content,” says Ian Forrest, chief marketing officer at New York Life Investments. “Our newly launched Advisor Channel harnesses Visual Capitalist’s expertise in developing engaging, nuanced and data-rich visualizations alongside our commitment to providing high-quality educational resources, allowing us to deliver compelling and insightful material to our clients through a uniquely accessible medium.”

Advisor Channel is an online resource developed in partnership with Visual Capitalist, featuring regularly updated and data-driven educational infographics and charts on the noteworthy markets and economic trends affecting financial advisers. The data visualizations are also available as posters and can be printed and shared in accordance with the needs of financial advisers and their clients. 

“Advisor Channel’s illustrative style infographics and charts help financial advisers, at a glance, evaluate and understand an emerging market or economic trend, while also providing them with high-quality instructive material that they can, in turn, use to engage and educate their clients as they seek to continue to build long-term, lasting relationships,” Forrest says.

American Beacon Announces Launch of New Bond Fund

American Beacon Advisors Inc. has launched the American Beacon NIS Core Plus Bond Fund (A Class: NISAX; C Class: NISCX; Y Class: NISYX; R6 Class: NISRX). The fund’s shares became available on September 10.

Focused on current income and, secondarily, capital appreciation, the new fund seeks to achieve its objectives by investing in fixed-income securities. The fund’s portfolio managers employ an investment strategy combining top-down and bottom-up processes while using a relative-value approach to security selection, and also considering changes to the economy and market over time. 

“We look forward to working with American Beacon to support this new fund and make it a success,” says Bob Brooks, CEO of National Investment Services (NIS). “Many investors are seeking income with limited volatility in today’s market; this fund has the potential to capitalize on returns by taking a high-level, traditionally institutional approach and making it available for all investors.”

American Beacon serves as the manager of the fund while NIS serves as the sub-adviser. As sub-adviser, NIS will be responsible for the day-to-day portfolio management of the fund, including managing assets and allocating all investments. Founded in 1993, NIS focuses on offering differentiated, fixed-income strategies that seek to provide institutional investors with consistent performance and downside protection. The firm offers investors a wide variety of investment strategies, including traditional and alternative fixed-income options and dynamic fixed-income offerings tailored to meet a client’s investment objective or desired level of risk. 

“We are thrilled to launch this fund, our second of 2020 and our first in partnership with NIS,” Gene Needles, chairman and CEO of American Beacon and Resolute Investment Managers, says. “We respect NIS’ decadeslong record of delivering fixed-income strategies with competitive returns, and we believe our clients can benefit greatly from the team’s expertise.”

The fund is the first American Beacon investment product sub-advised by NIS. In December, American Beacon’s parent company, Resolute Investment Managers, announced the closing of its purchase of a majority interest in NIS.

Capital Group and American Funds to Release Updates for Target-Date Support Tool

Capital Group and American Funds have announced upcoming updates to American Funds ProView, a target-date tool that supports plan sponsors and intermediaries researching target-date providers. Additionally, the companies will be including the ability to compare underlying funds in firms’ target-date fund (TDF) series.

American Funds launched ProView in May 2016 to help financial intermediaries and plan sponsors compare managers’ target-date series, which often use different building block funds and/or approaches to glide path allocations.

According to recent Morningstar research, differences in underlying funds are a bigger driver of returns than differences in asset allocations or glide paths. With that in mind, the new capability will dig into underlying funds’ characteristics, such as manager tenure, analyst rating and risk-adjusted returns, says a press release on the tool. 

Compliance September 10, 2020

DOL Proposal Likely to Dampen Proxy Voting, Shareholder Engagement

As with its guidance related to environmental, social and governance investing, the Department of Labor’s stance on proxy voting and other forms of retirement plan investor shareholder rights has become a political football.

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George Michael Gerstein, co-chair of the fiduciary governance group at Stradley Ronon, commonly provides analysis to PLANADVISER Magazine on complex issues pertaining to the Employee Retirement Income Security Act (ERISA) and the many regulations promulgated and policed thereunder by the Department of Labor (DOL).

Gerstein’s latest comments, which are also summarized in detail in a post published to Stradley Ronon’s Fiduciary Governance Blog, are about the DOL’s recently published proxy voting rule proposal. Like many other retirement industry stakeholders, Gerstein is voicing concern that the proposal risks seriously chilling proxy voting activities and other forms of shareholder engagement executed by investment managers and other parties on behalf of retirement plan investors.

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“If adopted without modification, fiduciaries of plans, who include investment managers subject to ERISA, may shy away from voting proxies and participating in shareholder engagement on matters that do not demonstrably improve the value of the plan’s holding in the short-term,” Gerstein says. “Thus, the exercise of shareholder rights on environmental, social and governance [ESG] issues, the benefits of which may be long-term in nature, may indeed be squeezed out of proxy voting policies of ERISA plan fiduciaries.”

Gerstein is far from the only ERISA expert making this argument and wondering why the DOL, under the direction of President Donald Trump, is seeking new restrictions on shareholder engagement on behalf of retirement plan investors. The U.S. Securities and Exchange Commission (SEC) is also seeking to create restrictions around the use of proxy voting advisers by certain institutional investors. In fact, the SEC has already finalized newly restrictive rules in this area.

Now that he has had some time to review the DOL’s proposed approach, Gerstein says it represents the continuation of a game of political football that has been playing out for many years. He recalls how, starting with the Clinton administration in the mid-1990s, each presidential administration has taken a slightly different approach on this topic.   

“Ultimately, the administrations have gone back and forth as to whether a weighing of the costs and benefits associated with proxy voting is necessary for each such vote or whether such an analysis is reserved for unusually expensive votes or engagements,” Gerstein says.

In guidance published in 2016—during the very last days of the Obama administration—the DOL pointed out that proxy voting rarely entails a significant expenditure of plan assets, and, because the value of the vote or engagement may be long-term in nature, there was rarely an issue where the costs outweighed the benefits, Gerstein says. Moreover, the DOL’s 2016 guidance stated that, because many plans’ investments track indices, it is often necessary to engage issuer boards rather than to divest the plan’s exposure in that company.

“And so, as the DOL reasoned in Interpretive Bulletin 2016-01, the general rule was that proxy voting and shareholder engagement was permissible in most instances,” Gerstein says.

This state of affairs now appears set to change again, thanks to the efforts from the DOL and the SEC. As Gerstein explains, the DOL’s new proposal provides that a responsible plan fiduciary “must vote a proxy where the fiduciary prudently determined that the matter being voted upon would have an economic impact on the plan after taking costs into account.” Conversely, and more significantly, however, the plan fiduciary “must not vote any proxy unless the fiduciary determines that the matter being voted upon would have an economic impact on the plan after taking costs into account.”

“This begs the following questions,” Gerstein says. “How much evidence must the fiduciary marshal to demonstrate that a particular vote would have an economic impact on the plan’s investment? Does the benefit of engagement by a group of shareholders count? What exactly are the ‘costs’ that need to be considered? Successive administrations have largely fought over how often the ERISA fiduciary must undertake this cost-benefit analysis with respect to proxy voting and other shareholder rights.”

Gerstein says the new proposal is a significant development in that it appears to demand that an ERISA fiduciary evaluate on a vote-by-vote basis whether the plan will receive some economic benefit as a result of the shareholder activity. Considering the fact that a given retirement plan may, through its indexed investments and actively managed funds, hold investments in hundreds or thousands of companies each calling for shareholder votes on many complex issues, this would be a tremendous amount of required analysis.

“The DOL, to its credit, recognized that a vote-by-vote analysis would be costly and onerous,” Gerstein says. “Thus, the proposal introduces the concept of ‘permitted practices,’ which, while not safe harbors, are examples of voting policies the DOL thinks the fiduciaries can efficiently rely upon to satisfy their compliance requirements under the proposal.”

Gerstein’s blog post includes a number of specific examples of such voting policies, noting that the DOL has solicited further feedback on whether other examples should be provided in a final rulemaking. One example policy states that “voting resources will focus only on particular types of proposals that the fiduciary has prudently determined are substantially related to the corporation’s business activities or likely to have a significant impact on the value of the plan’s investment, such as mergers, dissolutions, buy-backs, etc.”

Gerstein also points to a negatively structured but permissible voting policy, detailed as follows: “A policy of refraining from voting on proposals when the plan’s holding in a single issuer relative to the plan’s total investment assets is below a quantitative threshold that the fiduciary prudently determines, considering its percentage ownership of the issuer and other relevant factors, is sufficiently small that the outcome of the vote is unlikely to have a material impact on the investment performance of the plan’s portfolio or investment performance of assets under management in the case of an investment manager.”

The proposal has a 30-day comment period, meaning comments are due by early October.

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