Investment Product and Service Launches

PIMCO Acquisition Expands Municipal Bond Business; TIAA Adds Guaranteed Income to Custom Default Solutions; Franklin Templeton Adds Regional ETFs to Lineup; and more.

PIMCO has acquired Gurtin Municipal Bond Management (Gurtin), a specialist municipal bond manager. Combined, PIMCO and Gurtin plan to manage $38 billion in dedicated municipal bond assets.

Gurtin designs municipal strategies for high net-worth individuals and makes those strategies available through separate accounts and mutual funds which are only accessible through investment advisers, while PIMCO’s municipal bond management focus is accessed by institutional and retail investors with strategies delivered across a broader variety of investment vehicles. 

“PIMCO’s strategy is to grow mostly organically but we see exceptional value for clients in acquiring Gurtin, which is a premier muni investor with a like-minded culture that will enable us to provide clients with a more extensive and enhanced suite of muni strategies and services,” said Emmanuel Roman, PIMCO’s chief executive officer. “We are investing in a broader and enhanced muni platform for clients which is backed by strong credit research and outstanding service.”

To ensure continuity for Gurtin clients, the firm will maintain its San Diego and Chicago offices, and its investment team will continue managing its funds and separate accounts. Bill Gurtin, Gurtin’s founder, chief executive officer and chief investment officer will continue to be involved in the business for several years after the acquisition to oversee existing investment operations and support the combined business.

The transaction is expected to close in the fourth quarter of 2018.

Northern Trust and Parilux Partner to Improve Investing Solutions

Northern Trust Corporation will invest in Parilux Investment Technology, LLC, to drive developments of its Front Office Solutions business, according to a company representative.

Parilux’s software is said to power an integrated data management platform that delivers a range of information and functionality—including investment book of record (IBOR), accounting and risk analytics for alternative assets, as well as performance reporting and document management—for investment teams of endowments, foundations, corporations, family offices and other sophisticated asset owners focused on asset allocation and manager selection.

“This investment is a strategic partnership for Northern Trust and a sign of our commitment to technology innovation that enables investment transparency for global asset owners,” says Pete Cherecwich, president of Northern Trust Corporate & Institutional Services. “Our goal is to simplify the lives of institutional investors by providing a shared digital and service platform that integrates data into one system, streamlines operations, enables smarter investment decisions and facilitates better communication and information sharing across teams.”

According to the company, Front Office Solutions will combine Parilux’s software with a proprietary and newly designed cloud-based web and mobile interface. Front Office Solutions is led by Melanie Pickett, who joined Northern Trust in 2017 from Emory Investment Management. Pickett has nearly 20 years of experience in a variety of senior operations and technology roles at both Emory and Morgan Stanley, and is a founding Advisory Board member for the Investment Management Due Diligence Association (IMDDA). 

“As asset owners engage in more complex, data-driven approaches to asset allocation, their operational needs and demands for high quality data have skyrocketed,” Pickett says. “By providing a holistic, full-service solution that delivers a more comprehensive set of operational services and analytics, Front Office Solutions aims to empower in-house investment teams and support their important mission.”

TIAA Adds Guaranteed Income to Custom Default Solutions

TIAA added a new feature to its suite of custom default solutions that offers predefined asset class models, called TIAA RetirePlus.

“A Century ago, TIAA was founded on the need for secure retirement income,” says Dan O’Toole, senior managing director of Institutional Investments & Research at TIAA. “That need has not diminished, so we continue to bring new solutions to address the needs of our clients. This latest innovation makes it simple for plan sponsors and consultants to create models that can help improve participant outcomes and includes guaranteed income investments that provide certainty of income within the familiar target-date like structure.”

Mesirow Financial designed the strategy and asset class allocations. The plan sponsor, as fiduciary, selects the investment options for its models on its own or with advice from their co-fiduciary investment adviser, or can delegate selection to its own investment manager with full-discretion authority.

TIAA’s custom default solutions program lets plan sponsors and their consultants build model portfolios specific to the demographics of their plan. They provide more control over investment choices and costs and are designed to be eligible to be selected as qualified default investment alternatives (QDIAs).

“These solutions give plan sponsors and their advisers flexibility and control over perhaps the most important investment alternative in their plans—the default,” says O’Toole. “By giving workers better access to lifetime income options in their retirement plans, plan sponsors can offer protection against retirees outliving their savings and help provide their employees with the secure retirement they deserve.”

Columbia Threadneedle Offers Muni Bond ETF

Columbia Threadneedle Investments will expand its strategic beta exchange-traded fund (ETF) offerings, with the launch of Columbia Multi-Sector Municipal Income ETF (NYSE Arca: MUST), according to a company representative. MUST tracks the Beta Advantage Multi-Sector Municipal Bond Index, which has exposure to five sectors of the municipal bond market using a rules-based approach to bond selection.

Columbia Threadneedle drew upon its expertise as an experienced active investment manager of municipal bond portfolios to create the strategic beta rules that are the foundation for the construction of the index. MUST’s custom index was designed by Columbia Threadneedle’s municipal fixed-income team and is administered by Bloomberg Index Services Limited.

MUST is intended to serve as a core municipal bond allocation in investors’ portfolios but can also complement traditional core holdings to deliver higher tax-exempt income and risk-adjusted return potential than traditional benchmark products.

“Today’s municipal market is comprised of nearly $4 trillion in assets spread out among more than one million debt offerings from 80,000 issuers,” says Catherine Stienstra, who oversees more than $18 billion in assets as head of municipal bond investments at Columbia Threadneedle Investments and serves as lead portfolio manager of MUST. “In the muni space, buying individual bonds or purchasing a debt-weighted benchmarked product doesn’t give investors the diversification they need, nor the ability to manage credit risk transparently and efficiently. We created MUST with the goal of simplifying investors’ municipal bond exposure without compromising their investment objectives.”

According to Columbia Threadneedle, many of the standard municipal bond benchmarks in the market today were designed by index providers to measure limited areas of the market. As a result, they adhere to narrowly defined parameters that deliver distinct characteristics rather than desirable investment outcomes. Also, traditional benchmarks can distort the true investment opportunity set by favoring larger state general obligation bond issuers at the expense of revenue-backed bonds, since their constituents are typically weighted based on indebtedness.

“Even though most investors’ current exposure to municipals is through actively managed portfolios or individual bonds, we’ve seen a growing interest in passive products in the municipal space,” says Marc Zeitoun, CFA, head of strategic beta at Columbia Threadneedle Investments. “Given the limitations of existing municipal bond benchmarks, we opted to draw upon our expertise in managing active municipal bond portfolios to build an innovative, strategic beta fund that leverages our best thinking, but in a cost-effective, risk-managed way.”

Arabesque Offers ESG Monitoring

Arabesque has launched Arabesque S-Ray, a tool allowing anyone to monitor the sustainability of over 7,000 of the world’s largest corporations.

According to the company site, the feature assesses a corporation’s financial performance, helping to better understand its value to society.

Through machine learning and big data, Arabesque S-Ray systematically combines over 200 environmental, social and governance (ESG) metrics with news signals from over 50,000 sources across 15 languages.

Additionally, the tool rates companies on the normative principles of the United Nations Global Compact: Human Rights, Labor Rights, the Environment, and Anti-Corruption, with an assessment named the GC Score. Other industry-specific assessments include the ESG Score, of companies’ performance on financially material sustainability criteria.  

Both scores are combined with a preferences filter that allows anyone to better understand each company’s business involvements, and how those activities align with personal values.

More information about the tool can be found here.

Franklin Templeton Adds Regional ETFs to Lineup

Franklin Templeton Investments has introduced three new passive exchange-traded funds (ETFs) to its Franklin LibertyShares lineup—Franklin FTSE Saudi Arabia ETF (FLSA), Franklin FTSE South Africa ETF (FLZA) and Franklin FTSE Latin America ETF (FLLA)—expanding its suite of single country and regional market cap-weighted ETFs to now include 23 funds.   

“Many investors are looking to go beyond broad-based emerging markets or developed markets portfolios to capture the differences in performance that individual countries or regions can experience at different times based on a variety of market events,” says Patrick O’Connor, head of global ETFs. “We offer investors access to a large proportion of this universe in order to make these tactical allocations using passive ETFs.” 

Dina Ting, vice president, head of global index portfolio management and senior portfolio manager, and Louis Hsu, vice president and portfolio manager, global ETFs, will manage the new ETFs. They also manage the firm’s existing suite of passive ETFs, which includes both developed markets and emerging markets.

Franklin LibertyShares’ passive ETFs are market cap-weighted and benchmarked to country and regional indices from FTSE Russell.