Products May 1, 2014

J.P. Morgan Releases New TDF Compass

J.P. Morgan Asset Management has revamped its Target Date Compass Program to help financial advisers steer plan sponsor clients through an increasingly complex target-date fund (TDF) selection process.
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The new Target Date Compass is designed with expanded investment analytics, a more intuitive design, simplified charts and a tablet-friendly interface. Together, these enhancements make Target Date Compass a powerful resource for the timely, accurate and prudent analysis of TDFs, the firm says.

The tool is powered by data from Morningstar and is used by financial advisers to help plan sponsor clients narrow the growing array of fund choices in the TDF space. The tool collects data from plan sponsors on such criteria as the plan’s overall objectives, risk tolerance, demographics and expected participant behavior. Based on these answers, sponsors are directed to one of four areas on the Target Date Compass “quadrant map,” allowing them to concentrate on a group of funds that are likely to closely match the plan’s needs.

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“More than anything, Target Date Compass aims to facilitate the critical conversations that plan sponsors need to have with their advisers about which target-date funds are right for their participants,” says Catherine Peterson, global head of insights programs at J.P. Morgan Asset Management. “These conversations, along with custom reports from the Target Date Compass, are likely to have a critical impact on the fund selections that plan sponsors ultimately make.” 

The need for such a program is more critical than ever, Peterson adds. Not only do TDFs represent as a majority of current net flows into defined contribution plans—this growth has also led to a multiplicity of fund choices, making decisions for plan sponsors even more complex (see “Can You Really Set It and Forget It?”).

A white paper from J.P. Morgan breaking down the Target Date Compass program is available here.

Products May 1, 2014

Invesco Launches Variable Rate Preferred Portfolio

Invesco PowerShares Capital Management has launched the PowerShares Variable Rate Preferred Portfolio (VRP).
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The aim of this portfolio will be to provide income-seeking investors with efficient exposure to a portfolio of variable-rate preferred securities.

“We see strong demand for variable-rate preferred securities that offer the potential for high income and less interest rate risk than fixed-rate preferred securities in this current market rate environment,” says Dan Draper, Invesco PowerShares managing director of global exchange-traded funds (ETFs), based in Chicago. “As a variable-rate preferred ETF, VRP is designed to help investors meet their risk and return objectives.”

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Draper explains that variable-rate preferred securities are typically issued at rates below fixed-rate preferred securities of similar quality, in exchange for the issuer bearing most of the risk for changes in interest rates. In the rising interest rate environment, Invesco expects that their risk/reward profile and tendency to trade on a yield-to-call basis may provide variable-rate preferred securities the potential to outperform the fixed-rate preferred market. Typically, variable-rate preferred securities exhibit less sensitivity to interest rate movements than preferred securities, which is an important feature for investors interested in building a more diversified fixed-income portfolio.

Invesco’s VRP portfolio is based on the Wells Fargo Hybrid and Preferred Securities Floating and Variable Rate Index. The fund will generally invest at least 90% of its total assets in the preferred securities that comprise the index. The index is a market capitalization-weighted index designed to track the performance of preferred stock, as well as certain types of “hybrid securities” that are functionally equivalent to preferred stock and that pay a floating or variable rate dividend or coupon. The fund and the index are rebalanced monthly.

“The Wells Fargo Hybrid and Preferred Securities Floating and Variable Rate Index is designed to track a unique segment of the preferred market that offers both significant income potential and reduced interest-rate sensitivity,” says Daniel Forth, head of strategic indexing at Wells Fargo, based in Charlotte, North Carolina. “We are excited to partner once again with Invesco PowerShares to meet the needs of today’s investors.”

More details about the PowerShares Variable Rate Preferred Portfolio can be found here.

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