1) Annuities in 401(k)s Won’t Solve the Retirement Crisis. Here’s Why. Barron's | 7/2/2019
Because… The SECURE (Setting Every Community Up for Retirement Enhancement) Act updates the safe harbor provision to protect employers from liability if they select an annuity provider that meets certain requirements. Plan sponsors would not shoulder the responsibility “for any losses that may result to the participant or beneficiary due to an insurer’s inability to satisfy its financial obligations under the contract.” While the new legislation encourages employers to add annuity options to provide their employees with a lifetime income stream, we do not foresee an immediate uptake of in-plan annuities. Annuities are notorious for their high fees, complexity, and inflexibility. Unsophisticated investors may fall victim to aggressive selling by annuity providers if plan sponsors are not up for the task of selecting a quality insurer.
2) Eaton Vance to Dissolve Two NextShares Funds SEC Filings | 7/3/2019
Because… Calvert, an Eaton Vance affiliate, filed on the same day to shutter its only NextShares offering in August. With Hartford and Brandes exiting the space in June, Ivy Investment has become the sole external exchange-traded managed fund (ETMF) licensee. Since Eaton Vance is the parent company of NextShares Solutions, the liquidation of two funds suggests the firm is starting to scale back its NextShares business and shift its focus to the new active ETF structure it filed with the SEC in February: the Clearhedge Method. Unlike NextShares, which requires a platform upgrade to accommodate the trading, Clearhedge-powered ETFs could plug into any other broker/dealers’ systems, as claimed by the firm.
3) PGIM Investments Opens in Switzerland International Adviser | 7/3/2019
Because… Asset managers expand to overseas markets when domestic markets show signs of saturation and foreign markets appear to offer more growth opportunities. The U.S. asset management industry is the largest in the world, but the five largest firms managed 55% of mutual fund and ETF assets at the end of May 2019 with more than 800 other fund providers competing for the remainder of investor assets. To penetrate foreign markets, gaining a deep understanding of local investors’ needs and preferences is a must. In Switzerland, asset composition of the retail fund market is quite different from that in the ETF space. As of May 2019, 41.4% of retail fund assets were in equity with 31.8% in bond, whereas these two asset classes accounted for 71.6% and 16.5% of ETF assets, respectively.