State Street and the University of California Launch New Retirement Income Strategy
State Street Global Advisors, the asset management business of State Street Corporation, in partnership with the University of California (UC), has announced that IncomeWise, a deferred lifetime income solution, has launched within the University of California’s defined contribution (DC) plans. These plans serve more than 300,000 participants and include over $34.6 billion in assets.
IncomeWise is a next generation solution that blends the flexibility and simplicity of traditional target-date funds (TDFs)with the security of guaranteed lifetime income. Available for defined contribution plans, this solution represents a multi-year, cross-industry development, resulting in a new kind of retirement income strategy.
The enhancement, known as Deferred Lifetime Income at UC, was introduced to the university’s TDF, Pathway, in August 2021.
“The University of California has been researching how best to evolve our retirement savings program to help participants save during their working years and live long comfortable lives in retirement,” says Jagdeep Singh Bachher, University of California chief investment officer. “People are living longer, with smaller pensions due to shorter job tenures. Given market volatility, there’s now a strong need for a supplemental source of guaranteed income in the later years of life. Deferred Lifetime Income is an innovative solution and an important step toward improving retirement security for our participants.”
IncomeWise focuses on providing a simple investment option to support participants through all their retirement years. The solution uses State Street’s target-date glidepath to help participants accumulate wealth during their savings years. A portion of these savings can then be converted into a guaranteed income stream for later years of retirement by purchasing a qualified longevity annuity contract. This approach offers participants income security when they are likely to need it most, while providing flexibility and access to savings during their early retirement years.
State Street has worked in partnership with Fidelity to implement Deferred Lifetime Income as a custom solution on behalf of the University of California. Additionally, State Street conducted a thorough vetting process of insurance providers, culminating in the selection of Metropolitan Tower Life Insurance Company as the annuity provider for the 2021 annuitization.
Federated Hermes Launch Two New ETFs
Federated Hermes Inc., an active and responsible investing company, has launched the Federated Hermes Short Duration Corporate ETF and Federated Hermes Short Duration High Yield ETF. These new actively managed products benefit from Federated Hermes’ decades of experience in offering active fixed-income investment ideas and its capabilities with authentic environmental, social and governance (ESG) integration, along with the advantages of an ETF structure.
These short-duration ETFs are new tools for investors concerned about inflation and the potential interest-rate risk associated with products that invest in longer-duration securities, the firm says.
The funds utilize the experience, insights and capabilities developed over the firm’s 50 years of managing fixed-income solutions for investors. The ETFs also incorporate Federated Hermes’ proprietary ESG assessment process in evaluating the risk profiles of investment-grade and high-yield securities.
“With a growing U.S. client appetite for fixed income, our first two ETF strategies build upon Federated Hermes’ heritage of responsible investing, diligent credit analysis and experience in providing compelling options at every step of the yield curve,” says John Fisher, president and chief executive officer of Federated Advisory Companies.
The Federated Hermes Short Duration High Yield ETF seeks high current income by investing in a diversified portfolio of high-yield bonds, bank loans and other securities. The strategy seeks to maintain an effective duration of three years or less. The ETF is managed by senior portfolio manager Steven Wagner, portfolio manager Tony Venturino and senior portfolio manager Mark Durbiano, who leads the firm’s domestic high-yield group. Nine industry-specific analysts and two traders complete the 14-member group supporting the fund.
The Federated Hermes Short Duration Corporate ETF seeks current income by investing primarily in securities with maturities of one to five years and will maintain a duration between 1.5 and 3.5 years. The strategy may also invest up to 10% of its portfolio in non-investment grade fixed-income securities.
Senior portfolio manager John Gentry, who heads the Federated Hermes corporate fixed-income group, and portfolio manager Robert Matthews are supported by six analysts and two traders who specialize in investment-grade fixed income.