Services Tags: Investment Consulting

A Roadmap for Defined Contribution Plan Sponsors

Defined Contribution (DC) plan assets continue to grow and now total $7 trillion, with over 90 million Americans maintaining a DC account. The portion of employees in private industry who participate in a DC plan rose to 44% in 2016, while as noted in previous Marquette papers on Defined Contribution Plans and Secure Choice, the public sector representation in the DC space also continues to gain solid momentum. With this continued growth of participant-directed retirement assets comes the increased importance of fiduciary duty on the part of plan sponsors and where applicable, their consultant(s). This fiduciary duty is especially critical as it relates to plan structure and educational materials to maximize participation, appropriate deferrals, and responsible investment decisions for participants.

This paper highlights best practices for some of these key fiduciary duties, which can be helpful for plan sponsors that are either building or maintaining a DC program. It is centered on a goal of maximizing the likelihood that participants are saving (deferring) enough and are investing as prudently as possible.

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ESG Stewardship for Defined Contribution Plan Fiduciaries

Defined contribution plans have increasingly adopted features that encourage participation and retirement readiness — from automatic enrollment to target date funds. Consideration of environmental, social and governance issues within defined contribution plans has also gained momentum as a way for plan sponsors to engage participants and mitigate risks for the investor. Plan sponsors are now challenged with determining whether to incorporate ESG considerations into the stewardship of defined contribution plans — and how to best go about doing so.

Please join us for the third webinar in our defined contribution guidance series, a discussion on ESG stewardship. This session will cover key topics from our recently published paper, Bracing for Impact: How to Prepare for the Next Generation of Defined Contribution Plans.

Attendees will be briefed on:

  • ESG issues and relevance
  • Clarification of fiduciary duties
  • Materiality of ESG factors
  • Demographic shifts — the rise of millennials
  • Getting started with ESG
  • Top 5 reasons to add ESG to DC plans

 

Live Webinar – Wednesday, May 24, 2017 – 1:00-1:45 PM CT

Please contact us for access to this video.

How Currency Risk Can Impact Portfolios

International investment strategies such as emerging markets debt and unconstrained fixed income have seen significant volatility over the last few years, largely driven by gains or losses from currency movements. Over this period, the U.S. dollar generally strengthened due to gradually rising interest rates and stronger growth in the U.S. relative to other developed countries. The euro and yen generally declined versus the dollar during this time but experienced bouts of short term strengthening versus the dollar. Emerging markets currencies largely weakened throughout this period, but enjoyed a substantial rally over the past year. How does an investor make sense of these movements?

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Bracing for Impact: How to Prepare for the Next Generation of Defined Contribution Plans

As defined benefit plans continue to grapple with funding issues, defined contribution plans have emerged as the primary vehicle for retirement savings. In recent years we have seen increased adoption of features that encourage participation in such plans, such as automatic enrollment, as well as the emergence of options that better prepare participants for retirement, such as target date funds. Consideration of ESG issues — that’s environmental, social, and governance — within the participant-directed, defined contribution plan structure has also gained momentum as a way for plan sponsors to engage with their participants and mitigate risks for the investor. Plan sponsors are now tasked with the challenge of determining whether and how to best incorporate ESG considerations into the stewardship of defined contribution plans.

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Rate Hike: Yellen Pumps the Brakes a Third Time

March 2017

The Federal Reserve voted on March 15, 2017 to hike the fed funds rate by 0.25%, targeting a range of 0.75–1.00%. The vote was nearly unanimous — nine versus one out of the ten total voters on the Federal Open Market Committee — with Minneapolis Fed President Neel Kashkari voting for no change. This is the third hike after the Great Recession, following the 0.25% hikes in December 2015 and December 2016.

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Investing in Public vs. Private Real Estate: Are REITs the Right Investment for You?

February 2017

Real estate investments are a core part of institutional portfolios and provide returns through a combination of income and appreciation. Different vehicle structures offer options in regards to access, liquidity, and sector exposure. Ownership can be direct through individual properties and separately managed accounts, or indirect through publicly traded real estate investment trusts (REITs), private real estate commingled vehicles, and private REITs. Due to the recent creation of a new real estate sector within the Global Industry Classification system (“GICS”) as well as the current market environment, we feel it is an appropriate time to re-visit the available options for institutional investors to access real estate, specifically as it relates to public REITs. This newsletter examines some of the unique characteristics of public REITs compared to private real estate investments and compares the benefits of private real estate versus public REITs.

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Does Active U.S. Equity Management Have a Future?

February 2017

Active vs. Passive

To this day, significant debate continues about the topic of active versus passive investing in U.S. equities, with the discussion typically centering on the fundamental question of “Is the market efficient?” Active investors believe that the market is inefficient and an informational advantage can lead them to identify investments that will beat their respective indices. Critically, active investing features human judgment with respect to a company’s relative attractiveness and profit realization over an investment horizon. Passive investors, on the other hand, believe the market is efficient and that stock prices reflect all available information which could affect their prices. If markets are truly efficient, then a diversified, low-cost exposure to an asset class would be the best course of action.

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2017 Market Preview

January 2017

Similar to past market preview newsletters, we enter the year with a new set of questions. What shape will Trump’s policies take and how will they impact the market? Will the formal start of the Brexit have an impact on portfolios? To what degree and pace will the Fed increase interest rates? These topics among many others are covered in the following articles as we offer our annual market preview newsletter. Each year presents new challenges to our clients, and other headlines will emerge as the year goes on; it is critical to understand how asset classes will react to each new development and what such reactions will mean to investors. The following articles contain insightful analysis and key themes to monitor over the coming year, themes which will underlie the actual performance of the asset classes covered. Recognizing that many of our clients may not have time to cover the following 30 pages of material, we offer the primary conclusions for each asset class heading into 2017.

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What Does the Fed’s Rate Hike Mean for 2017?

December 2016

On December 14, 2016, the FOMC announced its unanimous decision to raise interest rates by 25 basis points, bringing the target fed funds rate to between 0.50% and 0.75%. This was the first increase since last December’s, with the hike prior to that occurring in 2006 before the Great Recession.

This move was widely anticipated and well-communicated to the markets. As such, fed funds futures carried a 100% implied probability of a hike going into it, and most – if not all – of the hike was already priced into global markets. Markets over the past one and a half days since the hike have remained relatively calm. The 10-year Treasury yield rose by only 12bp to end at 2.6%, while the one-year Treasury yield rose by just 3bp to end at 0.9% and the 30-year Treasury yield rose by 2bp to end at 3.1%. The Core Aggregate bond index and the Intermediate Government/Credit index were down only 0.5%, while the 1-3 Yr Government/Credit index fell 0.2%; the Long Government/Credit index also decreased 0.2%. The Credit Suisse Leveraged Loan index was up 0.1%, the Credit Suisse High Yield index was down 0.3%, and the JPMorgan emerging markets debt EMBI Global Diversified index decreased by less than 0.1%. The dollar rose while gold declined, as expected. The S&P 500 declined less than 0.1%.

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The Impact of Trump’s Victory on Capital Markets

November 2016

To the surprise of pollsters, analysts, and much of the American public, Republican presidential candidate Donald Trump trampled predictions by winning the presidential election in stunning fashion.

The long-term impact of Trump’s presidency on financial markets is impossible to predict at this point, given the amount of uncertainty around his expected policies. However, the short-term dynamics surrounding his election win are starting to emerge, and we share with you what we are seeing and hearing in the market in this newsletter.

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