Investment Product and Service Launches

Vanguard announces plan to launch new China equity fund; Two Sigma and eVestment to partner through Venn; and Equitable announces new registered index-linked annuity.

Vanguard Announces Plan to Launch New China Equity Fund

Vanguard has filed an initial registration statement with the U.S. Securities and Exchange Commission (SEC) to introduce the Vanguard China Select Stock Fund. The fund will invest in both onshore and offshore Chinese equities and is intended for clients seeking actively managed, high-alpha-target equity exposure to complement a broadly diversified portfolio. Vanguard expects to launch the fund in the first quarter of next year.

Vanguard says it believes exposure to China is an important part of both the equity and fixed-income allocations of a globally diversified portfolio. China is a significant and growing portion of the global equity market, representing the second largest nation by gross domestic product (GDP) output and the third largest country by market capitalization. With the China Select Stock Fund, Vanguard seeks to provide risk-tolerant investors with a targeted approach to exposure in the region.

The fund will seek to outperform the MSCI China All Shares Index and have estimated expense ratios of 0.83% for investor shares and 0.73% for admiral shares. The fund will be co-managed by long-tenured Vanguard fund advisers Wellington Management Co. and Baillie Gifford Overseas Ltd. Both firms have deep portfolio management experience and expertise in China and a track record of outperformance in Chinese equity markets.

While the fund may offer alpha potential and diversification benefits, Vanguard warns that the single-country focus may expose investors to more acute investment, geopolitical and regulatory risks. The fund’s country-specific concentration may drive higher tracking error and greater volatility relative to the broad market and therefore should be thoughtfully integrated into a globally diversified portfolio. An active approach to investing in China, coupled with the ability to invest in a wide range of both onshore and offshore Chinese equities, will provide the fund’s portfolio managers flexibility to help navigate the dynamics of potential market constraints and a rapidly shifting geopolitical landscape.

Two Sigma and eVestment to Partner Through Venn

Two Sigma, through its portfolio analytics platform Venn, and eVestment, a part of Nasdaq, have announced a strategic alliance under which eVestment data will be integrated into the Venn platform. The new alliance significantly enhances the scope of investment data available through Venn and will allow clients of both eVestment and Venn to complete more of their analysis on a single technology platform.

By integrating eVestment data into Venn, investment teams can uncover more robust insights to help drive decisions on investment evaluation, and portfolio construction and optimization.

“We’re excited to serve as strategic data partner to Two Sigma’s Venn to help power and expand the level of sophisticated investment data available to our mutual asset allocator clients,” says Lisa Terwilliger, eVestment head of strategic partnerships. “Nearly 1,000 institutional asset owners and intermediaries worldwide already rely on eVestment and Nasdaq Asset Owner Solutions as the backbone of their manager research and portfolio analytics. By integrating eVestment data into Venn, we can more effectively help our joint clients make data-driven decisions, deploy resources more productively and ultimately realize better outcomes.”

Equitable Releases New Registered Index-Linked Annuity

Equitable, a financial services organization and principal franchise of Equitable Holdings Inc., has announced a new registered index-linked annuity that combines lifetime income options with some protection from equity market volatility.

Structured Capital Strategies Income (SCS Income) allows investors nearing and beginning retirement to take advantage of equity market growth potential while maintaining partial protection against market declines. SCS Income also provides for a predictable stream of income.

“As retirement investors grapple with the idea that the bull market could falter while health care and other retirement costs appear likely to rise, coupling access to market growth potential with some level of protection against volatility and a predictable, sustainable income can help individuals achieve financial well-being in retirement,” says Steve Scanlon, Equitable head of individual retirement.

SCS Income will offer investors innovative ways to create guaranteed income in retirement, including the ability to start taking income immediately from a registered index-linked annuity. Other income options new to the industry include the level income option, which provides an income rate initially based on age at the time of purchase and that does not decrease, and the accelerated income option, which provides a higher rate of income in early retirement when individuals may have higher expenses. Income under this option is initially based on the age at which the product is purchased and only decreases if the account balance drops to zero by means other than excess withdrawal.

Both income options offer opportunities to increase income by 5% of contributions per year each year before beginning to receive income, if the contract holder has not yet taken a withdrawal. This extra growth will be credited for up to 20 years, or the contract maturity date, whichever is earlier.

Investors can choose to protect against up to the first 10% or 15% of market losses during the investment period and benefit from any gains up to a cap. Further, investors can choose to take advantage of the dual direction feature, which allows clients to realize potential for some upside returns even in down markets.