As we inch closer to 2021, seasoned product leaders from American Century, John Hancock, and Nationwide shared their future product priorities during the second day of GMM 2020 (held virtually on October 8).
Dan Beckman, Head of U.S. Product, Columbia Threadneedle, moderated the panel, which focused on the current landscape for alternative investments, interval funds, active and non-transparent ETFs, and share classes.
“This was an unprecedented year, distinguished by a global pandemic, a newly remote workforce, capital market volatility, social unrest, a focus on diversity and inclusion, and a divisive presidential election,” he said. “That said, this panel will be looking into the future.
Beckman cited a quote commonly attributed to Warren Buffett: “Someone's sitting in the shade today because someone planted a tree a long time ago.”
“I think that’s fitting for product development because you’re working on things today that often don’t pay off for years,” he said.
VEHICLE EXPANSION
Glen Casey, Global Head of Products, said American Century has long been focused on product and vehicle expansion in areas such as CITs, ETFs, and SMAs.
“The data is incredibly important when we think about product developers who have grown up with mutual funds as their primary focus,” Casey said. “Looking at Morningstar’s flows, for example, long-term mutual funds in the last in 12 months have had $300 billion net outflows, while ETFs have been positive $450 billion. And that’s not a one-time phenomenon; this has been playing out for many years.”
Margaret Farquharson, Senior Director, Head of Exchange-Traded Funds, Nationwide, pointed to a remarkable opportunity on the CIT side — an area that Nationwide is actively building out and looking to bringing to market in 2021.
“Looking at CIT flows relative to mutual funds, that is absolutely a growing space where we feel we can add a tremendous benefit to our members on the retirement plan side by bringing strategies to market in a more cost-effective vehicle.”
She also touched on a new innovation this year: Active Non-Transparent ETFs (ANTs).
“The ANTs definitely came marching in in 2020,” she said. “Looking at the first round of products, I think they’ve done tremendously well, particularly given the fact that those strategies were launched in a year dominated by the pandemic.”
“I do think there’s some education that needs to happen with those particular strategies related to long-term adoption through various distribution channels. We need to ensure we are really educating investors not only on the mechanics of those structures but rewhat the value-add is relative to what’s currently available in the marketplace.”
Answering a question from the audience, York Lo, Head of Institutional and Retirement Product Development at John Hancock, spoke about ESG product development.
“At this point, pretty much every firm has signed an United Nations' Principles for Responsible Investment (UN PRI) and has integrated ESG into the investment process — which is a great thing,” he said. “But I think it’s important to differentiate who is just checking a box to get business. I applaud the fact that PRI has kicked out some signatories for non-compliance. They’ve also done a great job of grading those who have signed an UN PRI, which is an important signal to the end investor in terms of who is really serious about ESG.”
Farquharson agreed.
“Factors around corporate diversity and inclusion, internal governance, etc. have emerged as some of the most fundamental drivers of company performance,” she said. “That has underpinned our decision to look very closely at the ESG space. As with ANTs, some education needs to take place, and as it does, you will see customization as a result.”
Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the Nicsa panel, they do not necessarily reflect the views of Nicsa or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.
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