ETFs
Stone Ridge targets retirement market with ‘longevity income’ ETFs
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Stone Ridge has filed to launch a range of ETFs designed to provide regular income to older investors, in the latest example of post-retirement product innovation.
The 32 Longevity Income ETFs have target dates of 2048 to 2063, depending on the year in which the intended investors turn 100, and are structured to generate regular income starting 20 years before that date, either through monthly income distributions over time or by converting shares into a closed-end fund.
“While there are many investment products designed to help investors accumulate assets and build a nest egg, there are few investment products designed to help investors convert those assets into predictable cash flows,” Stone Ridge said in its registration filing. “The Fund is designed to provide investors with the opportunity to receive predictable cash flows by making monthly distributions.”
Initially, the funds will invest in U.S. Treasury securities and U.S. government money market funds, while a complementary suite called the Inflation-Protected Longevity Income ETF will begin investing primarily in Treasury inflation-protected securities and government money market funds, generating monthly distributions equal to $0.0833 per outstanding share of the fund, for a total of $1 per share per year.
This article was previously published by Ignitea title belonging to the FT group.
The “modeled cohort” of investors will be 80 years old as of 2028, at which point they will be eligible to funnel their shares into a matching closed-end fund designed to maintain monthly distributions for the next 20 years.
Investors could also remain invested in the fund beyond age 80 and receive “term income” distributions adjusted over the past 20 years.
Another option: Investors could combine allocations to fixed-income funds and closed-end funds.
The ETF and the corresponding closed-end fund would then be liquidated in December of the target year, as both would have distributed substantially all of their assets by that time.
The fund fees are not yet public.
Five years ago, New York-based Stone Ridge announced plans to launch a “longevity risk franchise,” promising 40 Act products designed to provide up to 25 years of steady income. It later registered several series of funds under the “LifeX” brand.
The funds were launched earlier this year and the latest filing describes the products as “predecessor funds.” A spokesperson confirmed that the mutual funds would be converted into newly registered ETFs.
Stone Ridge’s ETFs do not include an annuity component. But Stone Ridge has contracted with “a market leader in the income annuity space” for actuarial services, according to the filing. The filing does not name that company.
The rollouts underscore the intense competition among fund companies for post-retirement assets, a market fueled by provisions in the 2019 Secure Act that green-light guaranteed income options on plan sponsors’ menus.
Since then, several firms, including BlackRock, Capital Group, State Street Global Advisors and T Rowe Price, have launched, or said they intend to launch, suites of target-date funds with annuity features.
*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignites.com.