How to Generate Income with Downside Protection
Margaret Farquharson is a senior director with the Nationwide Funds Group and leads its exchange traded fund business, where she has oversight for all aspects of the business including product development, product management, marketing, distribution, and operations.
I interviewed Marge on February 28.
What was the demand that you and your team saw that led to the development of Nationwide's newest ETF, the Risk-Managed Income ETF (NUSI)?
What we've seen since the 1980s has been a steady decline in real interest rates and Treasury yields. It's become exceedingly more difficult for investors to generate reliable streams of income from traditional bond investing. Consequently, investors have sought out alternative investment strategies for generating that supplementary income that's needed to address their retirement and other cash-dependent needs in this low-rate world.
In developing NUSI, Nationwide’s aim was to provide a more thoughtful alternative to some of the more popular income-oriented strategies in the marketplace – strategies like REITs, MLPs, fixed-rate preferred stocks, high-yields and emerging-market debt. Accordingly, Nationwide sought to offer a strategy that targets a higher level of income, while mitigating some of the risks that are traditionally associated with some of those aforementioned investments. This strategy also aligns with Nationwide's overarching value proposition. If you look at our 93-year history, we've cultivated a reputation as a protection company with an unwavering commitment to helping America prepare for and live in retirement.
We wanted to provide a meaningful addition to Nationwide's already differentiated lineup of solutions that seek to deliver better investor outcomes, while managing the short- and long-term risks inherent to retirement planning. In this case, we had a targeted focus on income generation given the low-rate environment in which we are currently operating.
Secondarily, the launch of this strategy, in partnership with recognized derivative asset manager, Harvest Volatility Management, affirms Nationwide's commitment to broadening access to institutional-quality investment solutions that address the unique and entrenched needs of investors while adhering to an investment philosophy that emphasizes long-term value creation, efficient implementation, and the reliance on a diverse body of academic research and strong empirical and economic intuition.