Stone Ridge aims at retirement market with ‘longevity income’ ETFs

Stone Ridge has filed to launch a suite of ETFs designed to deliver regular income for elderly investors, in the latest example of post-retirement product innovation.

The 32 Longevity Income ETFs set target dates from 2048 to 2063, according to the year when intended investors turn 100, and are structured to generate regular income starting 20 years before then, either via monthly term-income distributions or by converting shares into a closed-end fund.

“While there are many investment products designed to help investors accumulate assets and to 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 statement filing. “The fund is designed to provide an opportunity for investors to receive predictable cash flows by making monthly distributions.”

Initially, the funds will invest in US Treasuries and US government money market funds, while a companion suite dubbed Inflation-Protected Longevity Income ETFs will start out investing primarily in Treasury Inflation-Protected Securities as well as government money funds, generating monthly distributions equal to $0.0833 per outstanding share of the fund, for a total of $1 per share per year.

The “modelled cohort” of investors will turn 80 starting in 2028, when they become eligible to channel their shares into a corresponding closed-end fund designed to maintain the monthly distributions for the next 20 years.

Alternatively, investors could remain invested in the fund past the age of 80, receiving “term income” distributions adjusted to last 20 years.

Another option: investors could mix the term-income and closed-end fund allocations.

The ETF and corresponding closed-end fund would then liquidate in December of the target year, as both would have distributed substantially all of their assets by that time.

Fees for the funds are not yet public.

New York-based Stone Ridge disclosed plans to launch a “longevity risk franchise” five years ago, promising 40 Act products designed to provide up to 25 years of steady income. It subsequently registered multiple series of funds under the “LifeX” brand.

This article was previously published by Ignites, a title owned by the FT Group.

The funds launched earlier this year, and the latest filing describes those products as “predecessor funds.” A spokesperson confirmed that the mutual funds would be converted into the recently registered ETFs.

The Stone Ridge ETFs do not include an annuity component. But Stone Ridge has contracted with “a market leader in the income annuities space” for actuarial services, according to the filing. The filing does not name that company.

The rollouts underscore intense competition among fund firms for post-retirement assets, a market energised by 2019’s Secure Act provisions greenlighting guaranteed-income options for plan sponsor menus.

Since then, multiple firms including BlackRock, Capital Group, State Street Global Advisors and T Rowe Price have launched, or said they intend to launch, target-date fund suites with annuity features.

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