reddi is software that charges a license fee based upon Income Under Management (IUM), which is the income generated (i.e., scheduled distributions) from a Separately Managed Account (SMA) managed on a discretionary basis by the advisor using data from the reddi service. The standard IUM fee is 50bps, which is roughly equivalent to an AUM fee of 11 basis points.

reddi’s license fee (IUM) is accrued and paid quarterly from a reddi Separately Managed Account (SMA) under an enterprise license held with an advisor’s RIA. The fee is paid until the reddi SMA matures (i.e., completes scheduled distributions) or is otherwise liquidated at the discretion of the advisor. The fee is accrued (as opposed to being paid after scheduled distributions occur) since scheduled distributions can be deferred (e.g., bullet investment with a single distribution on a selected date many years away). Management fees for underlying ETFs vary but are currently around 10 basis points.

A reddi investment portfolio is held in a Separately Managed Account (SMA) established by the advisor. The advisor is the discretionary manager of the SMA utilizing the reddi data service. Reddi has no control over the SMA.

The primary underlying investment vehicles considered by the reddi service are defined maturity ETFs (e.g., Invesco and Blackrock corporate defined maturity ETFs). Constant maturity ETFs and other fixed income investments are also incorporated. 

Through reddi, the RIA sponsor selects a universe of eligibles investment funds for each program.

The reddi platform includes low-cost ETFs with average expense ratios of 10 basis points in spending plans, but RIA sponsors may customize the platform to include a unique universe of underlying investment vehicles, which may have higher or lower expense ratios.

reddi customizes a unique universe for every reddi program at the direction of the RIA sponsor (licensee) for each program.

At the direction of the advisor, reddi primarily analyzes investment in defined maturity vehicles/securities as part of a risk-controlled strategy to mitigate distribution/drawdown uncertainty. Constant maturity funds are utilized to complement portfolio construction.

No. reddi is software. It is a tool designed to provide data and analytics to advise providers.

reddi’s license fee is accrued and paid quarterly from any Separately Managed Account (SMA) setup using reddi under an enterprise license held with an advisor’s RIA. Whether the reddi license fee is passed on to the client is an advisor’s decision.

reddi does not guarantee income because reddi is not backed by a Guarantee Association. Insurance Companies do not guarantee income, either, but their income annuity products are generally backed by state Guarantee Associations under certain limitations.

The reddi platform is a patented system developed by NISA Connect, a technology affiliate of NISA Investment Advisors, a leader in institutional Liability-Driven Investing (LDI) for large Defined Benefit (pension) plans. By leveraging LDI principles and incorporating portfolio surplus analytics, the patented software helps advisors construct a self-insured portfolio that effectively mimics the balance sheet (general account) of an insurance company assuming the only obligation/liability of that insurer was the income (i.e., scheduled distributions) specified by an advisor’s individual client. The objective of a portfolio created with reddi is certainty (of distributions) while maximizing return under that constraint (i.e., competitive yield for the portfolio’s duration).

Yes. reddi is a risk-controlled strategy further enhanced to ensure predictable income even during down or volatile markets. reddi strategies are designed to self-insure against periods of poor performance by creating a surplus to absorb market volatility.

From an interest rate perspective, reddi is an immunized portfolio hedged for interest rate risk so changes in interest rates will not negatively impact scheduled distributions. reddi is also credit enhanced meaning it applies a “haircut” to the value of its underlying investments so that a commensurate surplus of assets exists relative to its liabilities (i.e., scheduled distributions) to absorb volatility that could offset distributions. The portfolio surplus is continually estimated with the remaining surplus returned with the final portfolio distribution.

reddi is software that provides data and analytics to an advisor for discretionary management of Separately Managed Accounts (SMAs). Programmatic recommendations regarding target allocations and/or rebalancing instructions are part of the software package but the advisor makes all portfolio decisions as the discretionary advice provider.

Defined maturity ETFs provide a known maturity date with efficient credit diversification. They are also transparent and low cost. For building predictable income-generating portfolios efficiently they are ideal. But what they also provide is intuitive understanding and portfolio confidence because they allow reddi to “cash match” more closely (i.e., line up assets with liabilities / scheduled distributions). While cash matching isn’t required to immunize a portfolio, it is more intuitive. This makes it better understood, which builds trust – a requirement for democratizing predictable income generation.

The advisor can liquidate and/or close the Separately Managed Account (SMA) at their discretion.

Since the license agreement for reddi is with the sponsoring RIA, reddi is intended to be integrated into the tech stack used by its IARs in a seamless manner so typical workflows are not impacted.