Products October 31, 2011

American Century Introducing Three Alternative Portfolios

American Century Investments is rolling out three alternative portfolios: Core Equity Plus, Disciplined Growth Plus, and Market Neutral Value.  
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These new portfolios will employ short selling, but in different proportions and using different investment approaches.  American Century recently published a study that showed the use of alternative investment strategies is on the rise (see “Wirehouse Brokers Use Alternatives the Most”).  

The alternative strategies include:

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Core Equity Plus: Core Equity Plus is a 130/30 version of the American Century Equity Growth Fund, a large core fund. The strategy will take long positions in securities that managers believe will appreciate and short positions in securities that managers believe will underperform. Specifically, the fund is long 100% of its assets, shorts 30% of the value of the portfolio, and uses the proceeds of the short sale to invest an additional 30% in long investments. By extending the long-only mandate with limited shorting, American Century Investments seeks to enhance portfolio efficiency and achieve higher excess return without increasing market risk.

The fund’s investment strategy utilizes quantitative management techniques in a disciplined, repeatable process. Stocks representing a broad range of larger domestic companies, approximately 1,200-to-1,600 securities, are ranked from most attractive to least attractive. This is determined by using a stock selection model that combines measures of a stock’s relative valuation, its growth and momentum characteristics, and quality.

Disciplined Growth Plus: Disciplined Growth Plus is a 130/30 version of the American Century Disciplined Growth Fund, a large growth fund. Like Core Equity Plus, this fund also uses limited shorting to enhance portfolio efficiency and obtain higher excess returns without increasing market risk.

The fund’s investment strategy utilizes the same quantitative management techniques and processes as Core Equity Plus. The differences between the two portfolios are the style benchmarks for the strategies, the starting universe and the makeup of the stock ranking model. The stock ranking model includes similar measures of relative value, growth and quality as the Core Equity Plus model, but with a greater bias toward measures of growth and growth potential.

Market Neutral Value: Market Neutral Value extends the capabilities, track-record and reputation of American Century Investments current U.S. Value Equity team. The strategy will buy long securities that appear relatively undervalued while selling short securities that appear relatively overvalued. It will seek to maintain equal dollar amounts in long and short equity positions. Market Neutral Value will primarily utilize the stocks within American Century Investments proprietary value database, the same pool of securities used by American Century Equity Income Fund, Value Fund, and Mid Cap Value Fund.

Market Neutral Value seeks to deliver an annualized return that exceeds the 90-day Treasury Bill rate, as well as lower volatility than, and correlation to, the broad equity market over a market cycle.

These new portfolios complement American Century’s current alternative strategies: Real Estate, Global Real Estate, Global Gold, Strategic Inflation Opportunities, and Equity Market Neutral.    

IMHO October 31, 2011

IMHO: Thanks Giving

After a dozen years here at PLANSPONSOR and PLANADVISER, effective November 1, I will join the Employee Benefit Research Institute (EBRI) in Washington, D.C., as Director, Education and External Relations, and Co-Director of the EBRI Center for Research on Retirement Income. 
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I have long had a strong personal and professional admiration for the work that EBRI does in helping provide our industry with valuable and objective information and am thrilled to be able to be part of those efforts at this critical juncture.

It has been my great privilege over this past decade and change to share with you some of my thoughts and observations in this space.  You have been generous both with your comments and commentary on those musings, as well as our publications overall. 

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While it’s not quite Thanksgiving, I thought I would dedicate this final “IMHO” to sharing some of the things for which I’m thankful:

I’m thankful that the vast majority of plan sponsors continued to support their workplace retirement programs with the same match and options as they had in previous years—and that so many of those who had to cut back in prior years still seem committed to restoring those original levels.

I’m thankful that participants, by and large, hung in there with their commitment to retirement savings, despite the lingering economic uncertainty.  I’m especially thankful that many who saw their balances reduced by market volatility and, in some cases, a reduction in their employer match were willing and able to fill those gaps, in most cases by increasing their personal deferrals.

I’m thankful that most workers defaulted into retirement savings programs tend to remain there—and that there are mechanisms in place to help them save and invest better than they might otherwise.

I’m thankful for the time, cost, and effort employers expend each year on health-care coverage for their workforce—and continue to do so, despite the uncertainties still attendant with health-care legislation.

I’m thankful that those who regulate our industry continue to seek the input of those in the industry—and that that input continues to be shared broadly in open forums.  I’m thankful that so many in our industry take the time to provide that input. 

I’m thankful that so many employers have remained committed to their defined benefit plans and—often despite media reporting to the contrary—continue to make serious, consistent efforts to meet funding requirements that are quite different from when most initially decided to offer these programs.   

I’m thankful that plan sponsors will soon have better access to more information about the expenses paid by their plans—and optimistic that it won’t be as bad as some fear.  I’m thankful that we’re no longer talking about whether fees should be disclosed to participants and are now trying to figure out how to do it. 

I’m thankful that the “plot” to kill the 401(k)…hasn’t…yet.

I’m thankful that we might—finally—be ready to have a national, adult conversation about retirement income and entitlement programs.

I’m thankful to have been given an opportunity to be part of something great here at PLANSPONSOR, and to participate in the launch of PLANADVISER; to have seen a little internal e-mail publication called “NewsDash” come to reach—and touch—the lives of nearly 70,000 readers worldwide.  I’m thankful to have been able, in some small way, to make a difference—and to have before me a marvelous opportunity to continue to do so.

I’m thankful for the warmth with which readers, both old and new, have embraced me and the work we do here.  I’m thankful for all of you who have supported—and I hope benefited from—our various conferences, designation program, and communications throughout the years.  I’m thankful for the constant—and enthusiastic—support of our advertisers throughout good times—and not-so-good times.    

But most of all, I’m once again thankful for the unconditional love and patience of my family, the camaraderie of dear friends and colleagues, the opportunity to write and share these thoughts over the years—and for the ongoing support and appreciation of readers like you.  

Thank you!

My new email address is nadams@ebri.org.  I look forward to remaining in contact with many of you there. 

 

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