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Art by Jackson Epstein
Vanguard Expands Target Retirement Lineup for Youngest Retirement Investors
Vanguard has announced plans to launch a Vanguard Target Retirement 2070 Fund and the Vanguard Target Retirement 2070 Trusts. As the newest vintage in Vanguard’s target-date retirement lineup, the 2070 fund and trusts are designed to provide the youngest members of the workforce with an all-in-one, low-cost portfolio solution as they begin saving for retirement.
The 2070 option is designed for younger investors with long time horizons that enable them to withstand equity market risk and benefit from decades of potential growth and compounding. The glide path begins with a significant equity allocation of 90% stocks complemented by 10% bonds. Over time, as an investor approaches retirement, the glide path gradually reduces its exposure to equities and increases exposure to fixed-income investments.
The portfolio reaches its most conservative allocation seven years after retirement (with 30% stocks and 70% bonds). Vanguard Target Retirement 2070 Fund and Vanguard Target Retirement 2070 Trusts will launch by mid-2022 with an asset allocation of 54% in U.S. stocks, 36% in foreign stocks, 7% in U.S. fixed-income securities and 3% in foreign fixed-income securities.
The Vanguard Target Retirement 2070 Fund will be available to individual investors with a $1,000 minimum initial investment. The fund’s investment minimum is waived for financial advisers, intermediaries and for participants in a qualified retirement plan. The fund is expected to have an expense ratio of 0.08%.
Vanguard also notes that the Vanguard Target Retirement 2015 Fund is approaching the end of its lifecycle, with an asset allocation of 30% stocks and 70% bonds, mirroring the allocation of the Vanguard Target Retirement Income Fund. The 2015 fund will close to new investors on February 14. To maximize portfolio management and cost efficiencies for shareholders, the firm plans to merge Vanguard Target Retirement 2015 Fund into the Vanguard Target Retirement Income Fund and the Vanguard Target Retirement 2015 Trusts into the Vanguard Target Retirement Income Trusts. The mergers are anticipated to be completed in July.
Furthermore, Vanguard has launched an additional retirement income solution for eligible defined contribution (DC) plans, dubbed the Vanguard Target Retirement Income and Growth Trust. Designed as an opt-in alternative to Target Retirement Income, Target Retirement Income and Growth provides a higher equity allocation upon retirement—50% stocks and 50% bonds—and is designed for investors whose wealth, risk tolerance or additional sources of income allow for a higher risk tolerance in retirement.
LGIM America Launches Five Mutual Funds
LGIM America (LGIMA), a registered investment adviser (RIA) specializing in designing and managing investment solutions across active fixed income, index, multi-asset and liability-driven investment (LDI) in the U.S. market, has announced the launch of several new mutual funds. The firm says these funds demonstrate its commitment to its clients and its expanding defined contribution (DC) capabilities.
The new Legal & General Retirement Income 2040 Fund is comprised of the four funds listed below. Its goal is to provide current income during the early and middle years of retirement while ensuring capital is not exhausted prior to the fund’s terminal date.
The Legal & General Global Developed Equity Index Fund seeks to provide investment results that, before fees and expenses, track the performance of the MSCI World Index.
The Legal & General Cash Flow Matched Bond Fund seeks current income through the management of investment-grade credit with a final maturity between zero and five years. The fund does not have a specific target for its average duration. The fund’s portfolio is laddered by investing in fixed-income securities with different final maturities so that some securities age out of the zero- to five-year maturity range during each year.
The Legal & General Long Duration U.S. Credit Fund aims to maximize total return through capital appreciation and current income. It primarily invests in investment-grade fixed-income securities with an average portfolio duration that is within 10% of the fund’s benchmark, the Bloomberg Long Duration U.S. Credit Index.
The Legal & General U.S. Credit Fund looks to maximize total return through capital appreciation and current income. It primarily invests in investment-grade fixed-income securities with an average portfolio duration that is within 10% of the fund’s benchmark, the Bloomberg Capital U.S. Credit Index.
Within the first several months of 2022, the firm also anticipates completing a long-life strategy, which is the longevity piece of its solution and designed to support individuals into their later years of retirement.
State Street Global Advisors Enhances ESG Portfolio Construction
State Street Global Advisors, the asset management business of State Street Corp., has announced the launch of three new index funds. They are the SPDR S&P SmallCap 600 ESG ETF (ESIX), the SPDR Bloomberg SASB Developed Markets Ex U.S. ESG Select ETF (RDMX) and the SPDR Bloomberg SASB Emerging Markets ESG Select ETF (REMG).
The exchange-traded funds (ETFs) are meant to provide exposure to small-cap, international and emerging market equities, respectively, that exhibit certain environmental, social and governance (ESG) characteristics. As such, the funds are designed to help investors reinforce core allocations and incorporate ESG considerations into their portfolios.
“As ESG awareness and education improves, investors are increasingly seeking to integrate best-in-class solutions across their entire portfolio,” says Brie Williams, State Street Global Advisors head of practice management.
The SPDR S&P SmallCap 600 ESG ETF seeks to track an index that is designed to provide exposure to securities that meet certain sustainability criteria—criteria related to ESG factors—while maintaining similar overall industry group weights as the S&P SmallCap 600 Index.
The SPDR Bloomberg SASB Developed Markets Ex U.S. ESG Select ETF seeks to track an index that is designed to provide exposure to large and mid-capitalization companies in developed markets, excluding companies in the U.S., that exhibit certain ESG characteristics.
The SPDR Bloomberg SASB Emerging Markets ESG Select ETF seeks to track an index that is designed to provide exposure to large and mid-capitalization companies in emerging markets that exhibit certain ESG characteristics.
Moody’s Analytics Announces Pension Analytics Support Deal
Moody’s Analytics has announced that MetLife Investment Management has licensed the PFaroe DB pension risk modeling platform. The PFaroe DB platform is designed to help its users develop customized liability-driven investment (LDI) solutions to drive business growth.
“We need to generate complex asset-liability analytics in a client-friendly manner to engage effectively with our institutional client base,” says Stephen Mullin, head of long duration and LDI strategies at MetLife Investment Management. “The PFaroe DB tool will help equip us with the right information at the right time allowing us to make informed decisions that can easily be communicated.”
DPL Introduce New Asset Allocation Option for RIAs
DPL Financial Partners, an insurance platform for registered investment advisers (RIAs), has announced the introduction of a new U.S. equity index designed to deliver higher expected returns with lower volatility. The Avantis Barclays Volatility Control (VC) Index represents a first for Eduardo Repetto and Pat Keating of Avantis Investors, who created it specifically for the RIA market and the fixed index annuity (FIA) structure. An index account option based on the new index is now available exclusively in Security Benefit Life’s ClearLine Annuity on DPL’s platform for RIAs.
The firm says the index is unique in that it uses an excess return option strategy, rather than a price return, which offers the benefit of dividends.
“When I learned about the fixed index annuity structure, I thought it presented a great opportunity to help advisers rethink asset allocations because FIAs can complement an existing allocation of equity and fixed income,” says Eduardo Repetto, Avantis chief investment officer (CIO). “FIAs offer risk mitigation, like fixed income, while diversifying the driver of returns away from bond yields. I think this structure can help advisers improve their clients’ portfolios, in particular during these times of extremely low bond yields.”
The index account option is only available in Security Benefit’s ClearLine Annuity, a product designed by DPL with Security Benefit that has proven to be popular on DPL’s platform for providing the lowest cost income rider as well as a 2% annual increase on income generated.