Deals & People October 23, 2014

LGIMA Expands Index Team with Two U.K. Members

Drew Miyawaki and Aodhagan Byrne, both members of the U.K. operations of Legal & General Investment Management America Inc. (LGIMA), have joined the U.S. division.
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Miyawaki, head of global equity trading, will oversee equities trading and be directly responsible for execution of all North American equities. He joined LGIMA’s U.K. unit, LGIM, in December 2011 from Knight Capital, where he was director of global program trading. Prior to that, he was the head of international trading at Liquidnet, where he helped build the electronic trade offering of the global crossing network. Miyawaki started his career in 2000, when he worked in a number of trading capacities in algorithmic and program trading at the U.S. broker/dealer Jefferies. Miyawaki holds a bachelor’s degree in behavioral science from Drew University.

Byrne, an index portfolio manager, will manage North American Index strategies at LGIMA.  He joined the LGIM Index Funds team in February 2012. Previously, he spent seven years as an index fund manager with Irish Life Investment Managers, managing equity and fixed-income funds. Prior to that role, Byrne worked for five years as a software engineer with Xilinx.

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Miyawaki and Byrne will be based in Chicago and will report locally to Chad Rakvin, head of U.S. index funds for LGIMA, working alongside Shaun Murphy, director of index funds.

The U.K.-based LGIM provides index fund management services to clients in Europe and Asia, and has more than $483 billion of index funds under management as of June 30, 2014.  

Data & Research October 23, 2014

Lifetime Income Costs Up Sharply Since 2013

Retirement savings for older workers racked up impressive investment gains in the past 12 months, but the price of securing lifetime retirement income is up significantly too.
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This is the state of affairs described by the latest update of BlackRock’s CoRI Retirement Indexes—which track the cost of purchasing lifetime retirement income by estimating how much an investor needs to have saved today to generate a single dollar of income in retirement, starting at age 65. Despite increased savings for workers in their 50s, the indexes suggest most retirement savers are worse off overall than they were 12 months ago, due to the significant increase in price for lifetime income.

On the asset-growth side, in the 12 months that ended September 30, median savings for 55-year-olds increased 16.48% to $271,620. The total includes investments both in 401(k) plans and individual retirement accounts (IRAs), as tracked by the Employee Benefit Research Institute (EBRI). The boost came mainly from equity markets’ strong performance, BlackRock says. Despite a recent pullback, the S&P 500 climbed 17.29% in the year ended September 30.

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The estimated cost of future lifetime retirement income for 55-year-olds climbed even faster, at 18.50%, according to the CoRI Indexes. This means that, for 55-year-olds, every dollar of lifetime retirement income purchased through annuities at the start of the current quarter would have cost about $15.12, compared with $12.76 a year earlier.

The main factor driving up the cost of future retirement income is a drop in interest rates over the past year, which has surprised some experts. Yields on 10-year U.S. Treasury notes fell to 2.52% at the end of the third quarter of 2014, down from 2.64% a year ago. As interest rates fall, it takes more money to secure future retirement income, BlackRock explains. The CoRI Indexes use techniques similar to those used by insurance companies, the Social Security Administration and pension plans to estimate future income costs.

For workers who were 60 and 64 starting September 30, 2013, the results of the latest CoRI Index updates were mixed. This group saw retirement account values increase, with median savings among 60-year-olds climbing 14.76% to $277,330, and median savings for 64-year-olds rising 15.01% to $259,934. Those savings outpaced the rise in estimated lifetime income costs, which were 13.64% and 6.28%, respectively, year over year. As BlackRock explains, lifetime income costs for different age groups are impacted differently by moving interest rates.

While older workers saw their portfolio growth outpace the increases in income costs, BlackRock warns that many older workers still have too little saved. 

More information about the CoRI Indexes, including current and past index data, is available here.

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