The Markets June 19, 2012

Most TDFs Employ a ‘Through’ Glidepath

More than six in 10 target-date funds (63.6%) surveyed by Callan employ a glidepath managed “through” retirement.
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In total, these funds account for the majority of assets managed (87.7%). Twenty-eight target-date providers offer 35 series using this approach, according to Callan’s latest survey of target-date fund managers. The universe of “through” managed funds is divided into fully active management (31.4%), passive management (25.7%) and those that combine both types of management (42.8%).   

Target-date funds (TDFs) managed “to” retirement accounted for 12.3% of total target date assets at year-end. The universe of “to” managed funds is split almost equally between active (47.6%) and an active/passive blend (42.8%). There is only one purely passive target date fund in this universe.  

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The prevalence of inflation-sensitive assets increased relative to 2011. The survey found greater use of commodities, and U.S. and international REITs (real estate investment trusts) in particular. In 2011, more than half the target date managers surveyed changed their glidepath as a result of a recent review. The most common change reported was the addition/ increase in the inflation-protection component. In Callan’s 2012 survey, two-thirds of managers reported glidepath modifications, once again primarily around inflation-sensitive assets. This category includes TIPS (Treasury inflation-protected securities), commodities, REITs, diversified real assets, natural resources, infrastructure, and gold and precious metals. 

 

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The use of emerging markets—both equities and debt—has also risen. Emerging markets equity prevalence jumped, from 60% of providers, to 76.7% over the last year. The second most common glidepath change reported in 2012 involved improving the diversification within asset classes, especially international equities. Diversification efforts included adding/increasing emerging markets equity exposure (this ranked fourth in 2010 changes), as well as adding or increasing small/mid-cap international exposure.  

One-fifth of funds report an allocation to alternatives—namely, absolute return strategies. The average allocation within the Callan Target Date Index was 1.3%, up from 1% in 2011.  

One trend that appears to be underreported in the survey is a reduction in the overall equity exposure of TDFs. In 2012 very few target-date fund managers reported changing their overall equity to fixed income exposure (7%), and those that did noted only marginal changes. However, a year-over-year quantitative analysis of the typical TDF’s equity glidepath reveals a material decline in equities and equity-like investments.

 

Deals & People June 19, 2012

JPM Asset Management Creates New Unit

 

J.P. Morgan launched Asset Management Solutions, consolidating its multi-asset capabilities into a group overseeing about $100 billion in assets under management globally.

 

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The division will bring together the Global Multi-Asset and Institutional Strategy groups, Global Access Portfolios and the J.P. Morgan Advisory Program.

Seth Bernstein, who has been with the firm for nearly 28 years, will serve as the global head of the new group. He will report to Mary Erdoes, chief executive of J.P. Morgan Asset Management. 

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Bernstein has led the firm’s Investment Management’s Global Fixed Income and Currency businesses. He has held senior roles in the Investment Bank across client coverage, debt and equity capital markets, and private placements. 

Bernstein will be succeeded by Chris Willcox as global head of fixed income and currency for Investment Management. Willcox will also report to Erdoes.

Willcox will be responsible for U.S. and international fixed-income and currency investment activities, operations and product management. He will become a member of the Asset Management and Investment Management Operating Committees, as well as the Asset Management Investment Committee.

Willcox, who has more than 20 years in the industry, worked in the firm’s investment bank as head of Global Rates. Before joining the firm in 2006 as co-head of Global Rates & FX, he served in many senior roles domestically and internationally. His roles included chief operating officer of Global Fixed Income, Head of Rates, Currencies and Commodities for Asia Pacific, Head of Foreign Exchange for Asia Pacific, and Head of Short Term Interest Rate Trading.

Willcox has also served on the FX Committees for the Federal Reserve and Monetary Authority of Singapore, the Joint Standing Committee for Foreign Exchange at the Bank of England, and the Supervisory Board of MTS. He is the former chairman of Tradeweb, and is a board member of the London Clearing House.

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