Investment Products and Service Launches

Prudential Launches New TDF Suite; Natixis Releases ESG TDFs; and Vanguard Reports Reduced Expense Ratios.

Prudential Launches New TDF Suite

Prudential Investments has released its new Day One Mutual Funds, a series of 12 target-date funds (TDFs), which will be available through retirement plans and financial intermediaries.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Choosing the right target-date fund may be one of a fiduciary’s most important decisions,” says Stuart Parker, president of Prudential Investments. “The Day One Mutual Funds are a solution to consider with a glide path constructed to mitigate risk at each stage of retirement with a competitive expense ratio.”

Prudential says the series is designed to mitigate risk for younger participants by accumulating higher equity exposure before preserving lower equity exposure for older investors to hedge against the risk of significant market losses.

“Studies show that Millennials early on tend to be underweight in equities despite having time on their side,” says Tony Fiore, senior vice president and national sales manager of retirement investment solutions at Prudential Investments. “So we have a higher equity exposure than most in the industry because we feel that accumulation is really the most important thing you can do early on … You eventually get to what we call the retirement red zone about 10 years before retirement. That’s when we try to take risk off the table as much as we can.”

The series also focuses on inflation protection to address the risk of eroding purchasing power for more than 30 years in retirement. Its hybrid investment approach combines active and passively managed strategies to reduce costs and generate potential for alpha, Prudential explains.

The Day One Mutual Funds are being offered at an expense ratio of 0.40%.

“Target funds have become the vehicle of choice within defined contribution plans, but not all target-date funds are created equal,” says Jamie Kalamarides, head of Full Service Solutions at Prudential Retirement. “Our approach to the Day One Target Date Funds incorporates nearly a century of experience in fulfilling pension obligations and helping plan participants reach their desired retirement outcome.”

The new Day One suite features 12 target-date mutual funds and is available in five-year increments, ranging from 2010 to 2060, in addition to an income fund. Additional information about Day One Mutual Funds can be found at DayOneFunds.com.

NEXT: Natixis Releases ESG TDFs

Natixis Releases ESG TDFs

Natixis Global Asset Management has filed a registration statement with the Securities and Exchange Commission (SEC) to register what it says is the first series of target-date mutual funds (TDFs) in the U.S. with investments focusing on environmental, social, and governance (ESG) responsibility. The Natixis Sustainable Future Funds will include ten investment vehicles with vintages ranging every five years from 2015 to 2060. They are expected to launch in the first quarter of 2017.

These funds will select securities based on ESG criteria with respect to such issues as fair labor, anti-corruption, human rights, fair business practices and mitigation of environmental impact, the firm announced. These TDFs will seek a diversified portfolio of investments that contribute to a more sustainable future.

Most respondents to the firm’s 2016 Global Survey of Individual Investors stressed the importance of investing in companies that are ethically run (83%), and have a positive social impact (70%) and good environmental records (70%). Some research also suggests that ESG is especially important among Millennials. The Natixis 2016 Retirement Plan Participant Study backed this notion as it found that 71% of Millennials say they would be more willing to contribute to their retirement plan if they knew their investments were doing social good.  

“Our research shows that most people want to invest in companies that are ethically run, have a positive social impact, and have strong environmental track records,” says John Hailer, CEO for the Americas & Asia and head of Global Distribution. “We are excited to bring to market the first target-date mutual funds with a sustainable investing approach that enables individuals to align their investments with those beliefs.”

The proposed funds will be advised by NGAM Advisors, L.P. and sub-advised by Natixis Asset Management U.S., and will incorporate equity and fixed income allocations that leverage the ESG expertise of Mirova, an affiliate of Natixis AM U.S., which has managed responsible investment solutions for almost 30 years. Natixis also has selected Wilshire Associates Incorporated as a sub-adviser to provide glide path design and portfolio allocation services.

The funds' prospectuses are not complete and may be changed. A registration statement relating to these target-date funds has been filed with the SEC, but has not yet become effective. The preliminary version of the Natixis Sustainable Future Funds' registration statement has been filed with the SEC and can be obtained by visiting www.sec.gov.

NEXT: Vanguard Reports Reduced Expense Ratios

Vanguard Reports Reduced Expense Ratios

Vanguard clients saved a total of $13 million as a result of lowered expense ratios for 35 individual mutual fund shares, including 11 exchange-traded fund (ETFs) shares, the company announced.

These mark the first wave of Vanguard funds with a fiscal-year-end date in 2016 to report expense ratio changes (in this instance, funds with a fiscal year that ends in August). Vanguard will announce any additional expense ratio changes as funds update their prospectuses in the coming months. Expense ratios are reported on an annual basis and are based on actual operating expenses for the prior fiscal year.

“While some will portray Vanguard’s expense ratio reductions as another volley fired in the fee war, we view it as business as usual,” says Vanguard CEO Bill McNabb. “We’ve been lowering the cost of investing for four decades and will continue to do so. Importantly, we have announced reductions across our product offerings—mutual fund and ETF, index and active, stock and bond, domestic and international.”

Twenty-four Vanguard bond index fund shares reported lower expense ratios. For example, the $18.7 billion Vanguard Short-Term Corporate Bond Index Fund reported the following reductions: Admiral Shares, 3 basis points to 0.07%; ETF Shares, 3 basis points to 0.07%; and Institutional Shares, 2 basis points to 0.05%.

A full list of reported expense ratio changes can be found here.

Plan Advisers Should Focus on Different Demographic Groups

Each retirement plan participant demographic group faces unique challenges, and advisers can help plan sponsors target their needs.

As different generations continue their concerns in saving for retirement, there’s one other demographic still strapped for knowledge: Women. They are more anxious about their savings than men, and face unique challenges to building retirement income.

A TIAA report finds women work for less years and gain fewer salary increases compared to men. Saving early in their careers can seem tough as well. The TIAA study found that in order for two recent college graduates to secure an equal amount in retirement savings, the male would need to save 10% of his salary, while the woman would have to put away 18% of her pay. Career breaks, whether it be caregiving or raising children; greater life expectancy and higher lifetime health insurance costs all add to the earnings gap and savings shortfall, a potential number of up to 1.3 million dollars.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

To combat these challenges, T. Rowe Price created a short, seven-episode video series on real-life experiences shared by 23 women, as well as advice on how to take back control of finances.

As for different generations, studies show Millennials need a savings rate of 22% in order to accumulate enough for retirement, with a start-date of now, due to lower expected market returns. A NerdWallet analysis reported that if a 25 year old Millennial were to wait until age 35 to save, he or she must put aside an almost impossible 34% ($16,400) annually in order to retire at age 67 with an 80% replacement income, assuming 5% annual returns. With student loans delaying most from saving, as well as 70% of Millennials preferring to travel than save, it’s possible the generation may see a bleak future in retirement.

However, there are evolving technologies and advances that exist to further assist workers in saving. Willis Towers Watson found that 66% of Millennials and Baby Boomers believe mobile apps and tools are either important or very important in managing and tracking the value of retirement savings. Furthermore, 59% of Millennials and 54% of Boomers place higher values on tools to help them track retirement goals.

For Boomers, education is particularly critical, especially since the age group is closing in on retirement each day. A survey from the Indexed Annuity Leadership Council (IALC) found that among Boomers, one in four have saved less than $5,000 for retirement. Pension income won’t cut it either, as the IRI estimated a total of 56 million Boomers will not obtain any income from pensions, and any future retirees will need more than $400,000 to replace the deficit.

Millennials and Boomers aren’t the only generations struggling to save, however. Among defined contribution (DC) plan participants in Generation X, less than four-in-ten believe they will have enough saved for retirement. Competing financial priorities are making Generation X far less confident than other generations that they will be able to make ends meet in retirement.

As all demographics continue their fight in retirement investing and saving, plan advisers and sponsors can respond with targeted communications and the right tools.

«