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Products October 19, 2023
BlackRock Launches Target-Date ETFs Aimed at Self-Directed Retirement Savers
The TDFs will provide ETF access in a glide path as the firm targets 57M workers who lack 401(k) access.
Reported by Alex Ortolani
BlackRock Inc. has launched a series of target-date exchange-traded funds focused on the self-directed retirement savings market, the asset manager announced Thursday.
The iShares LifePath Target Date series is available to retail investors seeking a long-term savings vehicle with a glide path that grows more conservative as they near retirement age. Targets for the product include the 57 million Americans who do n’ot have access to a workplace plan, including gig and part-time workers, according to Nick Nefouse, global head of retirement solutions and head of LifePath at BlackRock.
“A lot of this has to do with access,” Nefouse said at a Thursday press briefing at the firm’s New York headquarters. “We need to be able to take the learnings we’ve had in the 401(k) world and bring them down into the direct investor world.”
The LifePath funds are invested in a portfolio of BlackRock’s iShares ETFs that will transition into iShares Target Retirement ETFs at a target retirement date. The fund fees and expenses range from .09% up to .11%, which Nefouse said are competitive when compared to a retail mutual fund at about .67%.
BlackRock had previously brought an ETF-backed TDF to market in 2008, but that division was closed in 2014, Nefouse confirmed. Yet demographic changes, including an increase in the number of workers without access to employer retirement plans, as well as the growing number of people near or in retirement, make the product offering more relevant, he said.
In addition, there have been innovations in ETFs that make a TDF option more compelling, according to Nefouse.
“This is technically an active ETF,” he said. “We’re not going to be doing lots of active trading in this. But what that means is, as my team completes research, we can more quickly update the portfolio. … So, [for instance,] if inflation protection changes … we can more quickly get that into the portfolios.”
Self-Managed Retirement
BlackRock also sees the offering as being part of a wider market drive toward self-directed investing, said Monique Le, BlackRock’s head of iShares digital wealth and individual investor business.
“The industry had over 40 million accounts opened since 2020,” she said. “This rise of the end investor looking for access to financial markets is one of the reasons the ‘why now?’ is more prevalent. … You’re seeing a lot of these brokerages, like a Robinhood, launch an IRA plan and matching programs to entice people to start saving even more beyond the 401(k) if they don’t have access to a corporate plan.”
Le said BlackRock’s approach to reaching self-directed investors is two-pronged. One is working with digital brokerages that today range from Robinhood to Fidelity Investments to E-Trade and Public, along with bolstering their own brand through marketing. The second is educating investors on the benefits of a target-date ETF, including tax efficiencies, simplicity and affordability.
“A lot of it is focused around education and putting our products on the shelf and nurturing the clients to really understand how to invest, what to invest in and provide that sense of security,” she said.
Rollover Capture
Dominik Rohé, head of BlackRock’s Americas ETF and index investments business, also pointed to the trend of people changing jobs more often over the course of a career, which provides the potential for workplace 401(k) rollover options and the need for savings management.
“We know that many people are unadvised,” he said. “For these unadvised investors, this is a great way of gaining that [retirement savings] exposure and [of] saving for the future in a transparent, cost-effective way.”
BlackRock’s research shows that independent savers have an average of $68,000 in retirement investment accounts, as compared with an average of $94,000 in among workplace savers. Meanwhile, 55% of independent savers say they have never changed their mix of investment, and 80% say they plan to wait until they get closer to retirement to begin engaging their accounts.
The research results came from BlackRock’s “Read on Retirement” survey, which included 1,300 workplace retirement plan savers and 1,300 independent savers and was conducted by Escalent Inc. from March 21 through April 6.
BlackRock currently has more than $3 trillion of assets under management in ETFs globally across a lineup of 1,300 ETFs, according to Le. About 35 million investors use iShares ETFs, she said.
