Fidelity Adjusts Asset Allocation Funds Portfolio Targets

September 23, 2009 (PLANSPONSOR.com) - Fidelity Investments on Wednesday announced it would bump the asset allocation targets in its Freedom Fund product line for international equities to 30% of total equity exposure from about 20% currently.

A news release from the Boston investment company said the increased international exposure will be funded by a reduction in the allocation to domestic equity funds.

In addition, the Fidelity and Fidelity Advisor Freedom Funds will seek further diversification benefits by investing in two new underlying funds with dedicated exposure to commodities and Treasury Inflation-Protected Securities (TIPS) — Fidelity Series Commodity Strategy Fund and Fidelity Series Inflation-Protected Bond Index Fund, the company said.

The Fidelity Freedom K and Fidelity Freedom Index Funds, which are offered only to certain retirement plans for which Workplace Investing provides recordkeeping services, also will feature the higher level of international equity exposure, as well as the dedicated commodities and inflation-protected exposure.

The moves come as part of a firmwide enhancement to Fidelity’s planning and guidance tools as well as to other asset allocation portfolios. Other funds that will see a similar modification in their international equity exposures include the Asset Manager series — including Fidelity, Advisor, and VIP versions — and the Fidelity Four-In-One Index Fund.

“It’s no secret that inflation erodes a portfolio’s purchasing power, and historically it has been a factor in some major asset classes, such as stocks and bonds, underperforming their historical averages. A notable dimension of commodities is their historical record in providing inflation protection,” said said Derek L. Young, chief investment officer of the Global Asset Allocation group for Fidelity Management & Research Company (FMRCo), in the news release. “Adding explicit TIPS exposure can provide a real, inflation-adjusted return as well as additional diversification within the fixed-income asset class.”

Other funds that will be adding commodities exposure include the Fidelity and Advisor Asset Manager product lines and Fidelity and Advisor Global Balanced Fund.

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