S&P Dow Jones Indices has launched the S&P STRIDE Index series, “aimed at blending the process of wealth creation with the need to mitigate uncertainty of in-retirement income.”
The STRIDE name is short for “Shift to Retirement Income and Decumulation,” the firm explains. The index series is a multi-asset class solution “designed to transition from growth assets to a hedged stream of inflation-adjusted retirement income based on target retirement dates.”
Dimensional Fund Advisors worked collaboratively with S&P DJI to develop the glide path, inflation hedging, and duration hedging techniques used in these indices. Each S&P STRIDE index consists of an allocation to a group of indices covering global equity, global fixed income and U.S. Treasury Inflation-Protected Securities (TIPS). Allocations are determined by five-year increments of target-date years to cover a full life cycle of accumulation, defined as working years, and decumulation, defined as retirement years.
“As life expectancy increases and plan participants depend more on their retirement plan balances to generate income, the development of benchmarks addressing these trends are key to serve as the basis for investment solutions,” suggests Philip Murphy, vice president of North American equity indices at S&P Dow Jones Indices.
In a research paper released alongside the new index series, the firm argues the goal for many people saving for retirement is essentially to maintain a specific standard of living. For these individuals, one relevant risk to manage is the uncertainty of how much retirement income their balances can afford, the firm explains.
“This uncertainty is driven by changes in interest rates and inflation,” adds David Booth, chairman and co-CEO at Dimensional Fund Advisors. “The S&P STRIDE Index series represent a significant step forward in the design of target date indices, because they manage relevant risks facing participants saving for retirement. I believe these indices provide plan sponsors, consultants, and financial advisers with a better benchmark to understand how well prepared plan participants are to maintain their desired standard of living in retirement.”
Northern Trust Asset Management launched the Life Engineered Funds, described as a new generation of target-date retirement funds.
“The funds help defined contribution (DC) plan sponsors by providing participants with a comprehensive solution that takes the guesswork out of investing and builds a more secure retirement,” according to the firm.
The products build on Northern Trust’s asset allocation framework, funds combining the expertise of Northern Trust’s factor-based Engineered Equity strategies, and PIMCO’s active fixed-income and inflation-sensitive strategies.
“Northern Trust has re-engineered the target-date fund,” suggests Stephen Potter, president of Northern Trust Asset Management. “Life Engineered Funds leverage our unique factor-based investment approach and our demonstrated expertise in asset allocation. This new series reflects our continued commitment to the retirement marketplace by providing an efficient and effective solution for DC participants to build for their life in retirement.”
Rick Fulford, head of retirement at PIMCO, says the firms built the new TDF product line in the belief that the next generation of target-date funds should seek to provide sufficient, reliable income. He explains the Life Engineered Funds are available to DC retirement plan sponsors via 12 collective trust funds, “designed for participants who are retired or are planning to retire between now and 2060.” Each fund includes a combination of three distinct strategies—growth, income and inflation sensitive—according to the firms.
“We have seen considerable adoption of our Engineered Equity factor-based strategies by global institutional investors over the past year, due to an increased focus on managing volatility and taking compensated risks,” says Northern Trust Chief Investment Officer Bob Browne. “Academic studies, including our own, have identified factors in the equity markets that have been proven to outperform over time. Strategically combining exposures to those factors provides portfolios the right volatility at the right time, over a certain time horizon.”
More information about the funds is at www.lifeengineered.com.NEXT: Beaumont Capital Reveals TDF Alternative
Beaumont Capital Management, a provider of quantitative ETF-based investment strategies, launched a defensively minded alternative to target-date funds (TDFs) in the form of risk-managed collective trust funds.
Beaumont says the new product approach “addresses the need for a more versatile investment solution that seeks to benefit in growing markets and can react appropriately and decisively in periods of market volatility.” In addition, according to Beaumont, the products are “designed to address the current Department of Labor and industry concerns with other target-date funds.”
The age-based portfolios are designed to meet the varied needs across a workforce from aging Baby Boomers on the verge of retirement to Millennials just starting their first job, the firm says. Each portfolio mirrors the design of a target-date fund, “but the overall strategic allocations are adjusted over longer periods the way most investment advisers would manage a portfolio, rather than small annual adjustments.”
Additionally, Beaumont launched new U.S. Sector Rotation and Decathlon Growth Tactics strategies as collective investment funds, “which can easily be included and accessed in virtually any retirement plan.”
“The premise of our new retirement products is to offer portfolios that are low cost, have active management, are defensively oriented and meet the needs of investors regardless of where they are in their life stage,” explains Dave Haviland, managing partner and portfolio manager of Beaumont Capital Management.To learn more about Beaumont’s new retirement products, contact Bob Peatman at email@example.com.