According to a news release, the Wells Fargo Advantage Dow Jones Funds will offer investors a more sophisticated risk allocation strategy and greater diversification. The target date or lifecycle funds gradually grow more conservative as the target retirement date of the fund approaches.
“Target date funds are one of the simplest yet most
effective ways for 401(k) investors seeking to achieve
diversification, automatic asset allocation management
and ongoing rebalancing in a single investment option,”
said Doug Murray, senior vice president of client
delivery services for Wells Fargo Institutional Trust
Services, in the news release. He added that target
date funds simplify the often daunting
process of putting together a diverse
The Dow Jones Target Date Indexes are designed to measure an index’s overall equity-risk component, rather than focusing on just the exposure to equities in general, the company said. This particular feature allows the funds to manage the overall risk.
With the new structure the funds now invest in stock, bond and cash portfolios that in turn invest in 14 distinct sub-asset classes:
- a stock portfolio benchmarked to an equal weighting of nine Dow Jones domestic and international equity indices,
- a bond portfolio benchmarked to an equal weighting of four Lehman Brothers bond indices,
- and a cash allocation.
The use of distinct index-based components ensures that the funds’ underlying investments will not overlap each other by holding the same securities. The funds will also be benchmarked against the Dow Jones Target Date Indexes, which were introduced in April 2005.