Legg Mason will be offering a line of nine new target-date funds.
Called 401(k) Roadmap Funds, the funds succeed the similar QS Legg Mason Target Date Retirement Funds, which closed Nov. 14.
The Roadmap Funds will use basically the same investment strategies – it terms of risk tolerance and asset mix – as found in the Legg Mason Target Date Retirement Funds.
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In general, TDFs are set up so they can be used by investors who plan to retire in a certain year. By investing in a changing assortment of assets, the funds offer lower risk and become more conservative closer to the planned retirement date, according to the investment theory. Typically, many employers will use TDFs by default to invest employees' 401(k) accounts if workers do not choose another option.
The Roadmap Funds will invest mostly in other funds, representing multiple asset classes, such as equity, fixed-income and inflation-hedging assets, the company said.
TDFs now account for about 20 percent of the defined contribution retirement market, Barron's reported earlier this year. Looking ahead, TDFs may get up to 88 percent of new contributions made to 401(k) plans by 2019, according to data from Cerulli Associates. Their popularity is no doubt helped out by the current robust stock market.
The new Roadmap Funds are sponsored by Hand Benefits and Trust Co., which is a Benefit Plans Administrative Services Inc. company. QS Investors LLC, a subsidiary of Legg Mason, will offer sub-advisory and asset allocation services for the Roadmap Funds. In addition, Sheridan Road Investment Consulting LLC will provide research and analysis of the funds. Legg Mason manages some $720 billion in global assets.
The companies worked to come up with an economical option that "combines a distinctive glide path with a … risk management feature that is fairly unique in today's target date industry," Gary Kleinschmidt, head of Defined Contribution Investment Only sales for Legg Mason, said in a statement.
"The Roadmap Funds are really about providing investors with a streamlined retirement planning option that includes balancing market risk against longevity risk while attempting to reduce portfolio volatility in the five years before and after retirement when investors are most vulnerable to a drop in portfolio value."
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