Smart beta got another shot in the arm with Blackrock’s announcement of its new 401k target date fund lineup.
According to the $5 trillion investing behemoth, it made the changes to its LifePath series of target date mutual funds to “better reflect today’s retirement investing needs—in particular, by offering a broader choice among varying degrees of active asset management within the fund series.”
“In addition to offering a more flexible active fund, LifePath will now feature an innovative fund designed to capture “smart beta” factors for enhanced performance.”
BlackRock claims its LifePath Funds as the first target date funds and about one in four Fortune 100 companies use LifePath as part of their defined contribution plan investment menus.
The changes include:
- The BlackRock LifePath Active series will be renamed BlackRock LifePath Smart Beta and will be “among the first TDFs of its kind, with its exposures converted to 80 to 90 percent iShares smart beta exchange traded funds (ETFs).
“Smart beta strategies have become increasingly popular for investors who want to manage risk and target precise exposure to factors that are historical drivers of return. These approaches seek to take advantage of the performance premium that can be offered by certain fundamental security factors such as momentum, quality and value, as well as the risk reducing features of minimum volatility.”
- The LifePath fund series will be renamed BlackRock LifePath Dynamic. The funds will now allow for greater flexibility to adjust the portfolio’s asset allocation to respond to market conditions and opportunities, and will have additional access to more actively managed exposures. The exposures will include strategies managed by the firm’s Scientific Active Equity, Fundamental Fixed Income and Global Tactical Asset Allocation teams.
LifePath Dynamic is designed for plan sponsors who seek additional return potential and plans whose participants have a higher risk tolerance or are behind in their savings. LifePath Dynamic funds are managed by Matthew O’Hara and Phil Green.
There will be no changes in the investment process or strategy of BlackRock LifePath Index funds, one of only two target date fund series in the industry awarded a Gold rating by Morningstar. LifePath Index funds will continue to be managed by Amy Whitelaw and Alan Mason, and has added Matthew O’Hara.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
