T. Rowe Price Group announced Monday it will reduce expenses across its suite of target date mutual funds and trusts, filed with the SEC for a new series of target date funds, and launched a new marketing campaign to promote the firm’s target date solutions.
Baltimore-based T. Rowe Price, the largest manager of active target date products in the U.S. according to Morningstar, said the fee reductions on its target date portfolios will take effect on July 1, 2021. The new Retirement Blend Fund series is expected to be available publicly on or about July 28, 2021 and will offer Investor Class and I Class shares across all vintages, from 2005-2065.
“We understand everyone’s path to retirement is different, and we look forward to delivering greater choice and value to the target date marketplace through these lower fees and the new Retirement Blend Funds,” said Wyatt Lee, portfolio manager and head of Target Date Strategies, Multi-Asset. “As long-established leaders in retirement and target date investing, we have tremendous conviction in our approach to managing target date assets and we are pleased to extend our offering to a wider base of retirement investors, plan sponsors, and advisors.”
The new marketing campaign, centered on the theme “Retirement. Meet Your Match,” seeks to promote how the breadth of the firm’s target date solutions can help investors meet their unique retirement goals.
The expense reductions fees on its existing target date portfolios vary depending on the specific product type and vintage. Overall, the resulting asset-weighted average fee reduction, based upon assets under management as of March 31, 2021, is 6.3 basis points across mutual funds and 4.8 basis points across trusts. Specific fee changes vary across products.
The expense reductions follow the firm’s establishment last April of a new unitary fee structure for all target date mutual funds, in which an all-inclusive management fee rate was set at the top level. As part of that restructuring, fees were reduced across the Retirement I Funds—I Class, Target Funds, and Retirement Income 2020 Fund.
The unitary fee structure for the target date mutual funds will remain in place and will reflect the updated fees beginning July 1, 2021. This top-down fee structure has enabled the firm to lower target date mutual fund fees without making underlying fund or allocation changes.
The overall investment approach and benchmarks for the Retirement and Target series remain unchanged.
Retirement Blend Funds
The new Retirement Blend Fund series expands T. Rowe Price’s target date lineup, with the company saying in a statement it allows the firm “to deliver value to clients while further broadening the range of solutions to help them achieve their retirement goals.”
The Retirement Blend Funds will combine active and passive styles in selecting underlying investments. The Retirement Blend strategy has been in place at T. Rowe Price since 2018 but was previously only available in the collective investment trust (CIT) format.
This mutual fund series will extend the Retirement Blend approach to a wider range of investors for whom a mutual fund is the preferred or most appropriate investment vehicle.
The Retirement Blend series will offer the value of active management, the company says, allowing the opportunity for excess return and greater diversification in market sectors where a fully passive management approach may not be appropriate, while also providing the market exposure and reduced costs common to a passive investment approach.
The Retirement Blend Funds will utilize the enhanced Retirement glide path and the same diversification, and tactical asset allocation as the Retirement suite. T. Rowe Price recently announced that its target date portfolios are undergoing a gradual transition to their enhanced glide paths; this transition began in April 2020 and is expected to take approximately two years to complete for all funds and trusts. Neither the Retirement Blend Funds launch nor the fee changes affect this transition process.
All of T. Rowe Price’s target date portfolios will continue to be managed by the same portfolio management team: Wyatt Lee, CFA, head of Target Date Strategies, and portfolio managers Kimberly DeDominicis and Andrew Jacobs van Merlen, CFA.
T. Rowe Price established its first target date portfolios in 2002. The firm’s target date portfolios are advised by its Multi-Asset Division, which managed $451 billion in multi-asset portfolios for retail and institutional clients as of April 30, 2021. According to Morningstar, T. Rowe Price is the largest manager of active target date products in the U.S., with $327.3 billion in active target date strategy assets under management, as of March 31, 2021.