A new target date offering from MassMutual aims to provide 401(k) savers who are around retirement age an added layer of protection from dips in the market.
The idea is to lessen the chance that soon-to-be or recent retirees’ assets take a big hit when it could hurt the most.
Dubbed Legg Mason Total Advantage Funds, the new product is described as “a series of bank-maintained collective investment funds” that utilize “both active and passive investment management strategies by investing in underlying funds that are managed by 16 different managers.”
The Funds are subadvised by Legg Mason-affiliate QS Investors, LLC, and sponsored by Wilmington Trust, N.A. They are available through MassMutual 401(k)s and various other defined contribution plans.
“Financial advisors often caution retirees and pre-retirees against taking too much investment risk, to guard against steep paper losses at a time in which they will need to generate retirement income,” MassMutual explained in its statement. “Target date funds are evolving toward more dynamic structures that have the potential to better balance risk and reward for individuals, depending on macros market factors, their age and retirement plans.”
More specifically, Legg Mason Total Advantage Funds intend to mitigate market volatility by incorporating:
- Adaptive Asset Allocation, which leverages a Retirement Keeper tool and Tactical Accelerator.
- The Retirement Keeper tool seeks to minimize exposure to large market losses in the five years before and after a saver’s target retirement date.
- The Tactical Accelerator is designed to boost return potential through opportunistic asset allocation, in response to market indicators.
- Next-Generation Diversification combines both active and low-cost passive investment styles, employs a multi-manager approach to diversification across multiple asset classes, and includes a stable value fund to help reduce market volatility and generate more stable returns.
- Using a glide path, asset allocations are gradually adjusted, “shifting from an equity weight as high as 97 percent for those with 30 or more years until retirement to as low as 34 percent for those who are retired.”
- Stable value and fixed investment allocations then increase proportionately.
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.
