Focus on Broadening Series’ Spectrum by Adding Smart Beta and More Flexible Active Options
BlackRock (NYSE: BLK) has made 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’s LifePath® Funds were the asset management industry’s first target date funds (TDF) and today represents $144 billion in assets under management (at 9/30/16). About one in four Fortune 100 companies use LifePath as part of their defined contribution plan investment menus.
The changes announced by BlackRock, effective today, are:
- 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 80-90% 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. BlackRock LifePath Smart Beta funds are in the middle of the flexibility spectrum between BlackRock’s new LifePath Dynamic funds and the flagship LifePath Index funds, and are managed by Matthew O’Hara, Ked Hogan and Andrew Ang.
- 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 Morningstar¹. LifePath Index funds will continue to be managed by Amy Whitelaw and Alan Mason, and has added Matthew O’Hara.
“BlackRock pioneered the target date fund more than 20 years ago and we remain committed to offering easy-to-use solutions that bring sophisticated investment and risk management to the challenge of building retirement savings,” said Matthew O’Hara, Co-Head of LifePath and Global Head of the Lifetime Asset Allocation Group at BlackRock. “These changes illustrate our commitment to ensuring that LifePath continues to help plan sponsors and participants tackle today’s retirement investing needs.”
BlackRock is a global leader in investment management, risk management and advisory services for institutional and retail clients. At September 30, 2016, BlackRock’s AUM was $5.1 trillion. BlackRock helps clients around the world meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. As of September 30, 2016, the firm had approximately 13,000 employees in 30 countries and a major presence in global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa.
¹ Latest rating as of 2/3/16. The Morningstar Analyst Rating is not a credit or risk rating. It is a subjective evaluation performed by the manager research analysts of Morningstar. Morningstar evaluates funds based on five key pillars, which are process, performance, people, parent, and price. Analysts use this five pillar evaluation to determine how they believe funds are likely to perform over the long term on a risk-adjusted basis. They consider quantitative and qualitative factors in their research, and the weighting of each pillar may vary. The Analyst Rating scale is Gold, Silver, Bronze, Neutral, Negative. A Morningstar Analyst Rating of Gold, Silver, or Bronze reflect an Analyst’s conviction in a fund’s prospects for outperformance. Analyst Ratings are continuously monitored and reevaluated at least every 14 months.