The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from Business Wire

BlackRock Expands Index Fund Offerings for Defined Contribution Plans

<p class='bwalignc'> <b>New Mutual Funds Meet Growing Demand for Index Strategies</b> </p> <p class='bwalignc'> <b>Broader Index Line-Up Now Includes LifePath</b><sup>®</sup> <b>Target Date Mutual Funds</b> </p>

Monday, August 08, 2011

BlackRock Expands Index Fund Offerings for Defined Contribution Plans10:00 EDT Monday, August 08, 2011 NEW YORK (Business Wire) -- BlackRock, Inc. (NYSE: BLK) announced today that it has further expanded its menu of index mutual funds for defined contribution (DC) plans. With the June launch of nine BlackRock LifePath® Index Portfolios, and the All Country World Index ex U.S. Fund, the firm now features a full suite of 16 core index mutual funds that sponsors can use to construct a well balanced menu of investment choices for their participants. The newest funds, which will be available on most major recordkeeping platforms, complement a product suite that also includes BlackRock's S&P 500 Stock Fund; Small Cap Index Fund, tracking the Russell 2000 Index; International Index Fund, tracking the MSCI EAFE Index; Bond Index Fund, tracking the Barclay's U.S. Aggregate Index; and the Russell 1000 Index Fund. While indexing has long had a role in collective trust funds used by large and mega institutional DC plans, the trend towards indexing is expected to grow in the advisor-driven, small-to-mid size plan markets that have historically featured a heavier allocation to actively managed funds. Increasingly, plan sponsors are recognizing that indexing offers significant benefits to DC plans of all sizes, providing a transparent, low cost and low maintenance approach to managing some or all of an investment portfolio. In 1971, entities now part of BlackRock pioneered the development of the industry's first index fund, allowing investors to capture broad market returns in a single investment. Since then, the firm has met changing client needs by expanding its line-up of index solutions across various global equity and fixed income strategies offered through collective trusts, mutual funds and iShares® Exchange Traded Funds (ETFs). At June 30 2011, BlackRock managed over $2 trillion in index based products spanning equity, fixed income, multi asset and alternative investment strategies. “BlackRock is uniquely positioned to serve small and mid-sized DC plan sponsors that want to apply index strategies in their plans. Now, with our enhanced line-up we can help those that prefer to implement this form of investment style through their use of mutual funds,” said Chip Castille, Managing Director and head of BlackRock's U.S. and Canada Defined Contribution Group. “The growing indexing trend in this market is partly in response to regulatory focus on fees and the desire for increased transparency,” he said. “Sponsors like the publicly available pricing offered by mutual funds, as well as the detailed, standardized disclosures for prospectuses and other communications.” Industry wide, it's expected that the share of DC assets in index solutions will nearly have doubled from 11% in 2005 to 20% by 20151 – bringing the allocation into closer alignment with the percentage of indexing seen in defined benefit plans. “When considering plan design however, choosing between indexing and active management does not need to be an either/or decision,” Castille added. “The first tier in plan design should be a qualified default investment alternative such as a target date fund or an allocation fund that may use indices or active managers. The second tier may comprise the building blocks for a diversified portfolio – a suite of efficient professionally managed index and active funds – and the third tier may comprise more specialized exposures, including index funds or ETFs and actively managed funds for more savvy participants. New LifePath Index Portfolios Delivered in Mutual Fund Structure BlackRock has long been managing index based target date strategies through its LifePath series of portfolios. In fact, BlackRock created the first target date funds in 1993 under its LifePath brand, simplifying risk management and asset allocation, and offers access to these strategies primarily to mega and large DC plans. These strategies, with over [$50] billion in assets under management, are offered in collective trust structures with minimum investments that the mid and small plan market could not typically meet. By way of the nine newest LifePath Index Portfolios, delivered in a familiar mutual fund structure, BlackRock is bringing its combined heritage in indexing and target date funds to the fast growing mid and small plan market. “We're convinced that our legacy of experience in index and target date fund management as well as our ongoing commitment to innovation offer unique value to DC plan sponsors,” said Castille. Index target date funds typically provide pure, low cost exposure to a diversified asset mix as well as the flexibility of a broad range of share classes and fee structures, according to Mr. Castille. “Indexing also ‘narrows the range' of investment outcomes for a fund, making it more likely that the result is in line with a participant's expectations,” he said. The LifePath Index Portfolios employ combinations of equity and bond index funds, money market funds, and iShares ETFs, to offer DC plan participants globally diversified portfolios that are optimized for every stage of life leading up to retirement. Each LifePath Index Portfolio invests all of its assets in a range of classes including U.S. large cap equities, U.S. small/mid cap equities, international equities, U.S. bonds, U.S. inflation linked bonds, and money markets. Target Dates Reflect Broad Range of Retirement Scenarios The new LifePath Index Portfolios are offered in five year increments, reflecting a broad range of potential retirement dates: 2020, 2025, 2030, 2035, 2040, 2045, 2050, and 2055. Each LifePath portfolio grows more conservative as it approaches its target date. An allocation with prudent growth exposure and inflation protection intended for plan participants at retirement is also offered through the LifePath Index Retirement Portfolio. With the addition of LifePath Index Portfolios, BlackRock now offers both enhanced (active) and index versions of its LifePath Portfolios in a mutual fund offering for DC plans. The LifePath Portfolios are a series of target date and retirement funds delivering diversified, multi-asset portfolios that adjust the asset allocation mix in lockstep with the risk aversion of participants on a 30-year horizon to retirement. Reflecting growing sponsor and participant interest in approaches for transforming accumulated retirement savings into retirement income streams, the LifePath suite also includes LifePath Retirement Income, a collective trust fund that combines target-date fund technology with annuities for an innovative approach to the generation of secure income during the retirement years. DC Plans Carrying Growing Share of Retirement Planning Burden Proprietary nationwide polling of DC plan participants and sponsors conducted by BlackRock this spring affirmed that workers now consider the DC plan to be their primary retirement savings vehicle. “With DC plans now carrying a growing share of the burden of effective retirement planning for workers, we recognize that corporate plan sponsors as well as financial intermediaries more and more are demanding plan options as well matched as possible to particular sponsor needs and objectives,” Castille said. “We are dedicated to offering a comprehensive menu of DC investment choices that address the broad spectrum of critical sponsor concerns, including specific plan objectives, investment management philosophy, participant risk tolerance, retirement income, and plan costs,” he said. “This commitment is evidence of our strong advocacy for the cause of effective defined contribution plans that, over time, will become even more responsive to both sponsors' and participants' fundamental goals for retirement financial security.” About BlackRock BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At June 30, 2011, BlackRock's AUM was $3.659 trillion. BlackRock offers products that span the risk spectrum to meet clients' needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including 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®. Headquartered in New York City, as of June 30, 2011, the firm has approximately 9,700 employees in 26 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company's website at www.blackrock.com. About BlackRock Defined Contribution BlackRock is dedicated to bringing institutional-quality investment solutions to help participants achieve their retirement goals and assist plan sponsors in meeting their fiduciary responsibilities. At the forefront of investment innovation for over 30 years, BlackRock also invented the modern target-date funds by launching the LifePath® Portfolios in 1993. BlackRock has more than $325 billion in DC assets under management. As one of the largest managers of DC assets, and solutions that cover all asset classes and styles, BlackRock has the expertise, insight and experience to help plan sponsors build a better retirement future for participants. For additional information, visit www.blackrock.com/dc.1 Source: Cerulli, Retirement Markets 2007 and 2009 Prepared by BlackRock Investments, LLC, member FINRA. © 2011 BlackRock, Inc. All rights reserved. BlackRock, Inc.Media:Brian Beades, 212-810-5596brian.beades@blackrock.comorFarrell Denby, 212-810-8034farrell.denby@blackrock.com