Products December 3, 2014

Legg Mason Rolls Out Target-Date CIFs

In partnership with Hand Benefits & Trust Company, Legg Mason introduced 401(k) Roadmap Funds, a series of nine target-date collective investment funds (CIFs).
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The Roadmap Funds were designed to be successor funds to QS Legg Mason Target-Date Retirement Funds, a series of target-date mutual funds that closed on November 14. The new funds will utilize investment strategies and processes similar to those in shuttered funds, including similar asset-allocation glide paths and dynamic risk management.

The Roadmap Funds are funds-of-funds and will invest in a combination of underlying funds representing a variety of broad asset classes such as equity, fixed income and inflation-hedging strategies. The Roadmap Funds’ glide path is designed to adjust over time to become more conservative by increasing allocations to fixed-income securities as investors near retirement and to effectively balance market risk against longevity risk.

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More information on the funds is available on Legg Mason’s site.

Administration December 3, 2014

S&P 1500 Pension Deficit Ticks Up in November

Pension plan deficits of Standard & Poor’s (S&P) 1500 companies increased by $17 billion in November.
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The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies decreased, from 84% to 83%, at the end of November, according to Mercer.

The rise in liabilities due to a further decrease in interest rates used to calculate corporate pension plan liabilities overpowered the increase in assets from rising equity markets, causing a 1% dip in the funded status. The estimated aggregate deficit of $384 billion as of November 30 is up $17 billion from the estimated aggregate deficit of $367 billion as of October 31, and up $148 billion from the beginning of the year.

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The S&P 500 index rose by 2.5% during November. Typical discount rates for pension plans as measured by the Mercer Yield Curve decreased by 12 basis points (bps) to 3.86%.

”Despite the strong year for equities, we expect that many plan sponsors will report a lower funded status at the end of 2014 compared with the end of 2013 because of decreasing interest rates coupled with changes in mortality assumptions,” says Jim Ritchie, a principal in Mercer’s retirement practice. “Plan sponsors with glide path strategies that increased their long-term bond positions at the end of 2013 will likely fare much better with year-end reporting than plan sponsors without a glide path strategy. Now is a good time for plan sponsors to review their risk strategy for 2015 with the understanding that the change in interest rates can sometimes overpower equity returns.”

Mercer estimates are based on each company’s year-end statement and by projections to November 30, 2014, in line with financial indices. This includes U.S. domestic qualified and nonqualified plans and all non-domestic plans. Allowing for changes in financial markets through November 30, changes to the S&P 1500 constituents and newly released financial disclosures, the estimated aggregate assets at the end of November were $1.90 trillion, compared with the estimated aggregate liabilities of $2.28 trillion.

 

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