Products June 10, 2015

Franklin Templeton Expands TDF Series

The firm has added a 2055 fund to its target-date fund series.
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Franklin Templeton Investments has expanded its retirement target fund lineup for U.S. investors with the introduction of Franklin LifeSmart 2055 Retirement Target Fund.

Like other funds in the lineup, the fund’s assets are allocated among the broad asset classes of equity, fixed-income and alternative investments by investing predominantly in other Franklin Templeton mutual funds, based on each underlying fund’s predominant asset class and strategy. The new fund joins a lineup that includes 2015, 2020, 2025, 2030, 2035, 2040, 2045 and 2050 funds.

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“The Franklin LifeSmart 2055 Retirement Target Fund is aimed at Millennial investors who plan to retire in or near the year 2055 and reflects our ongoing commitment to innovating solutions for the retirement marketplace,” says Yaqub Ahmed, head of the investment-only division in the U.S. for Franklin Templeton Investments.

Like the existing Franklin LifeSmart Retirement Target Funds, the new 2055 fund will target a 5% allocation to alternative investment funds to take advantage of their lower correlation, in general, with traditional asset classes. The funds’ managers have the ability to tactically adjust this allocation within a range of 0% to 10% as they shift the funds’ allocations based on changing market conditions.

“As part of our continued efforts to generate better designed retirement funds, we include a strategic weighting to alternative investment funds for each of our Franklin LifeSmart Retirement Target Funds,” says Tom Nelson, one of the funds’ portfolio managers with Franklin Templeton Solutions. “We have found through extensive research and modeling that this asset class may provide diversification benefits and may help improve the risk/return profile of these portfolios.”

Each of the Franklin LifeSmart Retirement Target Funds is organized as a “fund of funds” that invests primarily in three specialized managers—Franklin, Templeton and Mutual Series—and may also include an array of exchange-traded funds (ETFs) for additional diversification. The range follows a “to retirement” glide path, which means that each of the funds reaches its most conservative allocation at its target date.

Data and Research June 10, 2015

One in 10 Sponsors Looking to Replace Recordkeeper

Fees and investment lineup are the primary motivators in the decision to keep or replace a recordkeeper.
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Just over one in 10 401(k) plan sponsors (11%) plan to replace their recordkeeper over the next 12 months, on par with the 11% who had the same strategy in 2014, according to Cogent Reports.

The primary reasons why they plan on making a recordkeeping change are plan fees and investment options. However, among large and mega plans, sponsors are also concerned about the level and quality of services provided to the plan and its participants. Cogent estimates that the number of sponsors that will look into replacing their recordkeepers at more than 66,000.

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For help in making the switch, small plan sponsors rely on advisers, their own research and requests for proposals (RFPs) from recordkeepers. Large sponsors, on the other hand, often turn to consultants.

“Once the gears of change are in motion, our data show that the factors driving the selection process vary significantly by plan size,” says Linda York, vice president at Cogent Reports. “Among micro plans, sponsors are looking for a good value and a partner that is easy to do business with, whereas strong recordkeeping, fiduciary support and fee transparency are important considerations at the other end of the spectrum.”

The top 10 firms that the sponsors said they are most likely to consider as new recordkeepers are:

  • Fidelity Investments
  • Charles Schwab
  • Bank of America Merrill Lynch
  • Vanguard
  • Wells Fargo
  • Merrill Lynch/Merrill Edge
  • ADP Retirement Serivces
  • Prudential Retirement
  • New York Life
  •  American Funds

Cogent Reports’ findings are based on a survey of 1,416 plan sponsors conducted between March 20 and April 20, 2015. The sponsors were selected from Standard & Poor’s Money Market Directories and ALM’s Judy Diamond Associates databases.

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