Benefits August 23, 2012

TDFs Reduce Risk for Retirement Plan Participants

August 23, 2012 (PLANSPONSOR.com) - Retirement plan participants who choose their own investment options are generally exposed to greater risk than target-date fund (TDF) investors, according to research from Principal Financial Group.
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In analyzing a subset of 2.4 million defined contribution accounts, The Principal compared do-it-for-me participants who use a target-date investment option with do-it-myself participants who select their own allocation and services. The research found that generally, do-it-myself participants were less diversified by asset class and number of investment options, rarely used automatic rebalancing to meet their investment goals, and at younger ages, frequently had much less exposure to equities.  

The research showed that do-it-myself participants are using an average of two to four investment options across the board, compared with the average 15 to 20 underlying investment options, representing a variety of asset classes, within the typical target-date portfolio. 

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Among the youngest investors analyzed, those opting for a do-it-myself approach generally had less exposure to equities, and may be missing out on one of the key ingredients to greater retirement savings: the potential power of compounded earnings. Equity exposure among do-it-myself investors who are far from retirement tended to differ significantly from the average target-date investor in the same age group.   

The average do-it-myself participant born after 1987 had nearly 30-percentage-points lower equity exposure (54.7%) within their investment portfolio compared with the 83.95% within a target-date investment option.  

With time, participants’ investment allocations may become out of alignment with their goals. While participants may rebalance on their own to realign their allocations to their intended strategies, the analysis found that do-it-myself participants are rarely selecting automatic this option. Only 2% of do-it-myself investors elected an automatic rebalancing service. Auto-rebalancing is typically a built-in feature within target-date investment options.
Products August 23, 2012

GSAM Repositions Fund for Higher Yield

August 23, 2012 (PLANSPONSOR.com) - Goldman Sachs Asset Management L.P. (GSAM) has repositioned the Goldman Sachs Balanced Fund as the Goldman Sachs Income Builder Fund (Class A Shares: GSBFX).
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The fund’s new investment objective is to provide income and capital appreciation. It seeks to meet this investment objective by investing in higher-yielding bonds and higher dividend-paying stocks.   

“Today’s low interest rate environment is driving investors to seek investments that offer attractive, consistent monthly income,” said Glen Casey, global head of Global Product Strategy and Development for GSAM. “Goldman Sachs Income Builder Fund is designed to access income opportunities across a broad set of asset classes. While the fund is focused on high-quality stocks and high-yield bonds in industries that may be less susceptible to market cycles, its flexible mandate allows it to invest in nontraditional asset classes, including non-U.S. securities, convertible bonds, preferred stock, REITs and MLPs.”   

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The fund employs a baseline allocation of 50% to fixed-income securities and 50% to equity securities, with the flexibility to opportunistically tilt allocation up to 15% above or below the baseline toward either asset class. The fund will now pay dividend and interest income monthly, and its new benchmarks are the Russell 1000 Value and the BofA Merrill Lynch U.S. High Yield BB-B Rated Constrained Index.   

The fixed-income portion of the fund’s portfolio continues to be managed by GSAM’s Fixed Income team. The management of the equity portion has transitioned from the Quantitative Investment Strategies team to the Fundamental Equity team, which employs an active, bottom-up stock selection process.   

The fund is offered in Class A and Class C Shares, both with $1,000 minimum initial investments. Institutional, Class R and Class IR Shares are also offered.

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