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.
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