There are three pdf files posted on the topics of target date fund and glide path.
Assignment : Write one to one and one-half pages (single space) paper describing what is a target date fund, what is glide path, and what role can target date fund play in the investment strategy. also find one to two target date funds and provide you analysis : For example content of the fund; how much stocks versus bonds, beta value, etc.
There are three pdf files posted on the topics of target date fund and glide path. Assignment : Write one to one and one-half pages (single space) paper describing what is a target date fund, what is
Release Date: 03-31-2016 GlidePath Retirement 2055 ……………………………………………………………………………………………………………….. ………………………………………………………………………………………………………………………………………………………………………………….Morningstar Category Target Date 2051+Investment Objective & StrategyThe Fund utilizes both actively and passively managed investments and allocates its assets across a broad range of underlying strategies, including global equities, broadly diversified fixed income, and private real estate. The strategies are managed by a diverse group of investment management organizations, each with a demonstrated expertise in their area of focus. The Callan GlidePath® 2055 Fund seeks to achieve a balance of long-term capital growth, inflation protection, and capital preservation by investing in a diversified mix of asset classes and investment styles that becomes increasingly conservative over time.Operations and ManagementInitial Inception Date10-01-09Management CompanyCallan Associates IncIssuerWilmington Trust, N.A.Volatility Analysis Low Moderate High Investment Category In the past, this investment has shown a relatively moderate range of price fluctuations relative to other investments. This investment may experience larger or smaller price declines or price increases depending on market conditions. Some of this risk may be offset by owning other investments with different portfolio makeups or investment strategies.NotesEach GlidePath Retirement fund (e.g. 2010, 2015, etc.) invests in the corresponding target date fund of the Callan GlidePath Series, a collective investment trust of Wilmington Trust, N.A. The Callan GlidePath Funds are not mutual funds. Rather, Wilmington Trust, N.A. has established a “group trust” within the meaning of IRS Revenue Ruling 81-100, as amended, which is managed by Callan Associates, Inc., a registered investment advisor. The group trusts are collective investment trusts exempt from registration under the Investment Company Act of 1940, as amended. The year in the target date fund name refers to the approximate year when an investor in the fund would retire and leave the work force. The fund will gradually shift its emphasis from more aggressive investments to more conservative investments based on the target date. The strategy of the GlidePath Retirement funds translates into an equity allocation that is somewhat more aggressive in order to protect against longevity risk. The GlidePath Retirement funds’ underlying investment allocations continue adjusting along the glide path for approximately twenty years beyond the named target date. The return of principal for the underlying funds in a target date fund is not guaranteed at any time, including on or after the target date. Although the target date funds are managed for investors on a projected retirement date time frame, the fund’s allocation strategy does not guarantee that investors’ retirement goals will be met and a target date fund should not be invested in based solely on age or retirement date. Unit price, principal value and return will vary and an investor may have a gain or loss when units are sold.Allocation of Assets 050 40 30 20 10 -10 -20 -30 100 80 60 40 20 0 Years Until Retirement % AllocationBondsU.S. StocksNon-U.S. StocksCashOtherPortfolio AnalysisComposition as of 03-31-16 % Net U.S. Stocks57.5Non-U.S. Stocks26.4Bonds-1.4Cash 3.7 Other13.8………………………………………………………………………………-100-50050100Total100.0Morningstar Style Box™ as of 03-31-16(EQ) ; 03-31-16(F-I)LargeMidSmall Value Blend Growth Not Available Top 20 Holdings as of 03-31-16 % Assets BlackRock Russell 1000 Index Fund 0TS45.96Prudential Ins Co Amer 9.97 Capital Group Intl All Countries Eq DC-S 8.72 BlackRock MSCI ACWI ex-U.S. Index M 8.70 Dodge & Cox International Stock 8.68 ………………………………………………………………………………………….PIMCO StocksPLUS® Small Institutional 6.51 Royce Pennsylvania Mutual Instl 6.48 Pyramis Core Plus Commingled Mutual Fund 2.70 BlackRock U.S. Debt Index Fd 0TS 1.50 Voya Senior Loan Trust 0.80 ………………………………………………………………………………………….Total Number of Holdings 10 Annual Turnover Ratio % 39.90 Morningstar Equity Sectors as of 03-31-16 % Fund h Cyclical 36.86 …………………………………………………………………………………..r Basic Materials 4.40 t Consumer Cyclical 13.28 y Financial Services 16.06 u Real Estate 3.12 j Sensitive 40.07 …………………………………………………………………………………..i Communication Services 4.47 o Energy 5.61 p Industrials 12.34 a Technology 17.65 k Defensive 23.06 …………………………………………………………………………………..s Consumer Defensive 8.20 d Healthcare 12.43 f Utilities 2.43 Morningstar F-I Sectors as of 03-31-16 % Fund% Category⁄ Government 34.5626.05 › Corporate 8.2920.29 € Securitized 7.6110.69 ‹ Municipal 0.460.43 ﬁ Cash/Cash Equivalents 38.3336.31 ± Other 10.766.23 Principal RisksLending, Credit and Counterparty, Extension, Inflation-Protected Securities, Prepayment (Call), Reinvestment, Currency, Emergi ng Markets, Foreign Securities, Long-Term Outlook and Projections, Loss of Money, Not FDIC Insured, Country or Region, Municipal Project-Specific, U.S. State or Territory-Specific, Capitalization, Active Management, Interest Rate, Market/Market Volatility, Bank Loans, Depositary Receipts, Distressed Investments, Equity Securities, High-Yield Securities, IPO, Inverse Floaters, Mortgage-Ba cked and Asset-Backed Securities, Municipal Obligations, Leases, and AMT-Subject Bonds, Repurchase Agreements, Restricted/Illiquid Securities, Underlying Fund/Fund of Funds, Tax-Exempt Securities, U.S. Government Obligations, Fixed-Income Securities, Maturity / Duration, Sovereign Debt, Multimanager, Shareholder ActivityAFN42012 03-16©2016 Morningstar, Inc., Morningstar Investment Profiles™ 312-696-6000. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed and (3) is not warranted to be accurate, complete or timely. Nei ther Morningstar nor its content providers are responsible for any damages or losses arising from any use of information. Past performance is no guarantee of future performanc e. Visit our investment website at www.morningstar.com.ß ® Investment options are subaccounts in an insurance company separate account maintained by United of Omaha Life Insurance Company for contracts issued in all states except New York, and by Companion Life Insurance Company for contracts issued in New York, that invests in the underlying mutual fund/ collective trust investments or is managed by the specified investment manager. All funds may not be available as an investment option in a plan. Composition Graph The Long/Short/Net bar chart replaces the Composition pie chart when a fund invests in shorts and derivatives. The overall net percentage value of each investment class is displayed. A short is any security in which a negative position is taken where the portfolio manager looks to profit from falling prices. A derivative is any future, forward, option or swap contract that provides exposure to assets like stocks, bonds, or commodities. Derivatives are also used to manage risk or to act on a view about the economy. Morningstar Style Box™ Morningstar Style Box™ The Morningstar Style Box reveals an investment choice’s investment strategy as of the date noted on this report. For equity funds the vertical axis shows the market capitalization of the long stocks owned and the horizontal axis shows investment style (value, blend, or growth). For fixed-income funds, the vertical axis shows the credit quality of the long bonds owned and the horizontal axis shows interest rate sensitivity as measured by a bond’s effective duration. Morningstar seeks credit rating information from fund companies on a periodic basis (e.g., quarterly). In compiling credit rating information Morningstar accepts credit ratings reported by fund companies that have been issued by all Nationally Recognized Statistical Rating Organizations (NRSROs). For a list of all NRSROs, please visit http:// www.sec.gov/divisions/marketreg/ratingagency.htm. Additionally, Morningstar accepts foreign credit ratings from widely recognized or registered rating agencies. If two rating organizations/agencies have rated a security, fund companies are to report the lower rating; if three or more organizations/ agencies have rated a security, fund companies are to report the median rating, and in cases where there are more than two organization/agency ratings and a median rating does not exist, fund companies are to use the lower of the two middle ratings. PLEASE NOTE: Morningstar, Inc. is not itself an NRSRO nor does it issue a credit rating on the fund. An NRSRO or rating agency ratings can change from time-to-time. For credit quality, Morningstar combines the credit rating information provided by the fund companies with an average default rate calculation to come up with a weighted-average credit quality. The weighted-average credit quality is currently a letter that roughly corresponds to the scale used by a leading NRSRO. Bond funds are assigned a style box placement of “low”, “medium”, or “high” based on their average credit quality. Funds with a low credit quality are those whose weighted- average credit quality is determined to be less than “BBB-“; medium are those less than “AA-“, but greater or equal to”BBB-“; and high are those with a weighted-average credit quality of “AA-” or higher. When classifying a bond portfolio, Morningstar first maps the NRSRO credit ratings of the underlying holdings to their respective default rates (as determined by Morningstar’s analysis of actual historical default rates). Morningstar then averages these default rates to determine the average default rate for the entire bond fund. Finally, Morningstar maps this average default rate to its corresponding credit rating along a convex curve. For interest-rate sensitivity, Morningstar obtains from fund companies the average effective duration. Generally, Morningstar classifies a fixed-income fund’s interest-rate sensitivity based on the effective duration of the Morningstar Core Bond Index (MCBI), which is currently three years. The classification of Limited will be assigned to those funds whose average effective duration is between 25% to 75% of MCBI’s average effective duration; funds whose average effective duration is between 75% to 125% of the MCBI will be classified as Moderate; and those that are at 125% or greater of the average effective duration of the MCBI will be classified as Extensive. For municipal bond funds, Morningstar also obtains from fund companies the average effective duration. In these cases static breakpoints are utilized. These breakpoints are as follows: (i) Limited: 4.5 years or less; (ii) Moderate: more than 4.5 years but less than 7 years; and (iii) Extensive: more than 7 years. In addition, for non-US taxable and non-US domiciled fixed income funds static duration breakpoints are used: (i) Limited: less than or equal to 3.5 years; (ii) Moderate: greater than 3.5 and less than equal to 6 years; (iii) Extensive: greater than 6 years. Annual Turnover Ratio A proxy for how frequently a manager trades his or her portfolio. Investment options are offered through a group variable annuity contract (Forms 902-GAQC-09, 903-GAQC-14, 903-GAQC-14 FL, 903-GAQC-14 MN, 903-GAQC-14 OR, 903-GAQC-14 TX, or state equivalent) underwritten by United of Omaha Life Insurance Company for contracts issued in all states except New York. United of Omaha Life Insurance Company, Omaha, NE 68175 is licensed nationwide except in New York. Companion Life Insurance Company, Hauppauge, NY 11788 is licensed in New York and underwrites the group variable annuity (Form 900-GAQC-07(NY). Each company accepts full responsibility for each of their respective contractual obligations under the contract but does not guarantee any contributions or investment returns except as to the Guaranteed Account and the Lifetime Guaranteed Income Account as provided under the contract. Specific features of the Lifetime Guaranteed Income Account vary by state. Restrictions apply. The Lifetime Guaranteed Income Account is not available in Nevada or New York. Neither United of Omaha Life Insurance Company, Companion Life Insurance Company, nor their representatives or affiliates offers investment advice in connection with the contract. Group variable annuities are long-term investment vehicles designed to accumulate money on a tax-deferred basis for retirement purposes. Distributions may be subject to ordinaryincome tax and, if taken prior to age 59½, a 10 percent federal tax penalty may apply. Investing in a group variable annuity involves risk, including possible loss of principal. Group annuity contract (Form 728 LGAM-U-Rev. and Form 728- LGAI-U-Rev.) is issued by United of Omaha Life Insurance Company, Omaha, NE 68175, which accepts full responsibility for all its contractual obligations under the contract. Payments and values provided by this contract that are based on investment results of the separate account are variable and specific dollar amounts are not guaranteed. Investment options are offered through a group annuity separate account rider (Form 625-GAQR-09, Form 625-GAQR-09(VA) or Form 625- GAQR-11) underwritten by United of Omaha Life Insurance Company, Omaha, NE 68175, which accepts full responsibility for all of United’s contractual obligations under the rider but does not guarantee any contributions or investment returns except as to the Guaranteed Account, as provided under the rider. Neither United of Omaha Life Insurance Company nor its representatives or affiliates offers investment advice in connection with the rider. For a complete product description, including benefits and limitations, please refer to the contract. This product is not available in New York, Oklahoma, or Puerto Rico. Investment options are offered through a group annuity contract (Forms 728-GAQC-13, 728-GAQC-13 MN, 728-GAQC-13 OR, or state equivalent) underwritten by United of Omaha Insurance Company, which accepts full responsibility for all its contractual obligations under the contract. This product is not available in New York. Employers and Plan Participants: Prior to selecting investment options you should consider the investment objectives, risks, fees and expenses of each option carefully. For this and other important information, plan sponsors should review the fee disclosure document or the plan sponsor website. Participants should review enrollment materials or the participant website. Read this information carefully. For informational purposes only. Should not be construed as legal or investment advice, a promise of benefit or guarantee of investment performance. The performance data quoted represents past performance which does not guarantee future results. Current performance may be lower or higher than those shown. The investment return and principal value will change with market conditions, so when redeemed, you may have a gain or loss. Not FDIC Insured – May Lose Value – No Bank Guarantee Disclosure AFN42012 03-16©2016 Morningstar, Inc., Morningstar Investment Profiles™ 312-696-6000. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed and (3) is not warranted to be accurate, complete or timely. Nei ther Morningstar nor its content providers are responsible for any damages or losses arising from any use of information. Past performance is no guarantee of future performanc e. Visit our investment website at www.morningstar.com.ß ®
There are three pdf files posted on the topics of target date fund and glide path. Assignment : Write one to one and one-half pages (single space) paper describing what is a target date fund, what is
Mutual Fund Matters| MUTUAL FUNDS December 2014 | BetterInvesting | 33 Big money has been rolling into target-date funds in the past few years. Morningstar reports that investments held in TDFs have quadrupled since 2008 to a current $1 trillion. Target- date funds are estimated to hold more than 20 percent of today’s retirement assets and that percentage is expected to double by 2018. Boston consulting firm Cerulli Associates estimates that more than 41 percent of 401(k) contributions will go into TDFs this year, rising to 63 percent by 2018. A s TDFs continue to grow and compete for investors, their management is taking a closer look at the funds’ glide paths. Experts say the old rules of retirement and investing no longer stand in a world of lower bond rates and longer life spans. Increasing life expectancy along with chang ing markets have many managers increasing their exposure to equities. Longer Lives, Changing Market Conditions One of the most important aspects of a target- date fund is the asset allocation and glide path. The glide path is the rate at which the fund shifts money from equities into bonds as the in ves – tor nears the target retirement date. Glide paths can vary dramatically, but the mix typically ranges from a 90/10 equity/bond split early in a TDF’s life to a 30/70 equity/bond split in the target retirement year. The problem is the old rules of thumb about asset allocation are quickly becoming outdated because of increasing life expectancy and changing market expec- tations. If people are going to live longer and bond yields are going to be lower, investors need to hold more in equities during their life to avoid outliving their money. It’s no surprise that TDFs are frequently changing their glide paths and allocations to adjust to changing market conditions and retirement expectations. According to the Society of Actuaries, a 45-year-old male currently has a 38 percent chance of living until at least age 85. For a woman of the same age, that prob abil – ity rises to 49 percent. Most investors should be plan ning for a 30-year retirement, if not longer. “It’s changing the way (investors) think about things,” says Mari Adam, president of Adam Financial Associates in Boca Raton, Fla. “There’s no right answer, but we do know if you go (too much) into bonds too early, you’re not going to get a sufficient rate of return to make your money last.” The 2014 Merrill Lynch report “Health and Retire ment:Planning for the Great Unknown” says health and lon gev – ity may be the big retirement wild card. It found that longevity places a double threat against retirement. First is the risk that people may outlive their money; this longevity also could lead to higher health care costs and increase the potential for long-term care. Second is the risk that unexpected early retirement owing to health problems will reduce earning years and savings poten- tial. Compounding that threat is the continued rise in health care costs above the rate of inf lation. Glide Paths a Critical Part of Long-Term Performance Most TDFs are adjusting their glide paths to meet these changes. Morn – ingstar analyst Jeff Holt says some fund managers have been placing more emphasis on not only market risks but also longevity risks. More aggressive TDF man- agers such as T. Rowe Price specifically state increasing life expectancy as a primary reason for adjusting their glide paths, he says. In June 2014, Black Rock increased the equity alloca – tions in its LifePath Index TDFs to account for longevity. Under the previous allo- cation, BlackRock held investors fully in equities when they’re 45 years from retirement with a gradual shift to 38 percent in equities at the landing point. The new allo- cation maintains 100 percent in equities until 30 years from retirement. “It’s very common for (fund managers) to revisit their assumptions and glide paths and adjust them accord – ingly,” Holt says. “Longevity is playing more of a role in that.” A 2014 report from Vanguard, “Target-Date Funds: Looking Beyond the Glide Path in 2014,” found that a target-date fund’s glide path and how it changes over time is a critical determinant in outcomes for investors. It compared glide paths of target-date funds for the five largest providers of TDF funds, representing 83 per- cent of all assets invested in TDFs. The report noted there was almost uniform agreement in asset allocations for younger investors. The variations in allocations were minimal for 2050 funds but grew larger for more near- term funds. Products Keep More Money in Stocks as Investors Increase Life Expectancy Target-Date Funds Adjust Their Glide Paths by Craig Guillot 33_34 Mutual Fund Matters_Dec14_33_34 10/15/14 11:12 AM Page 33 Various quantitative tools were used to test the adequacy of each path, with most paths deemed ade- quate to achieve retirement readiness for investors who saved consistently and invested with discipline over a 40-year career. The report noted that although such tools have limitations and can’t guarantee future success, the glide path may be less important than other elements. “Due diligence should go beyond funds’ glide paths and consider their historical and forward- looking sta bil – ity,” the report said. The Vanguard report also noted that more TDF providers are adjust- ing glide paths on a tactical basis designed to benefit from a perceived shorter-term opportunity in the mar – ket place. These adjustments receive little attention, but they can signif – icantly change the resulting allo ca – tions in the long term. Glide Paths Can Vary Dramatically Variations in glide paths can vary widely among some target-date funds, Adam says. In many cases, the percentage of equities can vary by more than 10 percent in some periods. Consider the case of the TIAA-CREF Lifecycle 2040 Retire – ment Fund (ticker: TCLOX) and the JPMorgan SmartRetirement 2040 Fund (SMTSX). The JPMorgan fund cur- rently holds 77 percent in equities, while the TIAA-CREF fund holds 90 percent in equities. (Funds are men tioned only for educa tional purposes. No investment recommen – dations are intended.) By the target retirement date of 2040, the JPMorgan fund will hold only 35 percent in stocks while the TIAA-CREF will hold 50 percent. Both funds have shown comparable per- formance, but a 15 percent variation in allocations and the glide path could have a big impact over time. Some advisers say too conservative of a glide path could hamper an in ves – tor’s retirement. “Even in retirement, I never like to see anyone with less than 40 per- cent in equities. You won’t even keep up with inf lation and your portfolio isn’t going to last. Not in this environment,” Adam says. Joe Tomlinson, managing director of Tomlinson Financial Planning in Greenville, Maine, wrote a paper for the Advisor Perspectives newsletter in 2013 about why higher equity allocations work in TDFs. Even factoring in the poor per- formance of TDFs in 2008, current or near retirees would have done better with TDFs in more aggressive stock allocations than in conserva- tive ones. The rule of thumb that stock allo- cations should decline dramatically with age doesn’t hold up relative to other strategies because those rules were developed in an age of higher bond yields, Tomlinson says. His re – search confirms Bill Bengen’s data from the 1990s that found retirees with the best outcomes were those who had stock allocations in the 50 percent to 75 percent range. Bengen, a financial adviser and author, formulated the 4 percent drawdown rule for pulling money out of retirement portfolios. “The glide path that achieves the best balance between positive and negative measures is the level 50 per – cent stock allocation,” Tom linson says. “It worked well with the 4 per- cent rule, which says you withdraw 4 percent in the first year then in – crease that by inf lation every year after that.” Change and More Change Adjustments to glide paths can be beneficial to investors, but changes should be infrequent and for the right reasons. “Bait and Switch: Glide Path Instability,” a 2011 report from Ibbotson, a Morningstar company, looked at the glide path stability of target-date funds. It found that the glide path the investor signed up for may not be the one received over time and that glide paths can “change dramatically over time, often with no explanation.” The report’s authors said that although glide path changes aren’t necessarily bad, investors should scrutinize funds that make unan- nounced, unjustified changes in glide paths. Morningstar developed a Glide Path Stability Score (GPSS) to track the stability and changes in TDFs. A 2013 report showed that the top three fund families with highest GPS scores (meaning more stable glide paths) were T. Rowe Price Retirement, TIAA-CREF Lifecycle and John Hancock Retirement Living. Holt says changes in a glide path should be only one part in evaluating a fund. Because TDFs are often used by investors who want a hands-off approach to their investing, a more important task may be to select the right fund to begin with. It may be difficult to shop around in a defined-contribution plan, but it’s about finding the best available option and making regular invest- ments. Whether that option is aggres- sive or conservative, Holt says minor changes in fund glide paths over the years shouldn’t have a significant pos itive or negative effect on the in – tend ed outcome. “You should be attentive to changes, but not overreact,” Holt says. “There should be understanding and reasoning behind those changes, and you should be confident that the manager is making the best decisions in the long term.” Websites of Interest Vanguard, “Target-Date Funds: Looking Beyond the Glide Path in 2014” https://pressroom.vanguard.com/content/ nonindexed/TDF_Glidepath_ 2014_4.11.2014.pdf Merrill Lynch, “Health and Retirement: Planning for the Great Unknown” www.wealthmanagement.ml.com/pub- lish/content/application/pdf/GWMOL/ML WM_Health-and-Retirement-2014.pdf Ibbotson, “Bait and Switch: Glide Path Instability” https://corporate.morningstar.com/ib/doc- uments/MethodologyDocuments/IBBAsso ciates/Bait_and_Switch_Glide_Path_ Stability_Final_091211.pdf MUTUAL FUNDS | Mutual Fund Matters 34 | BetterInvesting | December 2014 ■ ■ ■ 33_34 Mutual Fund Matters_Dec14_33_34 10/15/14 11:16 AM Page 34