The exchange traded fund industry is continuing to fight for the assets within the 401(k) retirement area, and the time is opportune as ever.
Barclays Globlal Investors has introduced a series of target-date funds, something that has become especially popular in retirement plans. John Spence for The Wall Street Journal explains these mutual funds are designed to manage portfolios by directing the allocations to stocks and bonds as workers approach retirement.
For example, if you were planning to retire in or around 2020, you would choose that fund and hold it until retirement.
The new funds are:
- iShares S&P Target Date Retirement Income (TGR)
- iShares S&P Target Date 2010 Index Fund (TZD)
- iShares S&P Target Date 2015 Index Fund (TZE)
- iShares S&P Target Date 2020 Index Fund (TZG)
- iShares S&P Target Date 2025 Index Fund (TZI)
- iShares S&P Target Date 2030 Index Fund (TZL)
- iShares S&P Target Date 2035 Index Fund (TZO)
- iShares S&P Target Date 2020 Index Fund (TZV)
- iShares S&P Conservative Allocation Fund (AOK)
- iShares S&P Moderate Allocation Fund (AOM)
- iShares S&P Growth Allocation Fund (AOR)
- iShares S&P Aggressive Allocation Fund (AOA)
But Barclays is not the first to introduce them. Last year, the TDX Independence Funds were introduced, which are not structured as funds of funds like other target-date products. They’re based on proprietary indexes from Zacks Investment Research.
The industry is still creating and innovating in anticipation of the markets resolving themselves down the line, and this will serve the industry well in the future. With trillions of assets on the sidelines, this kind of forward-thinking will help pull them in to ETFs. ETFs have yet to gain the ground of the 401(k) plan, but there is plenty of time for this to happen.
At the end of 2007, $3 trillion in assets was held in 401(k)s; $1.7 trillion of that was in mutual funds. Seeing what a boon the 401(k) market has been to the mutual fund business, the ETF side naturally wants a piece. The mutual fund market share of the 401(k) market has ballooned from 9% in 1990 to about 55% at the end of 2007, the Investment Company Institute (ICI) says.
State Street has registered some actively-managed target-date ETFs, but they haven’t been given regulatory clearance.
PowerShares is entering into the real estate market with the United States through a new actively managed exchange traded fund launched Wednesday.
PowerShares Active Real Estate Fund (PSR) will trade on the New York Stock Exchange and will invest in real estate securities within the FTSE NAREIT Equity REITs Index.
Billy Fisher for TheStreet reports that the Equity REITs Index has fallen 41.2% this year, more than the S&P 500’s 37.6% decline. However, the Invesco company reveals they think this is an opportune time to jump into the real estate market. The investors need to be convinced that this is the bottom for real estate. It is also important to remember that the markets will not remain depressed forever and a recovery could be just around the corner. We watch the trend lines in order to get a sense of this.
One advantage the new PowerShares fund might have is that the actively managed format allows it to avoid areas of the market that have been hit the hardest. The fund will focus more on commercial real estate than single-family housing.
- SPDR Dow Jones Wilshire REIT Index (RWR), down 58.8% year-to-date
click to enlarge
- iShares Dow Jones US Real Estate Fund (IYR), down 57.9% year-to-date