BlackRock extended its target-date series of ETFs with the recent (8/18/11) introduction of iShares S&P Target Date 2045 Index Fund (NYSEARCA:TZW) and iShares S&P Target Date 2050 Index Fund (NYSEARCA:TZY). The lineup now includes ETFs from 2010 – 2050, in five-year increments, plus the iShares S&P Target Date Retirement Income Fund (NYSEARCA:TGR). All ETFs in the series hold other iShares ETFs instead of individual stocks and bonds.
Target-date funds are one-stop shopping for investors who want to avoid the details of an asset allocation plan. An additional benefit is that the allocations are automatically adjusted over time, becoming gradually more conservative as the target date approaches. Investor flows into these ETFs has generally lagged. This could change as they make their way into more 401k plans, where target-date funds are often the default investment option.
For the 2045 TZW fund, the current asset class breakdown is Domestic Equity 59.0%, International Equity 29.3%, Domestic Fixed Income 10.3%, and Domestic Real Estate 1.4%. TZY, the 2050 fund, has slightly less Domestic Fixed Income at 8.4% with the other asset classes receiving proportionate increases. Neither ETF includes gold or other commodities.
For TZW 2045, current holdings are iShares S&P 500 (NYSEARCA:IVV) 46.4%, iShares MSCI EAFE (NYSEARCA:EFA) 25.3%, iShares S&P MidCap 400 (NYSEARCA:IJH) 7.5%, iShares Barclays Aggregate Bond (NYSEARCA:AGG) 6.8%, iShares S&P SmallCap 600 (NYSEARCA:IJR) 5.1%, iShares MSCI Emerging Markets (NYSEARCA:EEM) 4.0%, iShares iBoxx High Yield Corporate Bond (NYSEARCA:HYG) 1.8%, iShares Barclays Short-Term Treasury (NYSEARCA:SHV) 1.7%, and iShares Cohen & Steers Realty Majors (NYSEARCA:ICF) 1.4%.
The expense ratio for each new ETF is capped at 0.32%, which is quite reasonable for fund-of-funds products. BlackRock waives 0.14% from the 0.46% gross expense since they will also earn the 0.21% acquired fund expenses on the underlying iShares funds.
The db-X Target Date ETFs are currently the only competition to iShares in this arena.
The prospectus (pdf) covers TZW and TZY along with all the existing ETFs in the iShares S&P Target-Date Series. Other information can be found in the TZW 2045 overview, TZW 2045 fact sheet (pdf), TZY 2050 overview, and TZY 2050 fact sheet (pdf).
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.