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Rating:Mutual Fund Shops Vie For Advisors' Target Date Favor Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, June 08, 2012

Mutual Fund Shops Vie For Advisors' Target Date Favor

Reported by Neil Anderson, Managing Editor

Target-date mutual funds are seen by a growing number of mutual fund shops as a lever into the 401(k) market. While fund shops know to target traditional investment consultants as gatekeepers (the Callans, Wilshires and Frank Russells of the world), few may be aware that rival fund shops are setting themselves up as gatekeepers in their own right.

A trio of mutual fund giants committed to the defined contribution, investment-only market (DC I-O) have built tools targeted to the roughly 5,000 advisors that control access to most 401(k) plan sponsors.

Those firms include Allianz, J.P. Morgan Asset Management [profile] and Pimco. All three firms now offer tools that evaluate their own target-date funds and those of rival mutual fund shops on performance criteria and structure of the fund, such as whether it is a "to" or "through" fund.

Advisors are increasingly turning to these tools to evaluate target-date mutual funds for their 401(k) clients and for reporting purposes to the plan trustees.

This development comes as target-date funds continue to gobble up assets. This growth is a mixed blessings for mutual fund firms that do not act as plan recordkeepers as 75 percent of the assets are still concentrated in just three giant players, all of whom have both strong retail mutual fund brands and bundled 401(k) recordkeeping businesses.

The keys to more and more 401(k) plans are in the hands of a small number of specialist advisors, and several mutual fund shops are helping those advisors evaluate target date funds.

According to one defined contribution investment-only giant and target date fund shop, there are now 44 mutual fund shops with target date funds boasting a three-year track record and at least $100 million in assets. For fundsters in the DC I-O business, this means that they are fighting over a 25-percent slice of the market. And they're doing it while their advisor partners making selections based on help from the fundsters' DC I-O competitors.

J.P. Morgan Asset Management may have been the first DC I-O shop to make a successful big target date tool push. Of the hundreds of retirement plan advisors interviewed by MFWire's sister publication, 401kWire, most of them turn to J.P. Morgan's Target Date Compass to dig into the individual funds underlying different target date series. John Galateria leads J.P. Morgan's DC I-O efforts.

This year Pimco [profile] and Allianz [profile] both joined the quest to help advisors evaluate target date funds. Pimco's RealPath tool emphasizes differences in risk levels and allows advisors to analyze and compare different target date fund families' so-called glidepaths. A glidepath describes how a target date fund's estimated asset allocation is supposed to change over time as the shareholders approach retirement. Senior vice president Sean Murray is national sales manager for Pimco's DC practice.

Allianz's Target-Date Tool Set emphasizes risk, offering a chart comparing the risk levels of different target date fund families. The tool set also includes a questionnaire for helping advisors and 401(k) plan sponsors pick between to and through target date funds -- to funds stop adjusting the glidepath at the target date, while through funds continue to adjust post-target date -- and it includes a report with competitive, side-by-side analysis of different target date fund families. Glenn Dial, who once worked on the J.P. Morgan DC I-O team, now leads retirement distribution at Allianz.

Fundsters looking to make a target date splash and differentiate themselves may want to take a cue from Allianz, J.P. Morgan or Pimco and try to help 401(k) advisors evaluate their target date options. In doing so, DC I-Os can frame the target date selection process in their own terms, in a way that supports the philosophy behind their own target date funds. 

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