Barclays Global Investors, the world’s largest provider of exchange-traded funds, has announced the launch of trading on NYSE Arca of iShares Asset Allocation Exchange Traded Funds, a rang
Barclays Global Investors, the world’s largest provider of exchange-traded funds, has announced the launch of trading on NYSE Arca of iShares Asset Allocation Exchange Traded Funds, a range designed to provide investors with a diversified portfolio of ETFs based on S&P Target Date and Target Risk Indexes that contain iShares ETFs.
The launch coincides with the 15th anniversary of the first target date funds for institutional investors, known as LifePath, created by BGI in 1993.
‘As the pioneer of institutional target date funds, we’re pleased to offer individual investors and their financial advisors iShares Asset Allocation Funds that provide diversified, cost-effective one-stop solutions to help meet multiple investment needs,’ says Noel Archard, head of US iShares product research and development at BGI.
An asset allocation strategy seeks to balance risk and reward in a portfolio by spreading investments over different asset classes such as equities, fixed-income and other assets not correlated to equities.
Target date funds correspond to an anticipated timing need for funding events such as retirement or paying for college, whereas target risk funds correspond to a particular level of risk tolerance.
Among the new target date funds, the iShares S&P Target Date Retirement Income Index Fund, iShares S&P Target Date 2010 Index Fund, Target Date 2015 Index Fund and Target Date 2020 Index Fund have net expense ratios of 0.31 per cent, the Target Date 2025 Index Fund, Target Date 2030 Index Fund and Target Date 2035 Index Fund have ratios of 0.30 per cent, and the Target Date 2040 Index Fund has a ratio of 0.29 per cent.
Says Archard: ‘The new iShares target date funds are well-suited to IRA rollovers or small-sized 401(k) plans who want to offer their participants an option that combines certain benefits of ETFs, such as transparency, with the benefits of target funds, which help mitigate common investor pitfalls such as poor asset allocation and failure to make portfolio changes over time.’
The Standard & Poor’s Target Date Indexes aim to provide exposure to a diversified array of financial assets that shifts over time. Each year S&P conducts a survey of target date funds and combines the raw survey data to derive an allocation basis for each of the underlying indices, making each index a blend of target date provider philosophies.
The new iShares Target Risk Funds, the iShares S&P Conservative Allocation Fund, Moderate Allocation Fund, Growth Allocation Fund and Aggressive Allocation Fund, have net expense rations of 0.31, 0.32, 0.33 and 0.34 per cent respectively.
Archard adds: ‘Target risk funds can be a convenient way for individual investors and their financial advisors to meet a particular investment objective with one fund that covers multiple asset classes after they have identified the investor’s risk tolerance.’
The S&P Target Risk Indices use two features to offer risk-sensitive exposure to multiple asset classes. S&P identifies a value-weighted market portfolio, then employs a shortfall, or downside, risk control framework designed to provide insight into the potential for negative returns over a given holding period and adjusts the weightings of components in the market portfolio to tailor the risk profile to match the risk targeted by each of the underlying indexes.
Barclays Global Investors is one of the world’s largest asset managers with more than USD1.9trn in assets under management at the end of June. Having created the first index strategy in 1971 and the first quantitative active strategy in 1979, BGI is the global ETF leader with more than 330 iShares funds for institutions and individuals worldwide.
