MassMutual Introduces New Target Date Fund Family Subadvised By A Legg Mason-Affiliated Manager That Aims To Help Reduce Market Volatility For Retirees And Pre-Retirees
The Legg Mason Total Advantage Funds, a series of bank-maintained collective investment funds sponsored by
The Legg Mason Total Advantage Funds' architecture gives investors access to not only
"The five years before and after retirement can be a particularly vulnerable time for retirement savers," said
Nine in 10 retirees (94 percent) and pre-retirees (92 percent) "strongly agree" or "somewhat agree" that it is important to take steps to avoid major stock market losses right before retirement, according to the MassMutual Retirement Savings Risk Study1. One in two pre-retirees (49 percent) and one in three retirees (32 percent) are apprehensive about taking too much investment risk, the study finds.
Yet, 59 percent of pre-retirees and 32 percent of retirees describe their primary investment strategy as focused on either "aggressive growth" or "moderate growth," according to the study, which indicate that the level of risk in their investment portfolio may be too high for their age and goals. Although more retirees focus on preserving their assets in retirement,
Financial advisors often caution retirees and pre-retirees against taking too much investment risk, to guard against steep paper losses at a time in which they will need to generate retirement income. Study respondents who work with a financial advisor (46 percent of pre-retirees; 57 percent of retirees) say their advisor recommends they change their investment strategy. Of that group, 73 percent of pre-retirees and 88 percent of retirees report that their advisor recommended that they invest more conservatively. Target date funds are evolving toward more dynamic structures that have the potential to better balance risk and reward for individuals, depending on macros market factors, their age and retirement plans.
The Legg Mason Total Advantage Funds seek to manage investment risk with a series of proprietary investment strategies, including Adaptive Asset Allocation and Next-Generation Diversification.
- Adaptive Asset Allocation leverages a Retirement Keeper tool and Tactical Accelerator, both designed to deliver additional value through asset allocation and adapting to evolving market conditions. The Retirement Keeper tool seeks to minimize exposure to large market losses in the five years before and after the target retirement date. The Tactical Accelerator is designed to boost return potential through opportunistic asset allocation, in response to market indicators.
- Next-Generation Diversification combines both active and low-cost passive investment styles, employs a multi-manager approach to diversification across multiple asset classes, and includes a stable value fund to help reduce market volatility and generate more stable returns.
The Legg Mason Total Advantage Funds employ a glide path, which allows for a gradual adjustment of the asset allocation to reduce exposure to equities as savers approach retirement, shifting from an equity weight as high as 97 percent for those with 30 or more years until retirement to as low as 34 percent for those who are retired. Weightings for stable value and other fixed investments increase proportionately. The actual ratio of the weighting between equities and fixed income is calibrated according to the target retirement year.
"We have found that investors nearing retirement are woefully under-saved for this stage in their lives. Just as
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1 MassMutual Retirement Savers Study, https://www.massmutual.com/-/media/Files/MM%20Risk%20Study%20Report.pdf
The Funds will be collective investment funds available exclusively to qualified retirement plans and will be established by
Retirement Keeper refers to the Dynamic Risk Management Period of the Strategy. In rapidly declining markets, significant losses will likely occur. Conversely, when markets are in rapidly accelerating, market appreciation may not be fully realized due to the Portfolio's more conservative allocation.
The model used to manage a Fund's assets provides no assurance that the recommended allocation will either maximize returns or minimize risks. There is no assurance that a recommended allocation will prove the ideal allocation in all circumstances. In rapidly declining markets, significant losses will likely occur. Conversely, when markets are rapidly accelerating, market appreciation may not be fully realized due to a fund's more conservative allocation. In addition, because the portfolio invests in underlying funds,
While an investor's retirement age is a central component in deciding which series option is right for the investor, other relative factors should also be considered. For instance, an investor's individual circumstances, long-term investment goals and risk tolerance - and especially if the investor falls between two retirement years - should all be carefully considered. These and other factors, as well as the Funds' risks, should be discussed with an investor's financial professional.
Participation in the Funds is limited primarily to qualified defined contribution plans and certain state or local government plans. Investors should consider the investment policy, objectives, risks, charges and expenses of any pooled investment company carefully before investing. The Additional Fund Information and Principal Risk Definitions contains this and other information about a
The information in this material has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Opinions, estimates and projections constitute the judgment of
Investments: Are NOT Deposits | Are NOT FDIC-Insured |
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