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NewsBot Date: April 2, 2007 05:30:00 AM
AB News AllianceBernstein Launches Next-Generation Target-Date Retirement Portfolios
NEW YORK--(BUSINESS WIRE)--AllianceBernstein (NYSE: AB) announced today that it is offering customizable target-date retirement portfolios for large defined contribution plans. The portfolios offer plan sponsors the operational and reporting simplicity of prepackaged strategies with the benefit of customization, including a choice in how much of the portfolio is actively or passively managed. Plan sponsors can select the passive/active combination that best satisfies their preferred balance of expected return, risk and costs—and change the mix later, if they wish.
“AllianceBernstein is striving to provide innovative target-date investment solutions at a time when such portfolios are emerging as the investment vehicle of choice for defined contribution plan sponsors and participants,” said Lewis A. Sanders, Chairman and CEO of AllianceBernstein.
“Many of our clients prefer the quality and convenience of our prepackaged Retirement Strategies mutual funds; others have engaged us to design target-date portfolios utilizing their plan’s existing investment options,” Sanders noted. “Still others have told us that what they really wanted, but couldn’t find, is something that offers the best of both worlds. In response, AllianceBernstein developed Customized Retirement Strategies.”
Each target-date retirement portfolio in the series is a daily-priced, separate account that invests in a set of collective investment trusts that represent the component asset classes. AllianceBernstein designed the asset allocation glide path, implements it and invests daily cash flows. It also manages the active components of the portfolios. Northern Trust Global Investments sub-advises all of the passive components. State Street Corporation serves as custodian and provides daily valuation of the portfolios. Plan sponsors can add other investment managers or modify the asset allocation, but additional fees may apply.
“We are pleased to provide the index components of these strategies,” said Northern Trust’s Susan Czochara, Senior Product Manager for Defined Contribution Solutions. “Plan sponsors and consultants are placing an increasing emphasis on index products. Because of the breadth of our collective fund offerings, we are in a unique position to assist with the construction of customized target-date funds in addition to providing our own proprietary target-date funds.”
“We think this product is uniquely crafted to suit many plan sponsors’ needs,” said Seth Masters, AllianceBernstein’s Chief Investment Officer for Blend Strategies. “Our Customized Retirement Strategies combine superior asset allocation, industry-leading investment management of the component asset classes, low-cost institutional vehicles and asset-based breakpoint pricing, and adaptability.”
“The ability to add other managers to the mix is important to plan sponsors,” Masters added, “but many plans would rather not jump into a potentially complicated multi-manager target-date structure on day one. With Customized Retirement Strategies, they don’t have to -- new managers can easily be accommodated at any time.”
Target-date retirement portfolios are designed to be easy-to-use, complete defined contribution investments that provide broad exposure to the global capital markets. The asset allocation in each portfolio is gradually adjusted as the participants’ investment horizon shortens. Plan participants do not need extensive knowledge about finance or investment counseling to invest in target-date portfolios: they simply invest in the portfolio with the target-date closest to their anticipated retirement dates.
Proposed guidelines issued by the Department of Labor in response to the Pension Protection Act of 2006 (PPA) list target-date retirement portfolios as a “qualified default investment alternative,” or QDIA, for defined contribution plans. The use of a QDIA can reduce a plan sponsor’s fiduciary liability.
“Since the passage of the PPA last August, target-date portfolios have become essential to improving the retirement security of many Americans,” said Richard A. Davies, Senior Managing Director for Institutional Defined Contribution Services at AllianceBernstein. “The Act encourages automation of both enrollment and contribution-rate increases, as well as more appropriate default investments, to foster increased participation in 401(k) plans among eligible employees in the United States.”
“Department of Labor regulations also emphasize that defined contribution plan sponsors have a duty to ensure that the fees paid by their plans are reasonable,” noted Davies. “AllianceBernstein has structured its Customized Retirement Strategies accordingly by using potentially lower-cost Collective Investment Trusts and offering breakpoint pricing, in which investment fees decline as a plan’s assets in its portfolios build.” AllianceBernstein also employs various proprietary rebalancing mechanisms to reduce transactions costs.
According to AllianceBernstein research, defined contribution plan participants who receive an additional 1 percent in returns over 40 years would accumulate enough additional assets to fund 10 more years of retirement spending. Plan sponsors can help participants achieve that extra 1 percent through a combination of superior asset allocation in target-date portfolios, lower costs, operational efficiency and active management.
AllianceBernstein L.P.
AllianceBernstein L.P. is research-driven investment organization that provides AllianceBernstein Blend Strategies, Alliance Growth Equities, Bernstein Value Equities, AllianceBernstein Fixed Income and AllianceBernstein Alternative Investments to institutional, retail and private clients. It has one of the largest and broadest research footprints in the investment-management business. With more than 230 buy-side company, industry and economic analysts operating in 13 countries, the firm covers thousands of securities in every meaningful capital market around the world to help its portfolio managers identify pricing anomalies that can provide incremental return. Another 30 quantitative analysts study how asset classes have behaved over time in order to identify effective stock-selection tools and portfolio-construction techniques; they also study investment planning and asset allocation to help clients adopt the most appropriate plan for their own needs. The firm’s research into portfolio-construction for target-date retirement portfolio has had a wide impact on the industry.
Northern Trust Global Investments (NTGI)
Northern Trust Global Investments is the multi-asset class investment-management business of Northern Trust Corporation. NTGI comprises Northern Trust Investments, N.A.; Northern Trust Global Investments Limited; Northern Trust Global Investments Japan, K.K.; the investment advisor division of The Northern Trust Company and Northern Trust Global Advisors and its subsidiaries.
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of investment management, asset and fund administration, fiduciary and banking solutions for corporations, institutions and affluent individuals worldwide. Northern Trust, a multi-bank holding company based in Chicago, has a growing network of 84 offices in 18 US states and has international offices in 13 locations in North America, Europe and the Asia-Pacific region. As of December 31, 2006, Northern Trust had assets under custody of US$3.5 trillion, and assets under investment management of US$697 billion. Northern Trust, founded in 1889, has earned distinction as an industry leader in combining high-touch service and expertise with innovative products and technology. For more information, visit http://www.northerntrust.com.
