Exchange traded funds are being included in retail and institutional investment portfolios, other ETFs and even mutual funds. Manning & Napier, a pioneer in life-cycle investments, launched a line of actively managed target-date funds that only include ETFs to help achieve a target “glide range.”
In early June, the company marketed the Manning & Napier Goal CIT Funds suite, which is qualified for retirement plans, reports Mariana Lemann for Ignites. The series includes 10 funds with maturity dates from 2015 to 2055 and an income fund.
Target-date or life-cycle funds swap from high equity allocations to a more heavy emphasis on conservative fixed-income holdings as the fund reaches the target maturity date. [Target-Date Funds]
The money manager has $17.9 billion in life-cycle assets, including collective investment trusts, separately managed accounts and mutual funds.
Patrick Cunningham, CEO of Manning & Napier, believes their products will standout from the rest as the collective investment trust vehicle and active management overlay will hold an asset mix that will include about 15 to 20 ETFs.
“The reason we offer a collective investment trust is that it typically has a lower cost than mutual funds,” Cunningham said in the article.
The funds’ average fee for a zero-revenue share class is 0.34%, and the average fee for the ETFs will be about 0.18% and 0.19%. [Trading Costs]
“One of the key features to the way we manage these types of funds is active asset allocation,” Cunningham added. “Many lifecycle funds, whether they are funds of funds or regardless, will stick to a specific glide path. We do not have glide paths, we have a glide range.”
“[Asset managers] do have ranges for each asset class,” Bridget Bearden, research analyst at Strategic Insight, said in the article. “In 2008 the practice of rigid rebalancing back to a certain strategic asset allocation resulted in poor returns because the markets kept going down.”
In contrast, Manning & Napier’s target glide range “denotes a higher level of flexibility,” Bearden added.
ETFs help the asset managers achieve the higher flexibility.
“There is enough liquidity and variety [in the ETF market]and you can trade them very, very efficiently at a low cost,” Cunningham said.
For more information on new fund products, visit our new ETFs category.
Max Chen contributed to this article.