BlackRock is the world’s largest asset manager and it
seemingly failed to get enough of a foothold in the trillion-dollar target-date
market dominated by Fidelity, Vanguard and T. Rowe Price. The nine iShares ETFs
BlackRock is closing in mid-October amounted to less than $300 million in
assets under management.
The target-date market, expected to grow to $4 trillion, or
half of all retirement assets, in just a few years, is an asset gathering
machine mainly by virtue of its status as a Department of Labor-approved
qualified default investment alternative, or QDIA.
But investors have by and large have chosen the mutual fund
route and eschewed the ETF path in seeking a fund that automatically
reallocates to more conservative portfolio holdings as the investors age.
BlackRock’s business decision to shut down its nine
target-date iShares ETFs cedes the ETF target-date market to the Deutsche
Bank’s five X-Tracker target-date ETFs.
Surz, a pension consultant, has long been a critic of
target-date portfolio management, whose equity-heavy holdings he views as guaranteeing
a portfolio disaster for unwitting retirees the next time a market crash
occurs. His latest SmartFunds product, distributed to RIAs through Hand
Benefit & Trust of Houston, goes live Tuesday, and aims to create an
investable, ETF-like fund at a lower expense ratio (.34%) than the soon-to-be
defunct iShares funds.
Surz’s new target-date index fund follows his patented
“glide path” that helped his Smart Funds investors endure the 2008 market crash
with a loss of just 10%, compared with losses of more than 30% for T. Rowe
Price, Vanguard and Fidelity target-date investors during the market plunge’s five
worst months.
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