BlackRock is changing its target-date funds to provide more access to equities for a longer period of time, BlackRock announced Wednesday.
The asset manager says it is making the change because people are living longer and need more income for retirement. BlackRock’s LifePath target-date funds accounted for $112 billion in AUM as of the end of the first quarter of 2014.
BlackRock’s LifePath target-date funds will decrease their holding of equities at a slower rate and level out with 40 percent equities rather then the current 38 percent at the point of retirement and remain there throughout retirement.
BlackRock also is adding two new investment strategies to its LifePath platform.
The LifePath CoRI strategy incorporates allocations to funds that track BlackRock’s CoRI Indexes. The CoRI indexes seek to track the expected median cost of lifetime income for investors with various retirement target dates. The indexes also enable pre-retirees to translate savings into lifetime income once they turn 65, BlackRock says.
The LifePath Dynamic strategy is designed to take advantage of investment opportunities as the market changes over time, BlackRock says. By investing in a combination of active and passive underlying components, LightPath Dynamic intends to deliver alpha across almost all market cycles in an efficient, risk-controlled manner.
The changes are based on market research conducted by BlackRock that show more demand for income during a longer retirement period. The research indicates younger investors can sustain higher rates of risk for longer periods of time to increase income in retirement years, says Chip Castille, head of BlackRock’s US Retirement Group.