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Scott Wentsel |
Ibbotson Associates is working on a new fund of funds that incorporates aspects of risk-specific lifestyle funds and target date lifecycle funds into a single investment. The fund is under construction for at least one unnamed institutional client, according to Scott Wentsel, v.p. and senior portfolio manager. It will appear in a suite of investments that mature at a pre-determined date and come in varying degrees of risk. That means 401(k) participants may soon choose between moderate and aggressive target-date 2020 funds. Interest in combining lifestyle and lifecycle funds first took root a few years ago in the 529 college savings plan market, in which target dates are more important. Van Kampen Investments and Ibbotson launched conservative, moderate and aggressive target-date 529 back in 2002. Wentsel would not say which of Ibbotson’s clients are preparing to take the concept into 401(k) plans but he predicted the crossover would grow. Chad Peterson, a Van Kampen spokesman, did not respond to calls.
In addition, the firm is researching new types of tax-efficient funds of funds for investors of modest means--typically less than $100,000--with accounts outside of qualified plans that fail to meet minimum investment levels for diversified separately managed account portfolios. The demand for fund of fund innovation is growing in proportion to rising popularity of lifecycle and lifestyle funds that increasingly populate autopilot 401(k) plans, Wentsel said.