Goldman Sachs Asset Management and UBS Investment Management will provide registered hedge funds to support a retirement income program under development at AssetMark Investment Services. In addition, Wilshire Associates will provide tactical asset allocation to individual investors who participate in the program and choose to invest their money in AssetMark’s proprietary sub-advised funds. The program is planned for rollout in June.
Richard Steiny, co-founder and president of AssetMark, said, “It’s an income strategy designed to meet the needs of baby boomers who have reached the distribution phase of their lives.”
UBS started selling registered hedge funds last year via AssetMark (DCSPA, 9/5). They will be used in the upcoming program. Andrea Raphael, a Goldman spokeswoman, declined to make officials available.
Minimum investments start at $500,000. Its total cost is 245 bp per year. Forty basis points goes to AssetMark, 80 bp to financial advisors and 125 bp to the asset management firm.
Retirement portfolios traditionally use profits from conservative stock and bond allocations to generate income. The model runs smoothly in rising markets but some investors get nervous when their financial advisors sell off undervalued portfolio assets to maintain income schedules during down markets, Steiny said.
AssetMark’s program will divide retirees’ nest eggs into three pools: money markets, balanced portfolios and registered hedge funds. The money markets will supply income for at least two to three years. The money is replenished by gains from the balanced portfolios. The balanced portfolios blend up to eight fixed-income and equity style categories and would provide income for at least three to 10 years.
The hedge fund equity pools are earmarked for emergency access only, Steiny said. Clients will have the option to choose either UBS, Wilshire or Goldman to manage their assets in each pool. In addition, the program includes Monte Carlo simulation financial planning software to help advisors determine how much of their clients’ assets belong in each of the pools and review the plan on an ongoing basis.
AssetMark believes alternative investments that trade futures contracts as a means of hedging against falling stock prices add elements of growth and stability, Steiny said.