From the June 2006 issue of Research Magazine • Subscribe!

June 1, 2006

AARP Sells Funds To 50 Investors

AARP Financial, a new unit of AARP Services, has gotten into the retirement-funding act with the introduction of three index-based AARP Funds. The funds aim to serve investors 50 and older as mid- to long-term investment products -- and to assist those who may be looking for simple financial-planning solutions and aren't yet enjoying the benefits of a financial advisor.

With the growing demand for such lifecycle funds, it's no wonder AARP -- known for its lobbying efforts and consumer-discount programs -- would jump into the act. "Most AARP clients are older people and those who are thinking of retiring," explains Bill Sickles, a senior research analyst with the fund researcher firm Lipper in Denver, Colo. "This is a service for them and a response to the market: People want it. With 14,000 mutual finds to pick from, they are overwhelmed."

The three AARP Funds are based on conservative, moderate and aggressive portfolios, which include a blend of stocks, bonds and other securities. Each fund includes three underlying asset groups and seeks to match the performance of the Morgan Stanley Capital International U.S. Investable Market 2500 Index; MSCI Europe, Australasia and Far East, or EAFE, Index (which focuses on 1,000 securities in 21 developed countries, excluding the U.S. and Canada); and the Lehman Brothers Aggregate Bond Index.

"It is no secret that individuals are not saving enough for retirement," says Larry Renfro, president of AARP Financial. "Investors are overwhelmed by the numerous investment choices available in the marketplace and the difficulty of assembling and managing a retirement portfolio on their own."

With offices in Washington, D.C., and Lausanne, Switzerland, AARP includes some 35 million members age 50 and up. Though its members need not be U.S. citizens, the group says its funds can only be bought by U.S. nationals. Both AARP members and non-members may purchase the funds.

"The AARP Funds allow investors easy access to low-cost mutual funds," says Nancy M. Smith, AARP Financial's vice president of investment services. "The AARP Funds provide diversification and professional rebalancing."

The funds are expected to have yearly fees and expenses of 0.50 percent. The average mutual-fund expense is 1.25 percent, NASD reports.

AARP Financial, which also sells insurance and offers credit cards, is the investment adviser to AARP Funds; it oversees the sub-adviser to AARP Funds and AARP Portfolios, SSgA Funds Management, a unit of State Street Global Advisors. The funds are distributed by ALPS Distributors.

The fund manager is the AARP Board of Trustees. Leilani Sanders Halls of AARP Financial serves as the portfolio manager. Previously, she worked for the SEC and the Pioneer Group. Alistair Lowe, senior principal of SSgA, is the director of asset allocation; he formerly worked for NatWest Investment Management. The portfolio-management team also includes Michael Martel and Eduardo Borges of SSgA. Before coming to State Street, Borges worked for Putnam Investments.

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