August 11, 2011

BlackRock Adds Index Funds for DC Plans as Index Trend Grows

Broader index line-up includes nine LifePath target date mutual funds

As the trend toward index funds for defined contribution (DC) grows, BlackRock Inc. announced Monday that it has expanded its menu of index mutual funds for defined contribution (DC) plans with the June launch of 10 new index funds.

Industry wide, it’s expected that the share of DC assets in index solutions will double from 11% in 2005 to 20% by 2015, bringing the allocation closer to the percentage of indexing seen in defined benefit plans, BlackRock says.

“While indexing has long had a role in collective trust funds used by large and mega institutional DC plans, the trend toward indexing is expected to grow in the advisor-driven, small-to-mid size plan markets that have historically featured a heavier allocation to actively managed funds,” according to the BlackRock release. “Increasingly, plan sponsors are recognizing that indexing offers significant benefits to DC plans of all sizes, providing a transparent, low cost and low maintenance approach to managing some or all of an investment portfolio.”

The launch includes nine target-date BlackRock LifePath Index Portfolios, as well as the All Country World Index ex U.S. Fund. The New York-based firm now offers 16 core index mutual funds that sponsors can use to construct a menu of investment choices for their participants. The new LifePath Index Portfolios are offered in five-year increments, reflecting retirement dates in  2020, 2025, 2030, 2035, 2040, 2045, 2050 and 2055.

The newest funds, which will be available on most major recordkeeping platforms, can be used in conjunction with BlackRock’s S&P 500 Stock Fund; Small Cap Index Fund, which tracks the Russell 2000 Index; International Index Fund, which tracks the MSCI EAFE Index; Bond Index Fund, which tracks the Barclay’s U.S. Aggregate Index; and the Russell 1000 Index Fund.

In 1971, companies that are now part of BlackRock pioneered the development of the industry’s first index fund. Since then, BlackRock has met changing client needs by expanding its line-up of index funds across equity and fixed-income strategies offered through collective trusts, mutual funds and iShares exchange traded funds (ETFs). At June 30, BlackRock managed over $2 trillion in index based products.

Chip Castille, managing director and head of BlackRock’s U.S. and Canada Defined Contribution Group“The growing indexing trend in this market is partly in response to regulatory focus on fees and the desire for increased transparency,” said Chip Castille (left), managing director and head of BlackRock’s U.S. and Canada Defined Contribution Group, in a statement.  “Sponsors like the publicly available pricing offered by mutual funds, as well as the detailed, standardized disclosures for prospectuses and other communications.”

Read BlackRock: Early Boomers Ripe for Target Date Fund Shake-Up at AdvisorOne.com.

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