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August 31, 2016 at 01:32 PM
MFS has introduced enhancements to its target date funds that will lower fees significantly.
Across the MFS Lifetime Funds, which is MFS’ suite of target date products, fees are being lowered by 15 to 22 basis points depending on the fund.
“A couple of things that we were looking at as related to client demand and trends in the industry was in particular the asset allocation mix, how we continue to build out further diversification, and secondarily looking at fee structures and the attractiveness of the fees,” Ryan Mullen, head of defined contribution investments at MFS, told ThinkAdvisor.
MFS launched its Lifetime Funds suite in 2005, and the last time the firm introduced enhancements to the suite that lowered fees was 2012.
MFS was able to lower fees this year by making two specific changes.
First, MFS looked at its overlying asset allocation mix and decided to add its seven MFS Blended Research Funds to the underlying target date lineup. These funds have been available for more than 15 years on the institutional side and as stand-alone mutual funds.
“Previously we had not had them in the target date suite and we felt like adding those in … would diversify the underlying investments to provide additional layers of alpha while still staying completely active in terms of our approach,” Mullen told ThinkAdvisor.
The addition of the blended research funds provides further diversification of alpha profiles within the equity allocation, as well as reduces overall expenses of the MFS Lifetime Funds by 3 to 8 basis points across all share classes.
“That was the first component: How do we continue to enhance the asset allocation and the active management approach but also addressing a trend in the industry of making sure fees are reasonable and attractive?” Mullen explained.
