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CUNA Mutual restructures target retirement date funds
MADISON, Wis. (5/25/10)--Because CUNA Mutual Group views managed investment accounts as an appropriate investment choice for most employees, it is teaming up with Madison Asset Management to re-engineer its Ultra Series Target Retirement Date Funds. The funds, which plan sponsors can include in employees’ 401(k) retirement accounts, treat the retirement date as an important destination, a time when new investment strategies are often developed, said Scott Knapp, director of investment strategy for CUNA Mutual. Other target date funds view the retirement date as a “flyover date,” where investment strategies remain unchanged. “When you transition from getting a paycheck and accumulating assets to generating your own income by spending down your assets, this is a major decision point,” Knapp said. “We want to protect assets at this time so people can make prudent choices without the risk of a market downturn derailing their plans.” Target date funds are gaining traction as the account option of choice, because most participants need help in managing their accounts, he said. “Why force participants to become portfolio managers when, in fact, they’re not.” In 2009, participants held about a quarter, or 24.7%, of their assets in a premixed fund--up nearly 2% from 2008 and 8% from 2007--followed by Guaranteed Investment Contract/stable-value funds, 17.1%, and large U.S. equity funds, 15.3%, according to Hewitt Associates. When available in the plan, about half of employees, 51.2%, invested in a premixed portfolio. Target date funds are now offered by 78% of plans. The redesigned Ultra Series Target Retirement Date Funds use a more conservative approach in the 10 years prior to retirement and after retirement with a focus on capital preservation, said Tom Eckert, vice president of Retirement Plan Services. “The funds’ glidepath uses a unique ‘risk management zone,’ which gives portfolio managers the ability to adjust the equity exposure based on current market valuations and economic conditions,” Eckert said. “Outcome-based plans make it easy for participants to save enough for retirement and avoid huge investment mistakes that can occur in typical plans,” he added. “Investments offered in an outcome-based plan are often not the leading hot funds, but they support better decision making among participants. Ultimately, they can end up more financially secure during retirement.” The Ultra Series Target Retirement Date Funds are used in more than 2,000 of CUNA Mutual’s 401(k) plans and feature Target 2020, 2030 and 2040 versions. The funds are managed by Madison Asset Management, a member of the Madison Investment Advisors Inc. family of companies. CUNA Mutual manages 4,000 credit union retirement plans representing $6 billion in assets under administration. Knapp said the company has embraced outcome-based retirement planning for 15 years.
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